Wednesday, June 5, 2013

BIG’s Blog: The Wall Street Illusion

The other day I got a note from a very good Development Director who regularly reads my blogs. Although he agreed, “fundraising is changing,” he just finished his best year in the last five years with direct mail, and he tells me all of his digital initiatives were only generating a fraction of what his direct mail was generating.    
Here was my reply:
The short answer is that you are experiencing in your direct mail fundraising a variant of the Wall Street Illusion. 

The stock market crashed in 2008 and early 2009. It fell from almost 14,000 in 2007 to 6627 in early 2009. So, a year later when it had climbed back to 9500, we all felt great. “Wow, my portfolio of stocks in early 2010 was up 43% from a year before. Of course it was still down 1/3 from the high in 2007.” But all we focused on was one year’s GROWTH. Remember, the stock market goes up and down day-to-day, week-to-week, month-to-month and year-to-year. But if you want to see the trends, look at the five or ten year chart. What does a ten year chart of direct mail revenue for the last ten years look like for your organization?

This is where comparing the stock market to direct mail fundraising breaks down. The stock market that is based on the performance of the U.S. economy will recover and grow . . . that isn't going to happen with mail. Just because you are up from your lows from a year ago or a few years ago doesn't mean you will ever see gross revenue numbers from direct mail like you saw 10 years ago or more.

You don't have to take my word for it. The DMA's nonprofit studies and Blackbaud's Target Analytic group are saying the same thing. Plus, is the Post Office opening offices or closing offices?

And why are your digital fundraising efforts barely able to generate 5% of what you bring in via direct mail? The answer is that the Internet isn't a digital form of the old analogue media, it is a NEW THING. You need a new fundraising strategy that is built for the Internet. Until you change your fundraising methodology with these new digital tools, you’ve merely substituted digital for analogue.

At some uncertain point in the future, your direct mail appeals will become unprofitable. When? Nobody knows exactly.

But what we DO KNOW is that your organization needs a fundraising methodology that has a sustainable growth path. One model will eventually decline while the other grows. 

Take advantage of your up years in direct mail to build Plan B on the Internet.
Join us.
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