Charities | Supply + Demand Funding Formulas

Donation-12-28-2020

As I mentioned in my last charity related post, I get about 300-600 direct mail donation requests each year. Each charity’s direct-mail pieces encourages me to give more in two ways:

  1. They suggest donation amounts like:  $40  |  $60  |  $80. This is an old retail-upsell tactic: feature products at various price-points. While multiple price-points help people find a product that they can afford, it also frames the high and low ends of the product line. Because most shoppers don’t like to be perceived as “cheap” they move away from the low end; in this case a $40 donation, and give $60 or maybe even $80.
  2. They encourage me to make recurring monthly donations by credit card. 

In December 2020 I found more charities than ever were following up their direct-mail campaigns with a telephone call. This is another tried and true strategy that boosts DM response rates exponentially – if handled properly.

This year two charities really pissed me off. One called and the other came to our door. Both used the same lame excuse to argue an automatic credit card donation of just $30.00 per month.

We need you to make an ongoing commitment to enable us to plan & fund our current and planned initiatives.

I’m beginning to feel a bit hosed. Maybe they mean well but maybe they’re being managed by young, stupid people who discovered and adapted a “best practice” they found on-line. Except that I’ve see the same (high demand \ limited supply) strategy used by all sorts of (Ad) Agencies for over 40 years. It works like this: "to achieve our goals we need $XX,000,000 revenue with XX% margin per year. Therefore we need XX clients willing to pay us $XXX,000.00 per year – or about $XX,000.00 / mo.

It’s a great approach in a high demand market where you can pick the best (most lucrative) clients from all of the ones who call you and want to work with you or your agency.  

But 2020 was not one of those years for most companies, and 2021 probably will be another excess supply year - fewer calls and little new (high margin) business to choose from. 

In low demand (excess supply) years like 2020 and 2021 the better way for a charity (or an ad agency) to move forward is as follows:

  1. Look at how much I just donated.
  2. Look at your records to determine my cadence.
  3. Use a. and b. to figure out what my annual donation works out to be.
  4. Spend 1/12 of that amount each month.
  5. Repeat steps a. – d. for each donor.
  6. Add new donations as one-time "manna from heaven" events until you have a donation cadence to fall back on.
  7. Use your monthly + annual totals to sort out what you can afford to do in this lean year. 
  8. In lean years do what you can, for those you serve, and pray that the economy will rebound sooner than later.

 

Nothing lasts forever. Not the good times, nor the bad times.