Mailing existing supporters is an effective fundraising technique, but charities need increasingly sophisticated lists if they are to grow their donor base, says Alex Blyth.
Jo Lambert, a 32-year-old full-time mother from London, says she quite approves of charity mailings: "Since I started making regular payments to Cancer Research, I've received lots of letters from various well-known charities, so I must be on a donor list circulating to other charities. But I would rather be asked for donations in this way than have someone come door-to-door or accost me on the street. I like to consider the information in my own time and space and decide whether I want to get involved or put it in the bin."
The not-for-profit sector relies on people like Lambert remaining so positive about direct mail. Mailshots have always been an essential part of charity fundraising, and although in recent years some commentators have predicted that it would be eclipsed by modern techniques such as face-to-face and direct response television, it remains at the heart of most charities' fundraising efforts.
Indeed, as charities discover the limits of public tolerance of new fundraising techniques, many are returning to direct mail - so getting it right is crucial to the success of most charities.
Getting it right is a simple matter of saying the right thing in the right way to the right people. It sounds straightforward enough, but it is in fact extremely difficult, and charities have only just begun to master every aspect of it.
Recruiting committed givers
Charities have learned that direct mail is particularly effective at recruiting committed givers, so that tends to be the message. Most charities have discovered the hard way that it is worth investing in professionals to develop good creative executions of their messages. However, more than anything, they have learned that hiring the most expensive agency and spending months devising a beautiful, witty and thoroughly engaging piece of direct mail is a waste of time, money and creative effort if that mailshot is then sent to the wrong people. Accurate targeting is absolutely critical.
The ideal group of people to target is existing supporters. After all, charities know these people. They know what to say to them and how to say it. However, today's fundraisers must not only replace natural wastage among supporters, but must also develop their supporter base. This means that they must mail people with whom they haven't had any previous contact.
Logic dictates that they will get the best returns from this cold mailing by targeting people who are similar to their existing supporters. Charities profile their supporters and might deduce that a majority of them own cats, for example. So to recruit new donors, they need to find lists with people who also own cats.
"In the past decade we have seen a huge increase in the number of sources of lists," says Jane Evans, a list broker at direct marketing agency Target Direct.
List buyers used to be more or less dependent on the electoral roll, but they can now go to specialist companies such as CACI, Experian or Acxiom to buy almost any type of list. Or they can think laterally and, say, ask companies that sell cat food if they keep data on their customers.
These lists are expensive and cost around £100 per 1,000 names. However, according to Sharon Saunders, director of list broker Marketing et Al, there are often discounts to be had.
"Many list owners will give a 5-10 per cent price reduction for charities and will even sometimes waive their minimum quantity of 5,000," she says.
Some small charities do buy directly from list owners, but the majority go through brokers. Gerry Scott, account director at list broker HLB, reckons that around 90 per cent of charities use brokers, because it saves time and brokers know far more about the many lists on offer than charities.
Michael Newsome, head of direct marketing at deaf-blind charity Sense, emphasises this point: "We wanted to test a new creative execution earlier this year, so we went to broker Response One, because we know they work with other charities like the Red Cross and Cancer Research. They came back with 70 good sources, all matching our donor profile. We'd never have been able to do that ourselves."
Although brokers can help charities get better lists at lower prices, buying lists is nonetheless expensive and risky.
"Most charities prefer to swap data when they start," says Martina Nertney, an account director at list broker Occam. "This is primarily because it costs £38 per thousand names to swap as opposed to £120 per thousand names to rent."
Occam runs Reciprocate, which is the system through which almost all charities share data. Set up in 1993, it now contains around 13 million names. By putting their own lists into the pool, charities can take out the data on some of those individuals. Charities pay between £1,000 and £7,500 as a joining fee and then £38 per thousand names taken out.
Apart from the cost, charities like reciprocal deals because by using another charity's donor lists, they know that they are targeting people who are open to giving to charity. That's why Jo Lambert received so many requests when she began donating to Cancer Research UK. It's also why a growing number of people are predicting that charities will soon face a direct mail crisis.
"Through this better targeting and data sharing, charities are increasingly mailing the same people over and over again," says Newsome. "As these people become more aware of data protection, so more of them will join the 1.2 million already registered with the Mailing Preference Service and there will be fewer people responding to mailings."
No one is suggesting that charities are doing anything wrong. They are following all of the rules and all of the best practice guidelines on direct marketing. The problem is that they may well be over-milking the same cash cow. Not everyone is worried. Scott of HLB says: "There isn't a single client where I've seen any degradation in response from charity donors."
Joy Whitehead at broker Zed comments: "Charity donors tend to give to more than one charity at a time, so the risk of alienating them is not a significant concern."
And Amanda Mathers at the RNID has not noticed a problem: "Our response rates have dropped only slightly in recent years and we still get our best results from people who have given to other charities."
Yet list owners are becoming concerned. Occam's Nertney says over the past 12 months she has seen list owners begin to apply restrictions to data to prevent its over-use. They will not allow data to be used on certain dates and put a ceiling on the number of times certain lists can be rented out. She argues these concerns are unfounded. "We did some research that found that if someone donates to charity, you can mail them up to eight times a year without there being any effect on their propensity to give."
While she and many of her clients look set to continue to mail the same group of known charity supporters, others are finding new ways to identify potential donors. Hannah Roberts, a marketing manager from London, offers an indication of how this could work: "I donate regularly to a homelessness charity, and feel strongly about helping humans before animals and sorting out problems in our own country first. So I am incensed when I receive mailings from other charities who assume that just because I give to one charity I want to support others."
Roberts is not motivated by a general desire to be charitable - she has specific reasons for supporting a homelessness charity. Forward-looking charities are now exploring these subtle motivations.
For instance, Diana Sorrell, head of supporter marketing at Barnardo's, believes that charities are approaching saturation point on their current list-buying strategies and so she has done a lot of work recently to identify supporters' mindsets. "Grouping people by demographics is easy," she says.
"We're trying to find out why people really support us. For some it is because we are a children's charity, for others because we are a lobbying group and for some because we deal with controversial issues."
Another approach to the problem of declining returns from existing supporters is to change the medium. Many tout email as an inexpensive and controllable way for directly contacting potential supporters. There is, though, little evidence so far that email can be useful for cold mailings. It can work in emergencies and for charities that appeal to young people, but most fundraisers are finding it more useful for retention than recruitment.
Finally, there is the age-old question of how to target young people.
Most of the people on these increasingly tired lists are over 50. Although studies show that young people are more likely to give, the reality is that they donate relatively little. Also, there are precious few lists of young people available, and those that do exist have relatively little information on them.
It may be time for more charities to start taking some risks on this.
Much of their income remains dangerously dependent on mailing a core group of people and the indications are that this group will in time become decreasingly responsive.
Charities should begin to develop new targeting strategies. The risks can be minimised by testing small quantities of data and by negotiating test prices with list owners. Surely, the risks of not acting are even greater.
CASE STUDY: CANCER RESEARCH UK STRATEGY
Cancer Research UK works with list provider Acxiom and list broker Response One to carry out four mailings a year of 650,000 names each.
Although this is a significant mailing volume, the charity no longer sees cold mailing as a significant direct source of income generation.
As Chris Bates, donor marketing manager, explains: "Acquisition from cold mail has dropped over the past couple of years, and so we now only do mailing as a test for door drops. I think that returns are falling because lists are getting over-used."
Although she recognises that concentrating on the same small pool, with new lists forming only a small proportion of each mailing, is a strategy that is producing diminishing returns, she points out that Cancer Research has little choice: "We have a very flat profile, so it's almost impossible for us to profile by any other means.
"Charities with more clearly defined supporter groups might be able to sharpen their targeting, but for us our best bet is to target people who give to other charities. Those have always been our best-performing lists and they still are."
DATA PROTECTION ACT
The Data Protection Act of 1998 has put a further premium on good quality mailing lists.
It means that as charities build their own lists, they must give respondents the opportunity to opt out of further communication.
As consumers become more aware of data protection issues, more and more of them are doing this and so it becomes ever harder for charities to build their own mailing lists. However, when they buy a list from a third party, the only obligation imposed by the Data Protection Act is that they must check that the list is registered with the Information Commissioner's Officer before using it.