Bold Move

In February, I walked through the busy hallways of the American Cancer Society's National Home Office in Atlanta, Georgia, in anticipation of my meeting with the organization's executives — the lead for direct mail, the head of corporate communications, the CFO and the COO.

I went into this meeting expecting to hear what was behind their brand-new decision to halt direct mail acquisition and direct mail conversion. But I walked out of it with a completely new understanding of this organization. Yes, I left with a better understanding of the direct mail decision, which in itself is not as black and white as "doing it" or "not doing it." But, perhaps more critical was my understanding of how this organization is working to transform from the inside out and how direct mail is just one part of that transformation.

This article is based on interviews with various executives at the American Cancer Society as well as agencies within the industry. It will cover all the details of the Society's recent decision around specific direct mail programs — why it's doing it, how it's doing it and what the organization expects to happen over the next several years.

Because of the uniqueness of this decision in the industry, the Society has agreed to also share results over the next 18 months as it realizes outcomes, learns new things and even thinks through new approaches. A multipart series will follow this initial installment.

The decision

Let's start with the details of what many in the industry have heard about and, rightfully so, have been confused about. At the end of 2012, the American Cancer Society executive management team made a decision to do the following:

• Stop all direct mail acquisition to generate new direct mail donors for the organization.
• Stop all direct mail conversion to offer non-direct mail Society donors (online donors, event-participants/donors, information seekers, etc.) an opportunity to give a direct mail gift.
  
• Remove the American Cancer Society direct mail donors from all exchange universes.

To put this in perspective, in 2011 the Society mailed 41 million direct mail pieces to cold prospects and non-mail donors to the Society. This decision will also affect its strategy to mail about 300,000 lapsed donors each year that were placed in the acquisition program.

For those of you thinking "the Society must have been having performance problems with its direct mail program" — you're wrong! In fact, in my interview with Lin MacMaster, the brand-new chief revenue and marketing officer at the American Cancer Society, she said, "Direct mail will still be used, yet it will work harder to optimize the marketing plan to drive broader engagement across many areas of the organization."

As you read this article, it is important for you to separate direct mail as a marketing technique from what many organizations have as direct mail programs. As many direct marketers will agree, the concept of acquiring, engaging and retaining is a top priority for any organization. The Society is no different and is committed more than ever to using all viable, effective and efficient techniques to achieve great fundraising results.

As a point of reference, here are a few statistics based on the donors who currently are cultivated in its direct mail program.

• Gross and net revenue have increased annually since 2009.
• Average gift has increased annually since 2009.
• Core donor retention is the highest in 10 years.
• Core donor average gift has increased annually since 2009.

Additionally, over the last seven years the direct mail program has produced remarkable results compared with industry benchmarks.

This is a bold move for one of the world's largest nonprofit organizations. But, in reality, this decision is about much more than just direct mail. It is rooted in the decision to change how it views donor dollars, the donor experience with its overall iconic brand, and perhaps most importantly, how it drives a greater sense of urgency around its mission.

The path to the decision

My first meeting with the Society's staff president and COO, Greg Bontrager, started with a discussion around how you can save the most lives the quickest — the desire that is at the heart of how the Society is transforming and refocusing its decision making and organization. The organization celebrates 100 years this year in the fight against cancer, and while it has an amazing history of progress and success — its leaders desperately want to be out of business as soon as possible. That is the goal, and everything they are doing looks through a lens of pursuing it.

As the Society prepared for 2013 and reviewed strategies and budgets, its executives created a new process for ensuring it was laser focused on only the best and most effective fundraising strategies and mission-delivery programs. Every mission program and every fundraising program had to pass a very strict set of requirements to be considered a part of the 2013 plan of work from coast to coast. While much more complicated than what you'll read below, the basic requirements were very specific.

The Society is reorienting to a complete bottom-line mentality across all operating areas. For fundraising programs, the bottom line is viewed from the perspective of cost and yield. For mission programs, the bottom line is viewed from the perspective of efficacy and prioritization in order to save the most lives as quickly as possible. As a $900 million organization with more than 2.6 million volunteers and 5.9 million donors each year, looking across the full revenue portfolio was especially critical. When looking at the traditional metric of Cost per Dollar Raised (CPDR), some programs clearly seemed like better, more responsible investments for the future than others.

Additionally, the Society enjoys the Wise Giving Seal from the BBB's Wise Giving Alliance and already has industry-standard ratios of revenue to expenses. However, staff and volunteer leaders are not satisfied with the status quo. The organization has made a commitment to significantly reduce that ratio in order to apply more resources to its life-saving mission. Greater net means the opportunity for the Society to apply more funds to the fight to save lives. For this organization, it is as simple as that — and it is hard to argue with.

The Society wants to remain relevant and drive the greatest exposure to the audience that has the greatest need and/or the greatest opportunity to support the mission. All programs were reviewed relative to the audience and how they aligned with consumer priorities already identified.

Furthermore, operating strategies were reviewed using data to determine if they truly enabled the Society to reach a new target market or reach a current market segment more effectively. In an effort to ensure relevance in an ever-changing marketplace, the Society also asked how programs met constituent needs and if they drove long-term constituent value.

Of special note is that the organization is very unique in how it raises money. Unlike many nonprofits, it raises $477 million each year through community engagement events and $114 million through planned giving — nearly 67 percent of its total revenue — and only 6 percent through direct mail. Therefore, when reviewing the audiences and priorities, the special event audience, for example, is the largest market segment within the organization and, as you will read below, is very different than the much smaller direct mail audience.

The Society has always strived to ensure its 100-year-old brand is held with the highest regard. Because of this long-standing view and the accompanying desire to mitigate brand risk, programs were reviewed to make sure they still aligned with the ideals and expectations of the organization overall. For fundraising programs, of special attention is the current environment with the various charitable watchdog entities, as well as the overall consumer tolerance for fundraising expenses that may be seen as disproportionate.

As you have guessed by now, parts of the direct mail program were heavily discussed relative to the requirements described above. The decision to ultimately remove acquisition and conversion direct mail from the revenue portfolio was not a simple or easy one. And, while this article is specific to the direct mail decisions, this process created similar decisions in other areas of the organization. As we all know, change is hard — but it is required for success.

How direct mail measured up

If you're thinking, "The American Cancer Society must really dislike direct mail" — you are wrong again! Its leaders are as committed today as they were in past years to direct marketing as a way to reach consumers with their critical messages. In fact, when interviewing executives across the marketing, fundraising and constituent experience areas, it is clear they view direct mail as a channel to be used in a truly integrated marketing and brand strategy.

In other words, what they’ve said to me is they are not giving up on direct mail as an important fundraising technique but are moving away from high-cost, single-channel programs that do not meet their requirements. As an example, in 2012 the Society piloted a fully integrated marketing campaign around its breast cancer special event, Making Strides Against Breast CancerTM. This campaign included DRTV, direct mail, online and social media. Guess what? The direct mail component of that campaign performed very well and had a positive impact overall on the program. The Society celebrates and welcomes those results and the learnings they bring.

MacMaster said the organization is “moving from a broad-based approach to a laser-focused, segmented approach.” In the end, the Society has decided to stop acquisition and conversion mail — for now. Where it is taking a stand is that it’s not interested in generating any new direct mail donors to the organization who do not further advance the mission through broad engagement. Some of the most important elements of this decision making process are ...

As the Society continues to look at its opportunities through the lens of “high cost - low yield,” it’s no surprise that direct mail has continued to put pressure on the organization’s view of acceptable CPDR metrics. Over the years, the cost of doing direct mail has continued to rise, and while the Society has achieved good performance, the overall ratio of revenue to cost fell into a range that was not comfortable. This was especially true as it looks to drive an even greater percentage of revenues going to directly support mission vs. fundraising and management. Currently the Society allocates 72 percent of its revenues to program, and its leaders have committed to improving that percentage over the next several years. The organization has taken a progressive position with respect to good stewardship. Needless to say, therefore, any program with a high CPDR is under review.

The direct mail donors are older than the donors who are targeted by its other fundraising programs — 67 percent of the direct mail donors are over 65 years of age — yet its primary community engagement programs (Relay For LifeTM and Making Strides Against Breast CancerTM) have 80 percent and 84 percent respectively under the age of 65. As a further point of comparison between direct mail donors and the primary target audience within the donor population of the Society, direct mail donors make up only 12 percent, with the vast majority of the balance being the community engagement donors.

Direct mail donors have a tendency to stay within their single channel at the Society and not migrate to other programs it has prioritized. With the Society focused on integration and bridging its messaging across multiple channels, this is another area where direct mail donors stood out as being unique compared to the other constituents engaged.

While the Society is committed to engaging the 65+ market, its leaders do not believe that direct mail is the only way these consumers will engage and support the mission. It is committed to monitoring and continuously testing this audience along the way because it is an important demographic group, but will focus on engaging these donors through other channels.

While every organization worries about the frequency of donor touches, the Society did some work in this area and asked for constituent input about that very topic. Similar to what has been confirmed in other industry studies, the organization found that the frequency of direct mail is not necessarily the problem — the problem is the relevancy of the message and the lack of integration across all the branded communication channels.

This was stated already but is certainly a very important part of the discussion and decision: While direct mail may have been a long-time strategy for the Society, it is truly supplemental to the vast majority of the organization's revenue portfolio. Direct mail revenue overall is but a very small portion of the organization's total revenue — only 6 percent. The risk is there but also limited. It is also worth stating that the Society is not just "cutting" programs that don't meet a specific fundraising ratio — it is focused on continuing to innovate and build a broader, richer fundraising portfolio. Executives intend to focus on an optimized fundraising portfolio that drives even greater efficiency.

What about the MONEY?????

If there is one thing the direct marketing community does well it is tracking and measurement. So, yes, the Society realizes there are going to be revenue ramifications associated with this decision. The direct impact is clearer than the indirect impact, but over the course of the next several years the Society is committed to monitoring all the areas that matter. But here are the projections it is operating with as of today:

● The acquisition and conversion investment represented more than 41 million pieces of mail being sent each year. That investment will be repurposed either to other, more efficient/effective fundraising programs or reallocated to mission programs in the future. But the real net revenue impact will be seen in the renewal program.

● The current renewal program generated $41.5 million in gross revenue in FY12. The fact that no new donors will be infused into the program beginning with FY13 will have an effect over time. It is estimated that the donor population available to cultivate within the renewal program over the next five years will decrease by 34 percent.

The renewal program is projected to decline by 36 percent in gross revenue by 2017. Subsequently, as attrition occurs naturally within these types of programs and with no new donors to cultivate, the net will also decline 50 percent by 2017.

● While the above statistics are based on projection models using factual data, the big unknowns are about the contributions and impact these donors have on other revenue programs.

● In FY12 alone, direct mail-acquired donors gave more than $34 million to other channels, in addition to their direct mail contributions. But, the question everyone has is about cause and effect. Even the Society has conducted tests that show event donors who receive direct mail give more money than event donors who do not receive direct mail. In reality, that is old news as there have been many tests both within the Society and in the industry to prove it. The question is whether direct mail is required to get that extra revenue. It’s a good question, and I know many industry experts who have an opinion. But, in the end, those are just opinions. Without facts to use, their challenge is to do everything possible to recoup any of that revenue with other communications or perhaps even an integrated campaign that includes direct mail.

● Planned giving donors have long been linked to the direct mail audience for most charities. There are multiple views of this, but overall the industry data suggests that direct mail is a great lead generator for planned giving. It’s about the right message at the right time to the right audience. Plus, as that audience ages and begins to withdraw from other engagement opportunities such as events, direct mail is often their single connection with the brand. We have become used to looking for the “little old lady making $5 or $10 gifts” when we think of the link between direct mail and planned giving. Will leads be impacted? The Society does not know yet. But, as with the above areas, I hope to report back on how planned giving leads are (or are not) being affected with this decision over the next 18 months. The longer-term impact will probably never be known due to the 7- to 10-year timeline for a gift to be realized in this area. But, with all change comes opportunity, and perhaps new strategies will be developed to offset any impact.

● A similar situation is with online giving. In FY12, 56 percent of the Society’s unsolicited online revenue (representing about $1.7 million) can be attributed to direct mail donors. No one is going to easily pass up $1.7 million, but the question remains — did direct mail alone drive that revenue? If the answer is yes — or heck, let’s say it’s even maybe — the strategies should already be in the works to keep this revenue through a combination of other channels. Is it possible? No one knows right now — but it is something that will be monitored closely. We know from industry data (Dunham+Company and Campbell Rinker) that one in three donors who give online say that when they receive a direct mail appeal from a charity they use the charity’s website to give their donations. And, the higher the household income, the more likely the direct mail recipient was to donate online — again, raising the question on everyone’s mind: How critical is the direct mail appeal to that overall transaction that landed online?

As an organization, the conversation doesn’t end with this decision — one could argue it has just begun. How will strategies change based on this new dynamic? If 300,000 lapsed donors typically got mailed in the acquisition program, will the Society create some way to communicate with these individuals or will they just stop receiving communication from the brand altogether? Will the strategies in the renewal program change or stay the same? Out of about 3.5 million donors with direct mail giving to the Society, about 10 percent have an e-mail address. While these people will receive direct mail as expected over the next few years, eventually those touches may change. What can the e-revenue teams at the Society do this year to start bridging a gap that might occur downstream?

● And it goes without saying, the Society is committed to monitoring the impact and always considering whether to add highly targeted mail back into the portfolio as a part of its future plan as it continues to test and optimize its marketing and fundraising.

● The Society has been gracious to let me have a front-row seat to transparently study this bold decision. Over the next 18 months, there will be additional installments to this story as the organization monitors the data and starts implementing new strategies to deal with this community of donors. While direct mail revenue (acquisition, renewal and conversion) represents only 6 percent of all of the Society’s revenue, this is still a major decision for the organization. I have felt that in every meeting and conversation at every level.

Final thoughts ... for now

● There are so many challenges facing today's nonprofits. FACT

● Leaders are making tough decisions every day across their organizations. FACT

● The marketplace is more demanding, competition is tighter and expenses are increasing. FACT

But, what is not a fact is that organizations have to just stay the course. Peter Drucker once said, "The greatest danger in times of turbulence is not the turbulence — it is to act with yesterday's logic." The American Cancer Society has stepped out and has made a bold decision which, at minimum, has caught the industry's attention.

● Can anyone really predict what will happen? NO. Agree with American Cancer Society or disagree — that is your individual prerogative — but one thing is for sure: Our industry can learn from this. The real impact of this decision will be talked about in terms of years, not months — but that also means the organization has time to create new, innovative ideas on how to reach audiences and communicate messages differently than last year.

● Do I believe this was risky? YES. Do I believe it was brave? YES. The more our industry pushes these tough questions to the top of the agenda, the better we will get at answering them and creating the best strategies for tomorrow and beyond.

Do I believe what the Society did is the only option with direct mail — no, but I believe change is an inevitable part of the success of this channel. I was asked the other day on a webinar if direct mail was dead. I stepped out and gave an honest answer: If you are thinking of direct mail as a stand-alone program, get ready to plan the funeral. But if you are thinking of direct mail as a technique within an overall integrated communication and fundraising strategy, there are many more birthdays ahead.

Join me over the next several months as we continue the dialogue with the American Cancer Society and understand how its decision around direct mail impacts the organization and brings about new opportunities in strategies.

Angie Moore is a C-suite consultant with 25 years of experience in direct and relationship marketing, and author of the Navigating Off the Napkin blog. Reach her at amoore@navigatingoffthenapkin.com