Blog

To Premium or Not to Premium: Part I

05.15.18
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Concord Direct

At some point, every fundraising department has the conversation. That conversation.

It could be casual talk over lunch between two people, or a heated department-wide debate spanning three fiscal quarters. But eventually, all nonprofits must ask themselves: should we use direct mail premiums to raise money?

Alas, the answer is rarely cut-and-dry: what works for one organization may not work for another. So to help you solve the age-old question, we’ve outlined the pros and cons of premium mailings.

But before we delve into the pros and cons, let’s define what we mean by a premium.

At their core, premiums are essentially gifts—such as a wall calendar, a personalized booklet of address labels or even a magnet—sent by organizations to entice an action.

And while premiums vary as widely as the organizations that offer them, they can generally be grouped into two categories: front-end and back-end. Front-end premiums typically cost less than back-end premiums. But apart from costs, the way they are used is also different – with front-end premiums, organizations give a premium, then get a donation. Meanwhile, back-ends work in the opposite order: donors have to give first to get their gift.

Using premiums: the pros

They work. In fact, we’ve seen front-end premiums increase response rates anywhere from 15% to 55%.

They get people inside the envelope…even if it’s only to get to the goods. And once the piece is opened, recipients are more likely to read the message, learn about the organization and the need, and respond.

They help build a connection between the recipient and the organization – especially when the premium is personalized.

They increase response rates. When nonprofits send a gift, recipients feel obligated to respond with a donation.

They increase brand loyalty. When the premium is properly matched to the cause – and it’s something donors want to keep – it becomes a perpetual advertisement for the organization.

Using premiums: the cons

They can cost a pretty penny. It costs money to produce, coordinate and mail premiums.

They can lead to lower average gifts. Marketers must account for the ultimate revenue difference between more people giving less money (for a premium mailing) versus fewer people giving more money (in the case of a non-premium mailing).

They can create a negative perception. When people receive them, it’s common to think, “Why is this organization wasting so much money?”

They can train donors to expect a gift. This ends up building a transactional relationship where donors only give when they get a premium that they think is on par with their donation.

All of these considerations—both the pros and the cons—factor into the popular direct marketing metric of Lifetime Value, or LTV (AKA Customer Lifetime Value). This is a measurement of the amount of money an organization will collect from a donor for as long as that donor is engaged. Because LTV is a combination of frequency of gifts, dollar amount of gifts, and duration of the donor’s relationship with the organization, marketers must look at the long-term objectives when evaluating premium mailings.

For more, download our whitepaper To Premium or not to Premium today or check back for Part II of the series, where we’ll highlight some of the pros and cons of non-premium mailings.

Contributors:

Ali Bessette

Cindy Kilgore

Steve Rudman