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Direct mailpocalypse: de-risk revenue sources through diversification.


A front page article in a major industry publication (not this one) screamed: "Mail's Last Call? Direct mail fights to hold its own against the Internet." Yes, you probably have heard a lot recently about the impending demise of direct mail. Anyone who's anyone has been predicting the curtain call for direct mail.

Of course, the headline was from January, 2000. And 16 years later, direct mail is not dead. The Internet has not completely usurped all other channels as the primary way people support nonprofit organizations. Instead, direct mail continues to be an important engagement and fundraising tool for nonprofits when used in combination with other channels.

Let's pretend for a moment what the nonprofit world would look like if direct mail as we know it vanished tomorrow. Let's visit a dystopian world where direct mail no longer exists and nonprofits fight for survival like something out of a Mad Max movie.

The mail segmentation mills have fallen silent. The windows on the list vendor buildings are all covered up. Piles upon piles of bulk rate mail crates sit collecting dust. Blank mailing labels sit in stacks with nowhere to go. Windowed envelopes lay shattered. It has been years since direct mail vanished from the surface of the planet. Some believe it was the work of aliens or consultants perhaps alien consultants from another world.

At first, many fundraisers did not know what to do. Decades of direct mail campaigns left them dependent on it for donor acquisition. The first reaction was to shift to other channels such as phone, radio, television, face-to-face, email, online, social, and mobile, applying the same segmentation techniques to different channels in an attempt to survive. The successful fundraisers found, regardless of the channel used, there was still no substitute for testing, re-testing, and using the right message at the right time with the right people.

The hunter-gatherer culture of annual direct mail acquisition campaigns slowly began to be replaced by a more agrarian approach to donor cultivation. Fundraisers had to get more serious about retaining existing donors. Being multichannel was no longer an option. They realized that it would take the combination of multiple smaller interactions to acquire and retain donors over time, planting seeds, nurturing relationships, and letting donors grow roots.

Fundraisers now needed to invest for the long-term with more focus on lifetime value versus simply living on subsistence, from year to year, on what direct mail brought in the door. A world without direct mail meant that you had to try new things and be willing to fail faster.

There was a switch from the use of descriptive analytics, such as income, age, and location, to using more predictive analytics to prioritize where to focus resources. Fundraisers realized that predictive modeling could help them to focus on donors with a higher likelihood to give, renew, and make larger contributions.

Modern analytics could help them identify the diamonds in the rough instead of just turning over the same old rocks. It turns out that years of loyal direct mail donors were much more likely to be planned gift donors and the wise fundraisers finally invested in getting more bequests.

Monthly donors weathered the changes better than anyone else. Most had been giving long enough that they had tuned out direct mail years ago. Matching gifts, often overlooked because of the work involved, suddenly became a highly valued source of found money.

It no longer mattered how many donors were in the house file. This is a world where it's all about the value of the donors--not their volume. Metrics that incentivized short-term growth like response rate or attribution were replaced with more valuable measurements like multi-year retention and lifetime value.

Yes, there was a shock to the system initially, but over time growth returned to the nonprofit sector. Fundraisers found ways to innovate and grow even without the existence of direct mail.

The screen goes wavy and blurry as we are teleported back to our present-day universe. Yes, direct mail is still with us. It is not dead. The nonprofit sector did not collapse. Remove one engagement channel and the others grow stronger to take its place.

Direct mail is not dead, but it is in transition. Smart leaders are not waiting for it to vanish before making the intentional choice to diversify their engagement and fundraising channels. They know that today's potential and existing supporters live in a world where the only thing dead is single channel fundraising.

These same organizational leaders also understand that direct mail helps to feed recurring, mid-level, and planned giving programs. The short-term investment might not always look rosy, but the long-term value of these donors is where they choose to focus. Better use of data and analytics can help to boost fundraising performance from these additional revenue sources.

Online, social, and mobile can be vibrant places to engage younger supporters, too. These are cost-effective channels that continue to develop relationships for the future. That includes email. Even though Ray Tomlinson, the creator of email back in 1971, recently died, this channel is still alive and well.

If direct mail did disappear today, it would cause some short-term challenges, but it would not end all fundraising. Thankfully, we are going to see a gradual transition away from direct mail dependence at many nonprofit organizations. That's not because the channel is going away, but because leaders need to de-risk revenue sources through diversification. Having more mix in your fundraising channels not only works better with donors, but helps reduce exposure to the entire organization.

Leaders who don't embrace an omnichannel approach to donor engagement put their organizations at risk of an untimely demise. The future belongs to those leaders who embrace the shift and changes that are happening across the sector.

Steve MacLaughlin is a director of analytics at Blackbaud in Charleston, S.C. His newest book, Data Driven Nonprofits, will be published in September. His email is
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Title Annotation:COMMENTARY
Author:MacLaughlin, Steve
Publication:The Non-profit Times
Date:Jul 1, 2016
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