You Are Wasting Money!

Rory Starks 

It's shocking … but true!

Someone once said, "I know that half my advertising dollars are wasted, I just don't know which half." When you acquire donors through traditional media like direct mail or radio, 99% of those receiving your message don't respond!

When you send an appeal to your own donors, 95% don't respond.

You're mailing all your appeals and newsletters to many donors who only give in December! This only irritates them.

You're mailing appeals to people who give every month through their receipt and don't need those appeals. These are some of your most committed donors.

Waste! Waste!! Waste!!!

The good news is there is something you can do today that will help you stop wasting money. While the solution doesn't fix 100% of the problem, it can get you a long way down the road to saving money right away.

Leaders in Christian ministries strive to be good stewards of the resources with which God has entrusted them and to achieve the greatest Kingdom impact possible. No one intentionally sets out to waste precious organizational resources.

Sadly, many Christian ministries are wasting money under the false assumption that they are employing every technology and strategy to create maximum net income.

Think about it. For 30 or more years, direct marketers in the Christian nonprofit arena have relied on Recency, Frequency and Monetary amount (RFM) to segment their donor files and to achieve cost-effective mailing strategies. For mailing purposes, donors were put in segments based on their date of last gift, their last or largest gift amount, and the frequency of their giving.

This approach to segmentation has been a very effective tool for maximizing income for ministries. However, there are numerous other variables that affect giving. Some examples include:

• The donor's age.
• The time of the year.
• The interest (or lack thereof) in specific aspects of your ministry.
• The way the donor was first introduced to you.

The Benefits of Data Mining

Up until the last few years there has not been an effective methodology to get at these and many other variables and giving patterns. Enter "data mining."

Data mining is an analytical method that looks for patterns in donor giving, creates predictive models, and results in more sophisticated ways of segmenting the donor file for mailing. Typical "bottom line" results are:

• Potential cost savings of 10-20% in printing and mailing.
• A much smarter way to segment donors so they only get the mail they want, when they want it.
• Fewer donor complaints about "too much mail."
• Increased income.

The examples below are just the "tip of the iceberg" in terms of donor giving patterns to consider.

• Seasonality: Through data mining you can pinpoint donors who only give at certain times of the year. As a result, mailing frequency can be selectively reduced during times when certain donors never respond, and significant cost savings realized without compromising income.
• Giving to Specific Media: You can identify donors who have a multi-year pattern of consistently giving to one medium over another. That's powerful information because you can use it to predict which fundraising vehicles donors don't need to receive or can be scaled back (in terms of how often they receive it).
• Second Gift Analysis: Imagine being able to refine the segmentation of your donors based on how long they have been on your donor file before they sent a second gift. In doing so, you can predict with reasonable certainty which donors will never give a second gift.
• Receipt Response Donors: Some donors treat their charitable contributions much like they do their bills. These donors consistently use the response portion of their receipt to send gifts. You should be identifying these donors and mailing them fewer times during the year.
• Long-Term Value: One of the most significant ways you can positively impact a new donor direct mail acquisition effort is to conduct a long-term donor value analysis by the direct mail kit used, mailing list, and the donor's first gift. In doing so, you'll discover amazing and counter-intuitive results that will improve your "bottom line."

Of course, you could keep doing things the way you've done them for years. The result? Waste, waste, and more waste.

Rory Starks is former director of marketing for World Vision U.S. and later was executive vice president and COO for Food for the Hungry. In 2001 he joined Masterworks®, a full service direct marketing agency, as senior vice president of strategic development. You can reach him at rory@masterworks.com.