Ken Burnett, one of the founding fathers of charity direct marketing, has blasted the “stupidity” of charities getting donors to sign up for £5 a month claiming it takes at least two years to recoup the recruitment costs.
Burnett, who sits on the Commission on the Voluntary Sector and Ageing, was speaking at a round table on the future of fundraising at New Philanthropy Capital’s offices in London late last week.
He said that too many donors did not continue supporting charities long enough to repay even their acquisition costs.
“From the viewpoint of a donor giving an average £5 a month, it will be two years before any of the money that they’re giving goes towards the cause they think they’re giving it for,” he said.
Burnett cited an informal poll of donor recruitment costs, in which he said that a regular donor acquired through face-to-face methods costs a charity £160 on average, while a £5 ask by mobile phone cost £90, a two-step regular gift conversion was typically about £164 and a £3 regular donor acquired through the radio or press cost between £72 and £140, not taking into account overheads.
He added: “We’re coming close to eating our seedcorn, which has got to be the ultimate stupidity for a sector.”
In the early Eighties, Burnett founded Burnett Associates, one of the first agencies which specialised exclusively in the charity sector. For two decades Burnett Associates was credited with producing original, donor-focused and effective communications campaigns.
The agency relaunched as Lion at the tail end of the Nineties, but re-emerged as Kitcatt Nohr Alexander Shaw after falling into financial difficulties. Burnett set up again as Burnett Works, but left in about 2005 and now works as a consultant.
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Stupid charities ask for £5 a month, says DM specialist Ken Burnett http://t.co/ftTCuwIlG4 #directmarketing #digitalmarketing #advertising
Hi Charlie,
I’m always grateful to you and DM for your enthusiastic support of the charity sector and its marketing activities. The piece that Third Sector ran though was a teensy bit misleading in that is misquoted me and also missed the point I was trying to make. I didn’t say charities were stupid, I said they’d be stupid if they don’t take action to avoid eating their seed corn (ie, if the cost of acquisition + low retention makes donor recruitment unviable). And I didn’t claim that the costs i quoted (from a small sample of regular donor recruiters) were average costs.
My point was that acquisition costs such as they are can only be justified if we keep donors for longer and encourage them to give more. We need to improve the experience of being a donor, which we can do by giving much better feedback and improving what passes for customer service.
Fundraisers now can easily demonstrate a far better return from investment in fundraising than from investment in stocks and shares, yet charities, often with big stock and share portfolios, routinely underinvest in donor acquisition and retention.
Now that you mention it, you’re right. That is stupid.
Best regards,
Ken
RT @nfpdata: ‘Stupid’ charities… according to @kenburnett1 So what’s the alternative? See comment here http://t.co/7DJizxHlAe #fundraising
RT @kenburnett1: RT @nfpdata: ‘Stupid’ charities… according to @kenburnett1 So what’s the alternative? See comment here http://t.co/7DJiz…
RT @kenburnett1: RT @nfpdata: ‘Stupid’ charities… according to @kenburnett1 So what’s the alternative? See comment here http://t.co/7DJiz…
Are #nonprofits eating their seedcorn? http://t.co/mdHAiQ16dL asks @Kenburnett1 #fundraising
Like most sweeping generalisations, Ken Burnett’s claims that charities are “stupid” for soliciting 5 pound a month gifts is not only an unedifying insult to the charities that do it, but it’s also sheer nonesense.
He cites an “informal poll” to quote cost of recruitment. In other words, he rang some of his mates up. That’s hardly definitive. He also didn’t bother to ask any of his mates for the corresponding net present value of each donor acquired.
There are many ways that a 5 pound a month ask works. If you do it as a direct mail ask and you combine it with a cash ask, the cash response rate usually returns a cash-positive result and the cost to acquire any monthly donor, at any level, is effectively zero. So a 5 pound a month donor, with an average tenure of 20 months, is worth 100 pounds and it cost you nothing to acquire them.
There are also lots of opportunities to upsell the donor to a higher giving level, beginning with the very first ask. Most 5 pound a month asks are actually done as an asking string of 5, 10 or 15 pounds. And the average response is actually 10 pounds a month. Just because 5 pounds a month is advertised doesn’t mean it’s the modal amount given by all people who respond. The average is usually higher than the bottom of the asking string.
Then there are even more opportunities to upgrade the donor after they have signed up, using the thank you and welcome letters, using telemarketing and even using email and sms.
If a donor is currently contributing cash-only, and you cross-sell them to a 5 pound a month gift, it increases the net present value of that donor. In those cases, cross-selling the donor to regular giving, even a small amount, increases income.
If a donor is acquired as a 5 pound a month donor at the get-go, there are also opportunities to ask them for cash, making them more valuable as well.
And 5 pound a month donors can also be cross-sold onto bequest programs.
The assumption that all monthly giving programs take 2 years to return a profit is first: not true, and secondly even when it is true it’s not necessarily a bad investment to make. The discounted future income, less attrition, inflation and cost of capital is often still a higher rate of return than other forms of investment.
But instead of taking any of that into consideration, Ken Burnett is happy to just hurl insults at fundraisers, calling them stupid”, whilst peddling his own stupid gross generalisations. Hardly edifying.