The cost of a direct mail fundraising campaign: what not to forget

Less cluttered doormats, better data, increasingly receptive audiences of all ages – and a greater need than ever to raise funds. No wonder you’re considering cold direct mail.  

But as with any channel you also need to think about the financials, and charity direct mail packs tend to have more elements than most to consider when costing up a campaign. If you’re new to DM or are coming back to it after a long break, it’s easy to be blindsided by an unexpected additional cost.

No one wants any nasty surprises, particularly with the year we’ve just had. So it’s important to plan in advance every step of the process and how you’re going to manage the costs. This way you’re fully prepared for how much budget, time and expertise a campaign is going to require. If you’re new to direct mail, involve all the different specialists you’ll be using as early as possible, as they will also help spot any gaps.

Here’s a checklist of 5 commonly overlooked areas:

• Your team’s time

This is most often forgotten about when relying on existing staff. But there is of course still a cost associated with using your own people. It’s all too easy to forget to include the cost of your team’s time if they are switched from other duties to developing, running, and managing a new DM campaign. This should all be added into the true campaign cost.

• Campaign creative

If your organisation is new to cold mail, you’ll need to pull together the creative and copy for the first time, which can be a complex task combining brand values, essential messaging and of course the ask and giving mechanisms. There’s a particular skill to writing copy that elicits a response and it’s common for the initial creative origination to be outsourced, so ensure you’ve budgeted for it.

Ideally, have a separate budget line for this probable one-off expenditure – this way it’s easy to account for the spend without it impacting the campaign’s performance. After all, if the initial campaign is a success, the same creative and copy will likely be used again or tweaked only slightly, so that cost may not be incurred again. Analysis later down the line would be misleading if it were included.

• Data costs

This is the area people generally believe is the most straightforward. It is billed at a cost per thousand names, plus sometimes selection and delivery costs. The gross list cost is often only around 25% of your total campaign cost. However, you pay for volume supplied rather than volume mailed out, and you will lose names in the merge process. With a small house file and just a few lists you may only lose 5-10% of the total records delivered. However, with a large house file and numerous lists, loss increases exponentially and can be in the region of 40%. As such a large proportion of your budget, bear in mind that data cost has a big impact on campaign performance.

• Data processing

Once you have your data, you’ll need to ensure it’s fit for use. This means merging the files to get rid of duplicates and creating one single output file. This then should be run against the MPS (Mailing Preference Service), and relevant suppression files to strip it of goneaways, deceased, and inaccurate records.

Every supplier of this service charges differently. Common costs include: uploading incoming files and selections (usually a fixed cost per file input), data cleaning (usually per record matched) running costs (usually per ‘000 depending on total records processed).

Also, it sounds obvious, but don’t forget to supply your own data for suppressing. Not just your active files, but lapsed, stop files etc., as you don’t want to mail an existing donor with a cold appeal and their inclusion will impact costs.

• Response handling

While print and postage costs are usually on the radar, what’s often forgotten is the response handling. An agency is generally the best bet for processing payments, which will need to be budgeted for. But you’ll need to manage returned letters, as well as recipients calling to ask where you got their name from, or requesting you stop mailing. This can be time consuming, stressful and expensive without effective management.

For example, if someone returns an envelope with “Do not mail” on it, being able to identify the original data source without opening it will significantly reduce costs. While if any of this is not handled correctly and becomes a complaint to the ICO, I think we’re all too aware of the potential financial penalties.

One last thing, if handling responses and processing internally, you’ll also need to factor in the costs of the training required for all of this.

For more help on sourcing data and insight-driven targeting as well as the other aspects of direct mail covered in this blog, contact Arc Data.

Training Course:

Adding Direct Mail to the Fundraising Mix, 19th January 2021

Arc’s founding director Suzanne Lewis is running a course in partnership with UK Fundraising, in which she will explain and dispel the common misconceptions associated with using direct mail.  She will guide attendees through integrating the channel into the fundraising mix, planning and executing a successful campaign. Find out more here.