A premium cynic

Cynicism is a good quality for a data analyst to sport. Lately, I’m sporting it in spades.

The focus of my current cynicism is an article in the Feb/Mar edition of Fundraising and Philanthropy magazine by Sean Triner of Pareto. It claims that the difference in renewal rates between premium acquired and non-premium acquired donors is minimal.

To my mind this seemed contrary to what I would expect and what I’ve read on the subject. Take this snippet from an article on the Agitator by Tom Belford:

Now, I’m not a fan of premiums, period. Yes, I know they can lift response (not always), but they’re prone to generating low value, low loyalty tippers. So analysis of lifetime value usually indicates a rather poor return compared to non-premium responders.

The stock standard response to complaints about poor conversion appears to be to continue to incorporate premium / freemium elements in the follow-up packs.

This is certainly the view of David Hazeltine who says: ‘so what?’ Send them another premium if that’s what it requires.’ Similarly, a convio study shows some increased renewal figures when a link back to the premium acquisition pack was included. That said, the convio slidedeck also features some data which supports the view that premium acquired donors are harder to renew and retain, with a smaller window of opportunity to boot! (You can see the convio slidedeck at: A New Donor is Like a Blind Date).

My experience to date (with more than one charity) is that the difference in renewal rates is anything but minimal. However, perhaps what the Pareto article is suggesting is that when it is all said and done, the difference in renewal rates is not sufficient to dismiss the use of the premium acquisition packs. If response rates are sufficiently higher, even with a low renewal, the ROI may come out markedly better. My only question is for how long?

Lastly, I have to throw in this one. Not because it has anything to do with premium acquired donors. It’s because it proves cats rule. Or at least, cat owners rule when it comes to donations. If I ever work for an animal charity, that knowledge may come in handy. Until then, I can just smile knowing feline owners are superior.

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Posted on March 19, 2012, in Direct Mail, Fundraising and tagged , , , , , , . Bookmark the permalink. 1 Comment.

  1. Thanks Data Monkey – it was contrary to what I expected too, but indeed does appear to be minimal. For donors over $50 it is even closer.
    The volume of new donors that premiums get, plus the fact that they tend to be much, much cheaper to acquire combine to make this minimal difference pretty irrelevant.

    There are people who just hate premiums (like I used to) because they don’t feel right, but the data, in the end, is what is important. That is what converted me!

    We are now working on a bit of a hybrid approach – relationship fundraising meets mass direct mail, and it is making a serious amount of money for a lot of charities. I was surprised to find the main drawback being the long lead time, not subsequent response rates. Here is my response to your healthy cynicism….

    http://seantriner.blogspot.com/2012/03/premium-v-non-premium-donors.html

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