Friday, September 30, 2011

BIG’s Blog: When You’re a Hammer, Everything Looks Like a Nail

When you’re a hammer, everything looks like a nail.

Think that’s not a truism? Try this: call up several of your physician friends who are specialists: i.e. an internist, an ophthalmologist, a psychiatrist, and describe an undiagnosed pain you are having. Listen carefully. Each one will lead with a diagnosis that is close to their expertise and specialization. These are very bright people, yet almost always they will look at something new from their experience and expertise. Most of them are so bright that they will even tell you that is their bias. Are we any different?

Right now, direct marketing agencies are trying to figure out how they should be helping their nonprofit clients transition to digital. They are quickly trying to figure out how to meld the demands for new digital marketing services, while still keeping direct mail – their economic bread and butter – viable.

I understand this completely as I ran a very large direct marketing agency in the 1990s even as the digital revolution was starting. We knew how to make money on direct mail and since it was mailed in such huge volumes, this was big dollars for the agency. But today, the economic mainstay of direct marketing agencies, namely direct mail, is declining. These agencies know how to make money creating and producing direct mail, but can these agencies have a viable and sustainable business model in the future as direct mail declines?

My sense is that just like some of today’s nonprofit fund raising organizations that are heavily reliant on direct mail, some nonprofit fund raising organizations and some direct marketing agencies will make the transition and some will not.

The hot buzzwords today are integrated marketing through multiple channels. Even we write and talk about it as the future of direct marketing for nonprofits. While I agree that integrated, multi-channel direct marketing is the future, I am less certain that it will be practiced in the same way that we practice direct mail marketing today.

My fear is that everybody thinks we are just going to use the same model as direct mail and translate it into digital. This makes some sense when you compare direct mail and email. They are kind of the same thing. But even between printed mail and digital email, there are very real differences in the dynamics of use.

Here is an analogy. We all still read. Reading is still reading but getting a book, magazine or newspaper is functionally different between print and digital. And it is this functional difference that is fundamentally disrupting the traditional book publishing and printed newspaper business. If the book publishers and traditional newspapers can’t figure out how to make money in a digital world, they will go out of business. So then, how will we get our favorite books and newspaper “news” if these businesses can’t figure out how to make money in the digital world?

The answer is that somebody will figure it out. As long as there is demand and competition, somebody will figure it out.

Ah, but will that “somebody’s” business look like the old traditional book publishers and traditional newspapers? I doubt it.

THAT is precisely the reason I worry about the traditional direct mail marketing agencies that 20 years ago only offered direct mail and now are offering a host of digital services, but still using the same traditional direct marketing model.

The movement from direct mail-based direct marketing fund raising to integrated, multi-channel marketing with the same direct marketing model seems to me like incremental change. I don’t think what we are going through is incremental change. I think it is a profound and fundamental shift.

Creeping incrementalism isn’t going to cut it. Keep the direct mail fund raising model for as long as it’s viable and raises revenue for your organization. But, digital is profoundly different as are the behaviors of the “younger” targeted audiences you are trying to reach with digital.


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Wednesday, September 28, 2011

BIG's Blog: Moving in the right direction

"Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route for success.” -Stephen A. Brennan

Executive leaders are the driving force behind a healthy organization. They are focused and devoted to do whatever it takes to ensure organizational performance is at its best. Clearly defined goals are required in order to achieve success.

The goal for nonprofits today should be to look at the current business and fundraising plans and determine where change is essential. Don’t let changing dynamics of the industry affect your mission’s success.  Whether setting an organizational or individual’s goal, remember to be “SMART”.  

Paul J. Meyers, Attitude Is Everything,” defines SMART as Specific, Measurable, Attainable, Realistic and Tangible. Defining these steps in your plan will help attain most goals as long as the timeline is realistic. 

Seek outside assistance if the organization needs direction to get started on this process. An outsider’s perspective may identify potential opportunities overlooked by management.

"Goals are not only absolutely necessary to motivate us. They are essential to really keep us alive." -Robert H. Schuller


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Tuesday, September 27, 2011

BIG’s Blog: Moneyball

Moneyball, the recently released movie starring Brad Pitt, is based on the 2003 best selling book by Michael Lewis. The story line is about the Oakland Athletics and their general manager Billy Beane using analytical sabermetrics to assemble a competitive baseball team, despite having less than half the revenues of other major league baseball franchises for player personnel. In other words, he had to get the biggest bang for his bucks with the players he chose in the draft and in trades. Beane used sabermetric analysis to improve his odds.

Wikipedia offers a great synopsis of Moneyball to thoroughly understand the story of the Oakland A’s, but suffice it to say that there is a key correlation between what Billy Beane was using statistics for and what nonprofit direct marketing fund raisers should be using statistics for. Both have limited resources and need competitive advantage.

As a professional commercial direct marketer coming into the nonprofit world, I have long known that nonprofit fund raisers are not using analytics at anywhere near the level of their commercial counterparts. We all have heard the terms analysis and data mining, but I have yet to find a nonprofit fund raising group with a statistician on staff.

As the Moneyball story explains, the essence of analytics is a new idea of how you manage using statistics. Direct marketers, including nonprofit direct marketers have long used RFM; which stands for Recency of a gift, Frequency of giving a gift and the Monetary value of the gift as the key selection components for segmenting and selecting prospect lists. Analytics goes so far beyond RFM analysis that it is like the Wright brothers airplane at Kitty Hawk versus the Space Shuttle. Using analytic methodologies, you drill into hundreds or thousands of cross-referenced data points to detect patterns or discrimination between variables that could lead to discernable patterns that can be statistically significant.

What this means for nonprofit direct marketing fund raisers that use analytic methodologies, you mail 40%, 50% or 60% of a list that you would otherwise mail 100% of and still get essentially the same number of responses. This can be huge savings for direct mail fund raisers.

It’s bang for the buck. It’s Moneyball.

Go see the movie!


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BIG's Blog: Performance Indicators

Nonprofit directors rely on metrics to determine the success of fundraising efforts. Some measure success as the number of new donors or growth of revenue. Others review cost-income ratios to determine the health of their programs. This data is helpful in driving fundraising/marketing efforts, but these metrics do not measure a nonprofit’s health.

One way to review the organization’s success is to establish key performance indicators (KPI) to assess the performance of the business units, departments and employees. It is critical that large nonprofits establish KPI to rate the efficiency, productivity and profitability of services they own such as: caging, data entry, creative, printing, mail shop and fulfillment centers.

Executive leaders should define clear, meaningful and measurable indicators that will be used to determine the health of the organization.

“Once a company has redesigned its regular strategic, budgeting, and planning processes to inject a strong dose of “healthy” thinking—and appropriate metrics are in place—executives must embed health in formal people-management mechanisms, including performance contracts, incentives, career path planning, and staffing decisions. Managers at all levels should know the expectations set for them. Companies should use the metrics discussed earlier to structure evaluations ensuring that employees reap rewards as much for doing health-building work as for enhancing performance.”

This statement may be a tough “pill to swallow,” but if the organization’s goal is to be healthy today and in the future, this action must be taken.


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Sunday, September 25, 2011

BIG’s Blog: What does the Ritz-Carlton’s Repositioning Campaign have to do with how you Raise Money?

So, what does a high-end hotel chain’s marketing campaign have to do with how you raise money from donors?

The Ritz-Carlton Hotel Co. recently launched a ten million dollar campaign as reported in Direct Marketing News to spread awareness of its new brand positioning. The marketing campaign included direct mail, email, social media and banner ads plus print ads.

The “news” is that half ... $5 million ... of the total $10 million marketing budget was dedicated to digital.

“This will be the first time in our history we’ve spent more on [a campaign’s] digital [elements] than on print,” said Allison Sitch, senior corporate director of PR at Ritz-Carlton. “Now, the visuals depict the detail, the little touches of staying at our hotels. I don’t mean a rose petal on the bed. I mean the details of a moment in time during the stay with us. The visuals depict all of the moments that you will carry forward for a lifetime.”

Ritz-Carlton recognizes they are competing with other luxury hotels. What if they had spent their marketing dollars the same way they spent them in 2004 which was the last repositioning campaign?

2004 was a time before Facebook, Twitter, Foursquare and a host of new digital visual technologies. So, what changed? Yes; the digital and social media expanded, but so too has the customer evolved since 2004.

Think about this for a minute. How much has digital marketing media changed since 2004? How much have your donors changed?

There is no doubt in my mind that your fund raising group’s digital work has grown since 2004. But, is digital anywhere near 50% of your spending? Is it even 10%?

To the Ritz-Carlton, this isn’t theory; they are spending 50% [$5 million] of their marketing dollars on digital elements to drive revenue for their hotel chain.

Yes. The digital technology and social media landscape has expanded and evolved since 2004, but so has your donor.


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Friday, September 23, 2011

BIG's Blog: In His Own Words

I take arrows for being so up front in talking about the coming demise of direct mail fund raising. I never say direct mail is going to disappear as one of many channels that fund raisers will use, but I am very clear in saying that in less than five years your organization will not be doing direct mail fund raising the way you are doing it today.

Why? Well, there are many reasons, but for today’s blog we are going to concentrate on just the problems of the U.S. Postal Service itself.

Click on the Postmaster Interview link below and listen for yourself to the Postmaster General talk about what the Post Office is facing. Then decide for yourself.

Listen to the Postmaster say . . .

“Things have changed dramatically within the past year. We lost a substantially larger portion of First Class mail and looking ahead it isn’t coming back.”

“The Internet and technology are the big change.”

Then my two personal favorite comments . . .

NPR: “Are you a business that has no future?”
PG:  “There will always be a need for a hard copy.”

My Comment: Really? There will always be a need for a hard copy sent through the mail? Like the PG has never heard of electronic signatures and printers? Also for nonprofits, he never mentions advertising mailings as an important piece of the Postal Service’s future.

PG:  “I don’t pay any bills online. It would be terrible for the Postmaster to be paying his bills online.”

My Comment: You know, I would have held out some modest hope for the guy if he would have said, “Sure, I pay some of my bills online. That is where things are moving and we are going to find our niche.” But, he didn’t say that. He stonewalls the technology that most Americans are moving towards and THAT (in a nutshell) is the problem with the current leadership of the Postal Service in general and their future prospects.


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