Wednesday, February 16, 2011

BIG’s Blog: The Old Order Is Passing Faster than Expected

Oh, you thought I was talking about Mubarak in Egypt?

No, I'm talking about how fast direct mail net margins are eroding based on forces we all knew were coming; just not this fast!

Frankly, I thought most direct mail fund raising programs could still be profitable ten years from now - albeit much smaller. But, I am thinking five years is a stretch based upon some new information. Some of our latest work, as well as conversations with historically large nonprofit direct mail fund raisers, lead me to conclude that net margins are eroding faster than I believe anyone anticipated.

- Production cost increases

- Postage rate increases

- Declining response rates

- Shrinking pool of prospect names

We’re in uncharted waters here. This IS NOT good news for nonprofits that depend on direct mail. The last ten years have seen the cost to raise a dollar double through direct mail. Look at your own 10+ year direct mail net margin trend lines and tell me you don’t see eroding margins.

Does anyone think this is sustainable?

Yet ... Organizations continue building their mail plans.

Remember, I have been in direct mail marketing for 30+ years. Few individuals and organizations have been responsible for mailing as much mail as I have. I have no vested interest in seeing direct mail die; in fact, I have a deep emotional attachment to direct mail. What I am saying is as real as it gets.

Here is what is important: BUILD AN ALTERNATIVE STRATEGY while your direct mail program is still profitable – if it still is profitable – and nobody can say with certainty if your program has two, five, seven or nine profitable years left as each organization has its own dynamics, although studying your own trend lines would give you a clue. Do you have a fiduciary responsibility to begin asking and raising questions like, “What happens when our direct mail program is not profitable?”

Direct mail as an adjunct to a multi-channel direct marketing strategy is not what I am talking about here. An important note, when I am talking about direct mail programs, I mean direct mail alone accounting for a significant portion of your fund raising budget.

Are there ways to extend your direct mail programs profitability? The answer is yes; and it might buy you another year or two but the truth is that it is akin to rearranging deck chairs on the Titanic – the direct mail ship as you have known it is going down.

The good news is there are alternative strategies out there.

Starting with my next blog, I am going to share an article that hit me like a ton of bricks. It will have the same affect on you.


Welcome to BIG’s Blog and yes, by all means forward our blog to your friends and co-workers.

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