Conquering the Direct Mail Acquisition Budget
I know that creeping feeling of dread. It's that time – the end of the fiscal year and your organization needs a prospecting direct mail budget - a roadmap to guide the path to success, helping grow the donor file next year instead of just counting up the losses... The clock is ticking, but all those numbers! All. That. Data. Where's that darn spreadsheet? Where do I even start?!
This is no time to get overwhelmed!
Keep calm and use our best practices and handy checklists below to help guide you through drafting a realistic, well-reasoned, and detailed acquisition budget that can get blessed by the board.
- Think about the big picture: Start by answering the question: how many donors do I need to acquire to overcome attrition AND grow the file? Based on your most recent full fiscal year of data, figure out “For every donor acquired or reactivated, we lost (fill in the #) donors”, and then work from there. It’s a good idea to draft the acquisition and reactivation budgets together to stay on top of this goal.
Keep in mind these key considerations as you outline the budget:
- Is your organization focused more on response or donor value, or a balance?
- Is the overarching goal to grow the file as quickly as possible, or to bring on donors who will have strong retention and net lifetime value (LTV)?
- Is there a target number of donors to aim for, a goal investment amount per donor, a maximum cost, or a target investment recoup timeframe?
Gather your intel: Put your list broker on speed dial, because you’re going to need some info from them to get this done. Some basic numbers you’ll require:
- 3+ full years of prior results by package, list and select
- 3 or 5-year net LTV by year, season, and package
- Current file exchange balances (if you exchange names)
- Core continuation list universe counts (including co-op models)
- Counts for warm prospect lists (e.g., non-donor: petition signers, survey responders, Care2 names, or newsletter subscribers)
- Counts for Lapsed or Expired names that can be mailed in prospecting
- Recent merge survival rates
- Multis creation rate (if you mail Multis)
- Non-DM matchback results by package and campaign (this shows the holistic value of the DM prospecting program and might influence where you allocate future mail volume)
After you have your results by year, month and package, then the real fun can begin!
Plot out each campaign considering seasonal variations in results, optimal ratios of the control packages, and plans for testing; shift mail volume around accordingly. Draft your budget, take a deep breath, step back, and tweak as needed. Compare projected performance to the prior year to see if the metrics are realistic and trending positively.
Keep these factors in mind as you work through the details:
- Assume a nominal increase in costs across the board (maybe 5%).
- Split out list costs from all other costs (this helps your list broker stay on track).
- Estimate the effects of new modeling on performance and costs (e.g., modeling for response or ask; modeling and then dropping and replacing names).
- Include projected file rental income to subsidize the prospecting program (if available).
- Estimate higher costs to allow for package testing.
- Test package performance projections should be conservative.
- Incorporate net LTV at seasonal and package levels to show projected investment recoup time.
- Include a line for whitemail.
Some pitfalls to watch out for:
- Unreliable prior results should be ignored in favor of consistency (e.g., high outlier gifts, exceptionally good - or bad – PR, and world events that influenced responsiveness).
- Changes to the existing suppression parameters (suppressing more people will lower merge survival rates and drive up list costs).
- Using results with small mail volumes to project performance at high volumes (don’t expect those results to hold).
- If growing the mail volume significantly, decrease the merge survival rate accordingly.
Most importantly, remember that creating a budget is a golden opportunity to put your organization on a solid track for success in the coming year! Good luck!