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Home > Research Articles > The wrong names can sink a charity's mailing program

Non-Profit Times

Sunday, May 19, 2002

By Tom Pope The wrong names can sink a charity's mailing program You would think that getting a list of names from which to fundraise would be pretty simple. You call a list company and presto, a billion names appear. Well, no. There are so many twists, turns and nuances to a mailing segment that 25,000 names can be very expensive when they don't work. A triangle of roles exists with the list owner at the top, according to most experts. The list owner is the list mailer organization, like the American Heart Association. On one arm of the triangle is the list manager who represents that file and rents those names to other organizations. The third arm is the broker. The broker acts as a consultant to the mailer and deals with lists from all over the country. The functions differ because of two separate programs. "When an organization hires me on an exclusive basis, I represent its file as a manager to rent or exchange," said Brian Manning, senior vice president for Direct Media Incorporated's Nonprofit List Management Services (DMI) in Greenwich, Conn. "For example, it's my responsibility to build the American Heart Association list revenue from its existing donors," he said. "But when it hires a broker, the organization wants to increase its donor base with new names." Previously, the broker simply recommended lists depending on the audience sought by the organization trying to raise money. But today's broker should go beyond that to guide the fundraiser to appropriate markets, according to Ralph Palmer, vice president at Rubin Response, a list broker in Schaumburg, Ill. "A broker should advise on the selects or factors that would help the organization," he said. "The broker seeks to guide them into demographics (selects) they want to reach and then to provide the right list with a full explanation of why the list is appropriate." The broker is the chief way to get guidance information about list managers. The broker should supply knowledge about tailoring a mail plan for greater effectiveness. The broker should also analyze the results after the mailing. Consultation should include a report of successful users of a particular group of lists so the fundraiser can get a feel for the audience of other companies. That way the fundraiser can determine which audience of a particular list is similar to the desired audience. "Brokers have to advise clients about quantities that should be tested," Palmer said. "Some people might want to get a reading from testing 2,000, but that is statistically impossible. Sometimes a test of 5,000 to 10,000 could lead fundraisers to jump at expanding the number drastically, but they have to use caution." The role of the broker is not to get the order but to provide the best possible information for the fundraiser, according to Palmer. The first step Knowing your current donors is vital before going out to get more. An organization like the Veterans of Foreign Wars (VFW) realizes that targeting a mature audience is different from going after a very young population. "If you appeal to a mature audience you might be interested in the list of the magazine World War II," Palmer said. "Read the ads to see who the appeal is designed to attract and you can determine whether the audience is young or mature." Outside lists can only generate new donors when those lists meet your donor's profile, according to Fran Green, president at the American List Counsel (ALC), in Princeton, N.J. Ask for information about what other fundraisers have used successfully. However, you may find out that the donor is responding to some affinity or is attracted to an item or purchase rather than the affinity. "An environmental fundraiser may want to use another environmental list," Green said. "Yet, they may discover that list relies on a younger or rural group of people compared to its average donor," she said, and doesn't do as well. Getting the most Decide on the volume of names to test when ordering lists. The more volume, the more leverage you have making deals, explained Kelly Browning, executive vice president of the American Institute for Cancer Research in Washington, D.C. "The standard brokerage commission is 20 percent, but volume discounts can be negotiated," he said. "The volume has an impact on merge/purge because the more names put in to the merge, the greater the rate of duplication of names on the lists." Merge/purge is a type of cleaning. All lists have to be "cleaned" or checked for various reasons, including: a duplication with the house list or others you test; reliability of information, such as addresses; or making sure the person has not opted out from any mailing. Negotiations for lists can be based on a net-name arrangement. The standard practice is an arrangement where the mailer pays for 100 percent of the names. "But if you order beyond a small limit of names and use a list for over a year, you can make arrangements where you pay for a percentage of the names," Browning said. An order of 50,000 names could warrant an 85 percent net-name arrangement. After the merge/purge you may actually mail 65 percent of those names. Yet you would pay for 85 percent rather than the 100 percent figure. "The idea is that with so many names getting knocked out because of big mailer's duplications, the names are pro-rated so everyone gets a fair share of the duplications," he said. "That way you pay based on how many names you mail." You try to get the net-name arrangement as close to the net you have been experiencing over the last few mailings with that list. "I used the Time magazine's list and have been netting 68 percent," Browning said. "I will try to get a 70 percent or 65 percent net arrangement to keep the cost as close to the base rate of the list." Exchanging your names Once you begin working with other lists to build your donor base, you discover that your house file becomes a weapon in your marketing arsenal. Browning helps his organization as a fundraiser but also as a list owner. Working exchanges means you can reduce the costs when you purchase lists. One of the first decisions is to look at other organizations that maintain lists you can get on exchange, according to Browning. He cautioned that sometimes you only get lists on exchange because an organization in the same field is wary to rent and let you take advantage of a targeted market. "That's when I hire a list manager to rent out my list or to exchange it for another," he said. Response vs. compiled The general difference between the two is that a compiled list includes the whole universe of a segment, such as doctors. The total of 700,000 only tells the fundraiser that the names are doctors. On the other hand, a response list may be a sub-set of that showing 70,000 names of doctors who responded to a particular product or letter. The accuracy of a compiled list is a few percentage points less than a response list because they are not based on whether the name responds. Thus, most compiled prices are less than response costs. A response list usually costs an average of $100 and more per thousand names compared to $60 to $65 for a compiled list. "The compiler is a manufacturer," said Adam Dunhill at Hugo Dunhill Mailing Lists, a list compiler in New York City. "We take original source material from paper, tapes, CD-ROMs and convert that to make the different sources fit into a database." Some compiled lists may arrive from association rosters and could be as accurate as response lists. "State licensing records that show everyone who is a nurse has to be up to date," he said. "This is treated by the state as a response vehicle because the licensee has to stay current." A perfect list for an offer generally doesn't exist, experts said. Fundraisers should ask the question of what comes closest to a profile. "An environmental group might seek the list of the National Geographic," Dunhill said. "That doesn't mean the name has donated in the past or what level of wealth is reflected by the presence of the name." Dunhill pointed out that a residential file is a compiled list that can be augmented. Information about age and income can be overlaid on top of the residential factor. Key items, like voter registration or owning a home for more than 10 years, can narrow down a list of names to a specific profile. Response lists could be niche oriented. "They could be regional lists and because of a geographic location, the universe is small," he said. But, a local youth organization in a town might make use of this list because it requires the names of people within 20 miles of its location. Compiled lists have a place, especially when competitors prove hard to loosen their grip on their organization's list. A compiled list might have names of people who have attended a YMCA. "The YMCA and Little League might be competitors in a situation where the Little League wants to borrow the Y's list," Dunhill said. "But the YMCA might have a baseball youth league and feels the exchange of its list hurts its nucleus." Broker Palmer believes that a response list can better hit the marketing bull's eye because those names have shown a propensity to read the mail. Fundraisers must discover why the response occurred. Names might have responded because they won something as opposed to subscribing to a cause. DMI's Manning believes a role exists for the compiled list, but the source has to validate the factors involved. The source has to inform you about whether it verified that the name actually is part of a segment or group. This leads experts to desire datamining or fine-tuning segments to specific niches. For example, information in compiled lists might show who owns a 2000 Mercedes. "Based on the model, the marketing person could figure out the customer would get rid of their cars in three years," Browning said. Data = better targeting A compiled list is a smaller version of a compiled database, according to Bethany Stanley, senior marketing manager at Experian in Schaumburg, Ill. While a compiled list could have three data elements or demographics, the database contains hundreds. Years ago nonprofits sent the same message with a one-shot approach. "Databases look at behavior to enhance your mailings," she said. "You can realize that you only hit certain people once because you know greater details about what prompts them to respond and when." Experian handles a consortium database and a large compiled database such as its Insource list that contains households and demographics. Such databases can be used for acquisitions and enhancement to take known donors and use data mining more intelligently. "You can customize the message in a newsletter or email," she said. "Now you can send a different letter to various households depending on whether they have a child." Data mining with large databases decreases wastes. Waste can appear in the form of undeliverables or can be a message that is irrelevant to the timing of the donor. "If the receiver has children and you talk about retirement, you could lose them and they will no longer have the same feeling about you," she said. "Timing is part of data mining." Despite their advantages in counseling, brokers are generally not expert in the data mining business, according to Stanley. Brokers are very knowledgeable but they still deal with a subsegment of lists. "The broker may purchase a compiled database of known contributors, but if they want to intelligently pull from that list, they have to datamine and move beyond to the entire country," she said. Lists require testing because the names that respond on one may not be interested in your message. Many highly responsive catalogs or subscription lists can fail despite the responsive quality of the receiver. One type of promotion might attract households with children, but if you ask them to become a member of a cause related effort rather than accept a promotion, the response may be different. "Each mailing has to have a hybrid approach," Dunhill said. "There is never a case for only response or only compiled lists and the percentage can only be determined by testing." Experts agree that approximately 5 percent of the total should be devoted to testing new names. When you start to mail larger volumes, you will hit a wall by running out of names. "To avoid that, test half a million names with 25,000 to 50,000 that represent five to 10 different types," said Dunhill. Browning said that he uses a mix of lists. While 25 percent are from healthcare, another roughly 50 percent are from charitable organizations that could include veteran groups, social or welfare charities. The last 25 percent are from commercial lists. "Commercial lists are important to the overall mix," Browning said. "If your donor base only comes from other charitable lists, you don't have the chance to grow." Tom Pope is a New York City-based journalist who writes about management issues.