Addressing the Facts on Labels

Monday, May 3, 2004 – One of the more interesting newsletters I’ve been reading lately is the Fast Company Now Newsletter DIGEST, which notifies me of new posts on the FC Now Web Log. On Friday, something posted by Heath Row, entitled “Marketing Play,” caught my eye, given that it spoke to the business of direct mail and the lengths we direct marketers go to convince people to respond affirmatively to our offers. One riff led to another, of course (the tangled webs we weave), and I eventually found myself reading a page on G-Blog.net — written by a user named Spam on March 31, 2003 — about charitable organizations and their use of address labels as a front-end direct mail premium. “I just got forty-five adhesive address labels in the mail from some random charity asking for money. I have to wonder how much these labels cost,” asked Spam, the tone of his post betraying just enough skepticism (understandably) to prompt me and my colleague, Mike, to compose the following response in the spirit of shedding light on the matter and addressing the facts on labels.
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“How much do charities spend on these address labels?”

Good question! But you might also ask how much more money charities raise using address labels as premiums (free gifts, inciting people to respond) in their direct mail fundraising appeals.

First, let’s talk cents (pun intended). Let’s use your estimate of one dollar for labels — even though they usually cost less. And let’s say it costs only 50 cents, half the cost of labels, for a straight appeal package (sans labels). Now if we were to execute a statistically valid, A-B split, testing one package against the other, the response to the label package is going to be at least twice that of the straight appeal — more often than not. So if a straight appeal receives a 10% response, a label package gets a 20% response. And assuming the average gift (dollar amount received from the individual donor) is the same, you come out even. Or do you? The fact is that the label package has brought in twice as many donors — which means more dollars down the road for the charity. That’s right! If we’re working with 2,000 donors instead of only 1,000, we have a much greater opportunity to build — and reap the benefits of — a major donor program (which is usually a small percentage of a charitable organization’s annual giving file). So if statistics say two percent of the file becomes major donors, the label file has generated 40 major donors and the more economical mailing only 20. And when all is said and done, if the average major donor contributes $5,000, the label package has ultimately generated $200,000 for the non-profit organization and the straight appeal only $100,000.

So it is really not a question of how much money charities spend on address labels. It is how much they raise.”

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