Friday, March 4, 2011

Acquiring new donors

Acquiring new donors is difficult because acquisition campaigns usually cost more than they raise. The donors acquired, however, give enough in subsequent donations to make up for the price paid to acquire them, but acquisition presents a cash flow problem because of its upfront expense. Let's start with what a typical acquisition campaign looks like.

Most acquisition campaigns are through direct mail. A non-profit rents a list of names and addresses of potential donors from a direct marketing company or another non-profit, mails them, and a small percentage donate. For example, an organization might mail a list of 10,000 people. Each letter costs 60 cents to mail, for a total cost of $6,000. 50 people donate, or 0.5% of the list. The average gift is $40, raising a total $2,000. The net cost of the campaign is $4,000, and each donor costs $40 to acquire. To re-coup the cost of acquisition, the organization needs to raise one more gift of $40 from each donor.

There are three main elements I'm going to explore that influence the cost of acquisition: list source, channel (mail, phone, email, etc.), and amount asked for. Of course, there are many other important considerations, such as the framing of the ask (does getting a celebrity to sign your letter help?), timing (if your issue is in the news, people are probably more likely to donate), the wording of your letter or script, and so on. I'm going to focus on the first three elements, because there is more research on them and they are, in some cases, easier to test.

But I'm going to leave this post at here for now so that it doesn't get too long. Next time, I'll talk a little bit about some testing that's been done to lower the cost of acquisition. If you've ever done a fundraising experiment or test, I'd love to hear about it, either in the comments or directly.