Focus On: Premiums: Primed for Premiums

Fundraisers radically modify the value proposition with prospects and donors when they offer incentives for giving. Albeit engaging, some experts consider the technique to be short sighted, for renewing premium-acquired donors can be arduous and cost prohibitive.

“Donors have become more inured to premiums over time and often will not respond to appeals without them,” says Fred Vallejo, a Utah-based freelance copywriter who has scribed packages for the African Wildlife Foundation, PBS and the National Audubon Society. “The selling of a premium starts right on the outer envelope and continues in the Johnson Box of the letter and letter itself. When you promote it to that extent, it drives the creative brainstorming and copy platform, and becomes the reason to give.”

Vallejo observed firsthand how PBS stations across the country morphed into “transaction-oriented” organizations.

“Trying to write renewal appeals to donors acquired during a pledge drive — without offering some sort of a second gift — is very difficult,” Vallejo notes. “Renewal rates are often quite low because [PBS] just can’t convert these ‘transactional’ people into committed givers.”

Even if organizations express a clear desire not to offer premiums, for fear of donor attrition, among other things, many are forced to for competitive and strategic reasons. (Get out your name-and-address labels, folks.) And yet some charities have unearthed unique incentive-based campaigns that complement the mission and drive response.

A win-win partnership
One in particular comes from the National Gay and Lesbian Task Force, a nonprofit advocacy group that fights for equal rights for gays and lesbians. Since November 2003, the organization has been offering current members and new donors an unusual back-end premium: a one-year subscription to The Advocate, a national gay and lesbian newsmagazine.

“The subscription is an added, mission-driven benefit to our members,” says Charles Robbins, CFRE, director of development. “To us, it’s almost as if new members are receiving an additional newsletter from us every two weeks in the form of The Advocate. It’s a natural extension of our organization.”

The Task Force extended the free-subscription offer in both prospecting and renewal efforts, and has witnessed staggering results. According to Robbins, since adding the premium, prospecting efforts are pulling an average gift of $55; without the incentive, $42. What’s more, renewals are fetching an average gift of $68.91 — after a 15.25 percent response to the first drop.

The Task Force’s standard annual membership rate is $35, but Robbins opted to increase it to $40 to cover the cost of the subscription offer. And even though the organization has built a strong rapport with The Advocate, subscriptions could not be donated due to Audit Bureau of Circulation rules. So Robbins purchased a block of 5,000 yearly subscriptions — valued at $39 each — at a deeply discounted rate.

Since November 2003, the Task Force direct mail program has generated about 5,000 subscriptions for The Advocate. “Not only did the mailing pay for itself, it actually brought in more revenue,” Robbins says. “It’s the best thing to happen to our program.”

A ‘miraculous’ response
For faith-based charities, however, the matter of pinpointing a relevant premium offer is a bit more taxing. Most lack the funding required to maintain a successful back-end premium program, and some have exhausted the popular religious-themed front-end offers of name-and-address labels, greeting cards and notepads.

A direct mail prospecting package with such a challenge and stigma arrived to the Who’s Mailing What! Archive recently from Food for the Poor, a Deerfield Beach, Fla.-based organization that ministers to spiritually renew impoverished people throughout Latin America and the Caribbean. FFP mailed a 43⁄4-inch-by-61⁄2-inch, three-dimensional box mailing carrying a unique front-end premium: a pewter necklace with a grape-sized pendant of the Blessed Virgin Mary, also known as “The Miraculous Medal” to Catholic audiences.

FFP first tested the package in January 2003, and as Director of Development Zach Hinton attests, it was a complete smash.

“The mailing just blew away anything we had done prior with this [box] format,” Hinton affirms. “We attribute a lot of success to the significance of the religious premium we’re offering, along with the spiritual message behind it.”

After the package’s impressive debut performance, Hinton tapped 18- to 36-month lapsed donors to FFP, as well as prospects represented on outside Catholic and religious lists. Currently the piece is garnering a 3.25 percent response rate, and Hinton reports donors renewing in droves.

“The donors who are giving to packages [offering] significant religious articles are renewing at a higher rate than other packages — by roughly 60 percent,” Hinton says, commenting on the newly acquired batch of multi-year givers.

One of Hinton’s chief concerns when he first joined the fundraising team at FFP was renewing premium-acquired donors.

“I don’t like guilt gifts,” Hinton asserts. “If you’re giving out of guilt, you’re not going to renew. These people aren’t giving out of guilt, they’re giving out of their own spiritual awareness.”

Through several tests, Hinton found no need to offer additional premiums in the renewal process, as donors to the original box mailing responded well to straight appeals focusing on FFP’s mission.

Iconic symbol lifts response
With 10 direct mail campaigns that target roughly one million prospects and donors annually, the Susan G. Komen Breast Cancer Foundation works hard to tie its premium offers back to the organizational mission — literally. Since the charity first launched a direct mail fundraising program in 1998, Komen has mailed a raft of No. 10-envelope appeals containing the most widely used front-end premium: name-and-address labels.

For its version, Komen employs the iconic pink ribbon to each label, and features important information about breast health on the reverse side of the sheet.

“All of our direct mail donors are premium-acquired,” Director of Development Paula Cain shares. “We do have donors who clearly indicate to us that they do not want premiums of any kind, and they end up receiving less mail because [Komen] doesn’t have that many non-premium, straight-appeal mailings in its program.”

In Komen’s six-year direct mail history, incentive-based campaigns have drawn higher response rates from prospects than mission-driven appeals, but the average gift has almost always been lower — as is the case for most premium-centric organizations.

But Cain stresses that Komen’s donors do not possess the typical characteristics associated with ofttimes impulsive, premium-responsive individuals.

“We have very strong direct mail donors who have been donors for more than five years and give twice a year, to every awareness-label mailing,” Cain says. “Fortunately, our labels carry the pink ribbon, which are more mission-related than labels that don’t have a distinct symbol of the organization or cause.”

Komen has tested calendars, notepads and breast-health information cards as front-end freebies, but not one has outperformed the name-and-address labels.

Use of incentives on the rise
In calendar year 2002, the Archive logged approximately 2,306 fundraising mailings. Of that total, 214 (9 percent) included or offered a premium. But in calendar year 2003, the Archive logged 1,852 fundraising mailings, with 420 (23 percent) offering premiums.

Gary Kline, president and CEO of SCA Direct, a Fairfax, Va.-based direct marketing consultancy serving the nonprofit sector, advises organizations that are contemplating premium-based campaigns to first explore the economics and how such incentives will effect net revenues.

“Typically, a well-run, premium-based acquisition program is going to get three to four times the number of donors than a well-run, non-premium-based acquisition program,” Kline affirms. “And if you only get a quarter of the scale with a non-premium program, you have to determine what type of long-term value you need to achieve.”

Does your budgetary process allow time to build a large donor file without offering premiums?

“The savviest organizations find a place for both,” Kline says. “They have a premium-based file, a non-premium-based file, and a crossover group for which they mail both premiums and straight appeals to.”

Kline admits that donors acquired without incentives tend to have greater long-term value, but in every premium-built file there are large pockets of donors who have demonstrated a predisposition to give beyond just a small-dollar impulse gift in exchange for a trinket.

“A well-run, premium-based acquisition [campaign] could get as much as 25 percent of the response in $25 gifts,” Kline says, commenting on the tendency of higher-dollar premium responders ($25 versus $10) to become committed givers. “If you could migrate a portion of those individuals over at an acceptable investment, then you will have a non-premium-based program really worth something.”

Surprisingly, the likelihood of locating a non-premium-based pro-specting file with more than a million names is scant. Cautions Kline, “Either you do a great job of extending the best premiums, effort after effort, or someone else will.”