The Trinket Dilemma: Considering the Pros and Cons of Premium Incentives

Sugarcoat it all you want, but offering premiums in an acquisition campaign is, essentially, bribery. And pretty unsubtle bribery at that. You’re saying to a prospect, “Look, I’m afraid you don’t care enough about my organization’s work to support it out of 
passion or principle, so I’ll offer you this trinket to try and buy your loyalty.”

The dilemma is obvious. You’re going to have much greater loyalty from people who support you because they believe in your cause. But those premiums sure can bring in more donors. At least in the short run.

To a development director, the promise of the premium can be very alluring. For a relatively small investment in mailing labels or tote bags or whatever, you can reasonably predict that significantly more people will respond to your mailing.

And, in fact, when you start seeing the results of your premium test versus your nonpremium 
mailing, you might be pretty happy. You’ll likely see that your premium, front-end or back-end, did in fact outperform your nonpremium control. The long-term return, however, is something else again.

It doesn’t take long to figure out that if you had to give someone a premium to make her first gift, you’re almost certainly going to have to give her another one to renew her. Even worse, the next premium you send probably will have to be “nicer” (i.e., more expensive for you) than the first one. Suddenly you’re in an 
ever-escalating cycle of having to keep up with your donors’ rising expectations.

And to make things even more difficult, your competitors are out there doing premium mailings, too. And often they are bigger organizations with bigger budgets and — surprise, surprise — fancier premiums!

And for all that, premium donors still end up being a lot harder to renew. In fact, many organizations have found that they need to enroll up to four times as many premium donors as nonpremium donors to net the same amount of housefile revenue. So in the end, dependence on premiums often produces short-term gains at the expense of long-term, continuing revenues.

Unfortunately, getting rid of premiums might not be as easy as it sounds. A lot of organizations have had premium-based programs in place for many years — and just walking away from them is simply not practical. 
Typically, those who try it find that simply reducing or eliminating premiums comes at a very high cost. While donor retention and average gift might increase without premiums, those gains all too easily can be 
offset by a precipitous drop in the total number of donors on your file.

What to do?
As Beethoven was fond of saying, sometimes the opposite is also true. The inconvenient fact is that the Trinket Dilemma is seldom an either/or proposition. And the most successful resolution involves time, patience and testing.

You might be surprised to find, at the end of the day, that what you really need are more control packages. In many cases, we have found that there frequently is a subgroup of premium-acquired donors who simply will not respond to nonpremium mailings. It takes some testing and analysis to establish the size and value of this subgroup, and the revenue potential that might be gained through operating your program with both a premium and a nonpremium track.

A two-track program like this usually can be 
conducted at relatively low cost by simply creating two versions of each house mailing — but the cost and value ultimately will depend on the size of the premium-required subgroup.

There are organizations out there that have had as many as five controls in a single mailing. These groups have adopted a best package/best list strategy, in which the best-performing packages are mailed only to the lists that have proven most effective.

Yes, this kind of package testing can be frustrating and expensive. But if you’re really interested in 
the long-term growth of your organization, it’s 
absolutely necessary to continue the search for a 
breakthrough. Start with a careful, thoughtful and detailed analysis of your past test results. Then assemble your best team to brainstorm every aspect of your program. Bring in stakeholders from different sectors of your organization — not just program and fundraising people. If possible, you might even want to involve a long-time donor or two in the process.

Your goal is to seek out fresh ways to frame your appeal in order to attract new attention from donors who will not be premium-dependent. Think in terms of the lifetime value of your donor, and focus on packages that will stimulate involvement in your mission.

Some tests that have proven successful for other organizations include:

• Sponsorship or adoption offers allowing donors to help underwrite key elements of your program;
• membership or supporter campaigns;
• bounceback devices like cards that donors can sign and return. These give donors a sense of direct contact with the individuals they are helping;
• involvement devices such as petitions and 
surveys; and
• gift demonstration vouchers that tie specific gift amounts to specific items or services your program provides.

These aren’t necessarily new concepts, but when packaged correctly, they can produce outstanding results.

More to test
You also might test more innovative, “outside the box” formats to see if they can increase response enough to offset the package cost and still provide high-value members.

A successful example of this is the control package for Volunteers of America. The organization had mailed an annual-fund package for years before it 
discovered a customized version of the paper-bag package. The bag cost almost twice as much, but it brought in three times the number of donors — 
making it very worthwhile.

Plus, as an affiliate-based organization, VOA was able to develop a geographic tier system for each chapter. The combination cut in half its cost to acquire a new donor.

Additional opportunities for donor acquisition might even include opening up new markets. As you probably know, the U.S. Hispanic population is 
rapidly growing in size, influence and affluence. And as the country continues to grow in cultural diversity, opportunities to target and test into new population segments are going to grow as well.

In the end though, the question is not so much whether premiums are good or bad. It’s what the real objective is for your fundraising campaign. 
If you want long-term, loyal donors, then use your 
best creative minds and most strategic mailing 
techniques.

Create powerful, mission-driven creative; then get out there in as many channels as you can. Get attention, tell your story and give your reader a compelling reason to take action.

If, on the other hand, it’s more important to get your numbers up in the short run — and don’t get me wrong … there are many situations in which that is a very legitimate goal — then premiums can be a 
perfectly good tool to help you accomplish that. Just be prepared for a challenging transition period when the time comes to renew those trinket-loving donors