The Crisis in Direct Mail Fundraising

1. The Crisis in Direct Mail Fundraising Some thoughts from the Not-for-profit Sector

2. CRISIS • Direct Mail Fundraising is in a major crisis today. • Response rates are down and costs are up, especially in terms of data and postage. • Software vendors are beginning to develop multi-lingual database software that can be handled by a single software installation. • The great challenge, however, is to be able to process addresses from all countries in one computer. • One of the major challenges to global or multinational fundraising is the absence of a unified addressing system.

3. The Golden Years 1980 - 2000 • In Europe and North America, these were perhaps the best years for direct mail fundraising and donor recruitment. • Most global “brand name” charities: Red Cross, UNICEF, World Vision, Save the Children, Oxfam and WWF depended for most of their private sector income on direct mail appeals distributed locally by National Postal Offices • Typical recruitment response rates: 2% – 5%. ROI 2:1 • Appeals to “house” donors: 15%-30%. ROI = 10:1 • ROI determines whether we can continue to raise funds

4. The Declining Years: 2000-2010 • Response rates for both recruitment and renewal appeals fell dramatically. • In Europe, charity mailers could no longer count on high response rates. Printing and postage costs remained the same or increased. So ROI plummeted. • In the USA, non-profit postage is subsidized by the Government.Response rates also dropped, but improved mass print production techniques reduced costs. • Smaller charities were forced to drop out of DM acquisition. • All charities began to look for alternative channels to replace mail. • Only newly emerging charity markets such as Japan, Korea, India and Brazil continued to grow.

5. Reactions by Global Charities As DM fundraising profitability declines, global charities pull back on domestic DM in many countries and begin to look at other ways to recruit supporters. • Some take to the internet and try email and website fundraising. But soon find that the internet and emails are saturated with fundraising appeals. • Others try so called “Face-to-Face” fundraising on the street or in shopping malls. Younger, lower quality donors with less disposable income and less longer-term loyalty to a cause • Still others try to use Direct Response TV, but find that the numbers only work for emergencies and recruiting child sponsors. • Some others focus on money from companies, or foundations or very wealthy donors. They did well until the 2008 recession.

6. The Fundraiser’s Dilemma • In fundraising, the “golden rule” has been an ROI of 1:1 on acquisition appeals. • Today, fundraisers aim for a donor “lifetime ROI” of 4:1. • Main factors influencing ROI : • Address Lists • Strength of the cause/issue • Package content, design and production cost • Delivery Cost

7. Package design and production • Experience shows that high personalization and superior package design greatly influence the results of DM appeals • Packages printed in the USA, on high-speed, mass-market, inline presses generate the best response. • The US market is by far the largest and most sophisticated market for direct mail appeals in the world today. • The relative weakness of the US Dollar vs. the Euro and the Yen make it hard to beat production prices available in the USA. • Even printers in China and India cannot offer the same low prices for personalized mail packs.

8. Address Lists • Now generally available in all countries, though often difficult to obtain owing to privacy legislation • One of the major challenges to global and multi-national fundraising is the absence of a unified addressing system. • Software vendors are beginning to develop multi-lingual database software that can be handled by a single software installation. • Unified global addressing must go hand in hand with rationalization of privacy legislation. To enable international utilization of national databases.

9. Solution: Global Production In fundraising, “credibility” is as important as price in merchandising. • Printing in Green Bay, WI (USA) (World’s largest inline printing press) • List sourcing in Japan for Japanese donors • Letter mailed from Charity’s international HQ or from a developing country where the charity has projects • Campaign management wherever staff or agency is based • Copywriting and design in New York • Donations received and receipted in Japan (No effective international payments system) • Funds transmitted to HQ in Geneva Switzerland

10. Post-recession Lessons For Fundraisers • Simple Direct Mail Acquisition Appeals no longer work in most industrialized countries. • Fundraisers must adapt by reaching out to newly emerging markets around the world or use more innovative methods locally. • Setting up a branch office or affiliate NPO can be beyond the reach of smaller charities. • Therefore the only solution for smaller charities may be to mail internationally to multiple markets, from one location. • For larger charities, a unified database including a unified addressing system, would afford substantial savings and make more international fundraising possible. • Multinational mailings require a unified global addressing system.