In my first Hilborn Charity eNEWS installment of 20 things you should know before planning your next direct response campaign, I talked about the first three things you should know, namely, why you should treat every donor as someone who has the potential to make a planned gift. In addition to that, I went over the importance of a well-organized database and basic guidelines for data segmentation.

This next installment covers measuring success, targets to shoot for and campaign expenses.

4. measuring success

The value of individual giving goes well beyond the gross and net revenue your campaign produces. Measuring the real success of a campaign includes other metrics that allow you to evaluate how your donors and prospects responded on different fronts. Every segment you mail to needs to be tracked according to the following key performance indicators:

Measure segment responses and revenue received by mail and online. Online contributions are often overlooked because they are more difficult to track. However, research shows that a growing number of individuals are responding to the appeals they receive by visiting an organization’s website and making their donation online. Knowing which segments are contributing this way is critical to planning for future campaigns.

Track the segments that are best at converting donors to monthly giving. Assign an annual and long-term value to your monthly gifts. A long-term value I like to use is taking the annual value of a monthly gift and multiplying it by four to six years and then applying a modest rate of reduction after two years to take cancellations into account. It sounds more complicated than it is. Knowing that the long-term value of a $15 monthly gift can be $750 or more puts your investment in monthly conversion into proper perspective. Understanding that monthly donors can be prospects for major and planned gifts makes that perspective even clearer. 

Measuring the response rate and average donation per segment is crucial. Having this information allows you to determine who is worth mailing to, who should receive an upgraded appeal, and who should be included in a prospect file. It also sheds a light on your organization’s most valuable donors.

Calculate the profit margin for each segment. This should be done so that you have a better understanding of where your profits are coming from — more specifically — how much your investments in active donor renewal and cultivation, lapsed donor reactivation, and new donor acquisition are really costing.    

If you are using multiple lists for donor acquisition, be sure to determine the cost of each new donor acquired per list on a gross and net (after taking the donation into account) basis. In order to do this, you will need to know the all-in cost per piece of your campaign so that you can establish the total cost of mailing to a list. 

5. targets to shoot for

I have yet to find consistent industry standards when is come to determining what constitutes a strong, average or weak response to a campaign. Since most of my own experience is in the area of direct mail, I have come up with what I think is a reasonable range of response rates you should shoot for in your next campaign. 

There will always be exceptions to the range of response rates above. Also, response rates are impacted by the number of times you contact your donors during the year. However, if your campaign segments fall within these ranges, you’re doing a fairly good job at managing your direct mail program. When it comes to acquisition, special incentives can drive up your response rates, but be careful. That costly first gift may not always lead to a second gift in a future appeal that does not include an incentive.

6. what you should spend

We covered how to measure success and the response rates you should shoot for, but how much should you spend? The answer to that question largely depends on the quantity you are mailing and the components of your appeal. 

Let’s look at a very basic package that includes the following:

• a two-colour outer window envelope
• a two-page letter and reply with three colours on one side and two on the other
• an insert note in two colours
• a business reply envelope

Add in some data production, segmentation, variable copy and personalization and you have yourself a standard direct mail package.

When I try to determine the cost per piece of that package, I like to include almost everything except taxes. This means strategy, creativity, copy, letter variations, art and revisions, printing, data production, lettershop and postage.

Now it comes down to quantity. Here is what you can expect to spend at different quantity levels:        

Some consultants and vendors may say that they can provide even lower costing than the ranges above and some may fall above the upper end of these ranges. Just make sure that everyone is quoting on the same services and specifications so that there are no surprises after the campaign has been delivered to Canada Post.

Next time, I will offer my thoughts on the true value of incentives and the true value of monthly donors.