Building a profitable direct mail fundraising program for a non-profit organization is like constructing a skyscraper; it takes an investment of time and resources to go from foundation to final, but once the building is complete, it is an asset that provides sustainable funding for the organization
For many nonprofit organizations, direct mail has proven to be the only effective and reliable mode of raising money. To be a successful program, charities need to build a donor base, which can cost more than $1 to raise $1. While this strategy has been debated for years – within the nonprofit and association communities, in Congress, and even before the Supreme Court, it has been a proven model for more than 50 years
For nearly 70 years, Quadriga Art has helped nonprofit organizations raise money in order to meet their mission goals and objectives. At the core of our company’s values is a focus on innovation, entrepreneurship, creativity and a deep and abiding sense of responsibility to the charities and communities we serve. We are committed to thinking big and making a difference, as well as offering our clients the lowest cost mailing solutions possible. That means working with organizations to determine what type of direct mail program is right for them
Direct mail donor files can be built gradually, where investment and growth are steady and conservative, or rapidly, where investment levels are accelerated and the overall profitability is higher
Gradual Donor Development Lifecycle
In a gradual growth scenario, the investment levels and cost of fundraising are lower, allowing the organization to generate positive net income 2-3 years before an organization on the rapid growth plan. However, since the ultimate donor file size is smaller and grows slowly, the long-term positive net income and philanthropic potential is also on a smaller scale. The market average for the response rate in a gradual growth scenario is 2%, and the cost to acquire a new donor is on average $15 per individual
Rapid Donor Development Lifecycle
In a rapid growth scenario, the initial cost of fundraising is more than the revenue generated in the early years, since significant funds are invested to acquire new donors and quickly build a large donor file. However, this accelerated strategy allows the organization to ultimately raise significantly more revenue over the same time span. Through an accelerated strategy, Quadriga Art has seen nonprofit organizations reach average response rates of 9%, with the cost to acquire a new donor at less than $7 per individual. Because a rapid growth scenario can delay the immediate return on the investment, Quadriga Art works with organizations to find solutions that will allow them to provide more program services as early as possible
Here’s our roadmap for success:
Year 1 à Create (draft the blueprint & break ground):
Regardless of whether the growth plan is rapid or gradual, the first year of a brand new direct mail program is almost always a net investment on the part of the organization. Net income is entirely dependent on the size of the donor file; the more donors an organization has, the more revenue it will generate. Acquiring a new donor file is like building a foundation – it costs more than it initially generates, but it is an asset for the future.
Year 2 à Validate (build the foundation)
In the first two years of a new direct mail program, the organization typically does extensive testing to ensure the long-term viability of the program. While the program is typically still running at a financial deficit at this point, it is starting to build the critical renewal donor file that will lead to significant net profit for program services in the coming years.
Year 3 à Rollout (extensive building)
In year three, the organization will continue to rollout the strategies that were validated in the early years of the program. In a gradual growth scenario, the organization could be generating positive net income at this point. In a rapid growth scenario, the benefits of the new donor acquisition program launched in year one will be apparent as the spending gap will start to close.
Year 4 à Cultivate (complete the build)
The fourth year is generally the turning point for most organizations in a rapid growth scenario; the annual new donor acquisition loss will be offset by the renewal donor base income and the program will generate positive net revenue. For organizations on the gradual growth plan, this step can happen as early as year two, and as late as year six
Year 5 à Sustain (fill units & generate profit)
For either growth plan, most direct mail programs should start to show significant positive net income by year five, even while they continue to acquire new donors. The amount of net revenue available for program services is dictated by the growth plan; those with the largest donor files will have the most revenue for programs and outreach.
Years 6 & beyond à Maintain (fully leased & profitable)
For most organizations, regardless of growth plan, the sixth year and beyond is where the program is running at a cumulative net-positive basis and generating consistent and significant net income. The skyscraper is complete
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