The Trinket Dilemma: Considering the Pros And Cons Of Premium Incentives Published in Fundraising Success Magazine May, 2009 By Willis Turner willis@huntsinger-jeffer.com

Sugarcoat it with all the euphemisms you want, but offering premiums in an acquisition campaign is essentially bribery, plain and simple. And pretty unsubtle bribery at that.

You’re saying to a prospect, “Look, I’m afraid you don’t care enough about my organization’s work to support it out of passion or principle, so I’ll offer you this trinket to try and buy your loyalty.”

The dilemma is obvious. You’re going to have much greater loyalty from people who support you because they believe in your cause. But those premiums sure can bring in more donors.

At least in the short run.

To a development director, the promise of the premium can be very alluring. For a relatively small investment in mailing labels or tote bags or whatever, you can reasonably predict that significantly more people will respond to your mailing.

And in fact, when you start seeing the results of your premium test versus your non -premium mailing, you may be pretty happy. You’ll likely see that your premium, front end or back end, did in fact, outperform your non-premium control.

The long-term return, however, is something else again.

It doesn’t take long to figure out that if you had to give them a premium to make their first gift, you’re almost certainly going to have to give them another one to renew them. Even worse, the next premium you send will probably have to be “nicer”, (i.e., more expensive for you) than the first one. Suddenly you’re in an ever-escalating cycle of having to keep up with your donors’ rising expectations.

And to make things even more difficult, your competitors are out there doing premium mailings too. And often they are bigger organizations with bigger budgets and – surprise, surprise – fancier premiums!

And for all that, premium donors still end up being a lot harder to renew, In fact, many organizations have found that they need to enroll up to four times as many premium donors as non-premium donors to net the same amount of house file revenue. So in the end, dependence on premiums often produces short-term gains at the expense of long-term continuing revenues.

Unfortunately, getting rid of premiums may not be as easy as it sounds. A lot of organizations have had premium-based programs in place for a many years. And just walking away from them is simply not practical.

Typically those who try it find that simply reducing or eliminating premiums comes at a very high cost. While donor retention and average gift may increase without premiums, those gains can all too easily be offset by a precipitous drop in the total number of donors on your file.

But as Beethoven was fond of saying, sometimes the opposite is also true. The inconvenient fact is that the Trinket Dilemma is seldom an either/or proposition. And the most successful resolution involves time, patience and testing.

You might be surprised to find, at the end of the day, that what you really need are more control packages.

In many cases, we have found that there is frequently a sub-group of premium-acquired donors who simply will not respond to non-premium mailings. It takes some testing and analysis to establish the size and value of this sub-group, and the revenue potential that might be gained through operating your program with both a premium and a non-premium track.

A two-track program like this can usually be conducted at relatively low cost by simply creating two versions of each house mailing – but the cost and value will ultimately be dependent on the size of the premium-required subgroup.

There are organizations out there that have had as many as five controls in a single mailing. These groups have adopted a best package-best list strategy, in which the best performing packages are mailed only to the lists which have proven most effective.

Yes, this kind of package testing can be frustrating and expensive. But if you’re really interested in the long term growth of your organization, it’s absolutely necessary to continue the search for a breakthrough.

Start with a careful, thoughtful, and detailed analysis of your past test results. Then assemble your best team to brainstorm every aspect of your program. Bring in stakeholders from different sectors of your organization, not just program and fundraising people. If possible, you may even want to involve a long-time donor or two in the process.

Your goal is to seek out fresh ways to frame your appeal, in order to attract new attention from donors who will not be premium-dependent. Think in terms of the lifetime value of your donor, and focus on packages that will stimulate involvement in your organization’s mission.

Some tests that have proven successful for other organizations include:

• Sponsorship or adoption offers allowing donors to help underwrite key elements of your program.
• Membership or supporter campaigns.
• Bounce-back devices like sign and return cards that donors can sign and return. These give donors a sense of direct contact with the individuals they are helping.
• Involvement devices like petitions and surveys
• Gift demonstration vouchers that tie specific gift amounts to specific items or services your program provides.
  

These are not necessarily new concepts, but when packaged correctly, they can produce outstanding results.

You might also test more innovative “outside the box” formats to see if they can increase response enough to offset the package cost and still provide high value members.

A successful example of this is the control package for Volunteers of America. For years, they mailed an Annual Fund before they discovered a customized version of the paper bag package.

The bag cost almost twice as much, but brought in three times the number of donors – making it very worthwhile. Plus, as an affiliate-based organization, they were able to develop a geographic tier system for each chapter. The combination cut their cost to acquire a new donor in half.

Additional opportunities for new donor acquisition may even include opening up new markets. As you probably know, the U.S. Hispanic population is rapidly growing in size, influence and affluence. And as the country continues to grow in cultural diversity, opportunities to target and test into new population segments are going to grow as well.

In the end though, the question is not so much whether premiums are good or bad. It’s what your real objective is for your fundraising campaign. If you want long term, loyal donors, then use your best creative minds and most strategic mailing techniques.

Create powerful, mission driven creative, then get out there in as many channels as you can. Get attention, tell your story and give your reader a compelling reason to take action.

If on the other hand, it’s more important to get your numbers up in the short run – and don’t get me wrong – there are many situations in which that is a very legitimate goal, then premiums can be a perfectly good tool to help you accomplish that. Just be prepared for a challenging transition period when the time comes to renew those trinket-loving donors.