Price Testing: Essential for Successful Fundraising (June,2002)

By Erica Waasdorp, Vice President, DMW

When someone asks me if there is a difference between commercial direct marketers and fundraisers, my typical answer is: "There are many differences, but the biggest one is price."

In fundraising, the donor sets the price. All we fundraisers can do is ensure that we build enough emotion into our appeals to give the donor a reason to make the price higher than he or she might normally pay.

For that reason, one of our biggest tools is the "ask amount" – the amount we propose that a person donates to our organization. Once we receive a first gift from a donor, we can build on the price of the initial gift from there -- mostly by following a step-by-step approach of price testing and adjustments.

Testing With Direct Mail

For many organizations, it is often hard to establish from the first gift what the potential of the donor is for future giving -- whether he or she is going to give again, how soon, and how much. It is a continuing challenge to identify which $5 donors might be willing and able to donate $25, $100, $250, or more. Price testing with direct mail is ideally suited to accomplishing this task.

Through testing (especially in donor and renewal appeals), it is possible to see which donors can be worked up the giving pyramid, and by which offers. Testing is vital in helping to improve response, average gift, and the lifetime value of a donor or member.

One major rule in fundraising is: "If you don’t ask, you’re not going to get it." Yet, if ask amounts (or prompts) are set too low, average gift size will go down. If prompts are set too high, response rates will go down. Of course, having a high response rate and a high average gift is the ideal we all try to reach.

The key to addressing this challenge is to test "ask amounts," and establish the relevant amount by type of donor and cause. Following are a few practical tips for doing just that.

1. Always test. Each organization is different. What works for one may not work for another. Set your ask amounts based on tables driven by prior giving.

2. Always establish a control ask amount string. For example, if the existing ask amount string uses a prompt for $15, $35, $50, $Other, and the resulting average gift is $35, you can begin testing and evaluating test results using this string as your control.

3. Don’t ask for too much. For example, if you ask a donor who just gave $15 for $1,000, that donor may become upset and go away forever. An ask amount string that is slightly higher than the current gift, however, may well work wonders. For example, if the current gift is $25, test an ask amount string of $35, $50, $75, $Other, and see what happens. Note: The rules are different for acquisitions. Many organizations seeking to acquire new donors conduct a campaign and are disappointed when the response rates are low, even though the average gifts are high. It is important to realize that the goal of acquisitions is to bring in new donors or members, so higher response rates are key. Therefore, it is often wise in this situation to ask for a lower amount, and bring in more new donors or members who can be upgraded later.

4. Use laser-personalized packages where possible. This allows you to easily test special ask amount tables that can be calculated based on previous gifts received.

5. Consider using incentives. Again, testing is key. Especially for a gift of, say, $100 or more, a certificate, a mention on a plaque, or other incentive may go a very long way at a very low cost, and it may even help improve your retention rate.

Test, Test, Test

Organizations are different in size; the smaller ones may not have the donor numbers to test. Smaller organizations will need to go with what has been proven to work. However, if the number of donors or members are there for you to test (minimum of 5,000 per cell to generate significant results), then price tests should be on the top of your list, based on the segment into which the donor or member falls.

Developing and analyzing tests, and determining rollout strategy are critical factors in successful direct marketing. Continued price testing efforts by fundraisers can have measurable impacts on their bottom lines as well -- raising more money for a wide range of charitable organizations.

Erica can be reached via ewaasdorp@dmwdirect.com or (774) 773-1200 Ext. 224.