Increasing Long-Term Value of Premium Donors

Increasing Long-Term Value of Premium Donors

Oct. 4, 2005

By Jennifer Bielat

The use of premiums to acquire new donors and to cultivate and renew existing donors continues to be a proven technique in the nonprofit sector. Based on research done by several list-brokerage firms, mail trends indicate nearly two-thirds of fundraising mail contains premiums.

A premium in a mailing typically drives a higher response rate and lower average gift. As a result, premiums attract a significant number of lower-dollar donors, which can be difficult for organizations to renew and upgrade. Although the average gift for premium mailings is on the rise, the long-term value of these donors still presents challenges.

Securing a larger initial gift from new premium-acquired donors is key to increasing donor value. Following are some test strategies for increasing initial acquisition gifts and ultimately improving your long-term donor value.

Each of the following concepts is designed to increase overall program revenue in an effort to offset the decrease in response rate from securing larger acquisition gifts.

Test Concept #1

A bail-out technique often is used in packages containing high-value, upfront premiums. A bail out technique -- used typically in high-end premium mailings -- is an additional check box with a nominal gift amount positioned to help offset the cost of the premium located on the response device, usually directly below the gift array. The incremental revenue generated by this technique helps to offset the higher initial costs of the package, but it also creates challenges in that large numbers of lower-dollar donors are acquired.

If your premium package contains a bail-out option in the gift array, conduct a test removing the bail out. Your response rate will likely fall off, but the goal is to increase the average gift enough to offset the decrease in response rate.

Test Concept #2

Eliminate the bail-out option and test a lower gift array highlighting the second gift amount. Again this test strategy is designed to help generate additional program revenue to offset the elimination of the lower-dollar bail out.

Test Concept #3

Asking for more from people who have the capacity to give more is another strategy. Test higher gift arrays to ZIP codes of greater wealth and targeted lists known to generate higher average gifts than the amounts suggested on your control array.

Test Concept #4

Test adding a lift note to your package such as a thank-you note from a recipient of services, mission-focused message from an organizational executive or a message about good stewardship of funds. The lift note should position why your organization is worthy of a larger donation and might even suggest an appropriate gift amount.

Test Concept #5

Add an additional check box to your form that asks the donor to add a nominal gift to their already generous donation to provide more support for your work.

Two additional strategies to consider implementing are a new donor conversion strategy to protect your initial investment in acquisition and a low dollar donor strategy to reduce your on-going investment in lower dollar segments. A new donor conversion strategy involves communicating with your newly acquired donors more quickly, offering them a "best of" series of mailings in an effort to secure a second gift. The low dollar donor strategy involves a reduced series of communications based on how the donors respond to your offerings in their first year and beyond. Both strategies can help in improving your overall long-term value of premium acquired donors.

Success in improving long-term value does not occur in a vacuum. Several different strategies will likely need to be in implemented in order to find success in this area. The use of premiums will continue to be a part of the fundraising landscape for many organizations into the future and the challenges of long-term donor value will be there along side. Making headway to improved donor value can be difficult and the road is often long. However, a deliberate resolution to address long-term value coupled with a methodical testing strategy will guide you to fundraising success.

Jennifer Bielat is assistant vice president for Easter Seals, whose mission is to provide exceptional services for people with disabilities or special needs and their families. She has nearly 15 years of direct- marketing experience and was recently named one of the top fundraisers under 40 in the country by The Nonprofit Times.