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Improving Direct Marketing Response with Online Advertising

This post was written by Richard Becker, President, Target Analytics at Blackbaud.

Determined to embrace integrated, multichannel marketing, the nonprofit sector is increasingly shifting direct marketing budget to emerging channels of consumer solicitation, most notably mobile, social media, and online advertising. Nonprofit marketers, however, are steeped in mono-channel direct marketing (primarily postal-based direct mail or outbound telemarketing) and often find themselves unable to rationalize these new, dynamic channels of consumer contact with an acceptable return on investment (ROI).
 
Perhaps the most blindly engaged channel used by nonprofits is online advertising.
 
Low-cost, capable of handling high-volume campaigns, and readily available from many turnkey network providers, online advertising is increasingly becoming a staple area of marketing spend for major nonprofit direct marketers. Yet, despite the increasing frequency of use, nonprofits are generally unable to demonstrate acceptable ROI for online advertising, often the result of:

• The inability to effectively measure the cross-channel impact of impressions served with offline consumer behavior (e.g., the impact of online advertising on direct mail response)
• The misclassification of online advertising as a “direct response” channel, when in fact this channel – although capable of eliciting consumer interaction – is more often more appropriately categorized and leveraged as “advertising” – more apt to reinforce the nonprofit brand and support improved response with other direct response channels such as mail, telephone, and DRTV
• The mistreatment of online advertising as a stand-alone channel, with inconsistent messaging and appeals relative to other channels, the frequent result of fragmented marketing organizations and unique marketing budgets

Fortunately, online advertising has evolved. Legacy paradigms of contextual targeting, re-targeting, geo-targeting, and other demographic or online behavioral targeting have given way to more precise household-level targeting.
 
How Online Advertising Has Evolved Over the Past 24 Months
 
Legacy models of online advertising largely target anonymous prospects based on loose inferences of affinity, interest, and capacity, not previous philanthropic behavior (the most predictive indicator of future donor behavior) or demonstrated organizational affinity (e.g., event participation, petition signing, etc.). For example, an Internet user reading an article on the rainforests may be targeted with advertising requesting a donation for an environmental cause.
 
In such an instance, advertising is delivered to an unknown recipient with no true understanding of that recipient’s philanthropic behavior or passion. Moreover, as a result of the recipient’s anonymity, the return-on-ad-spend calculation is limited to their conversion at the point of impression, limiting the ability to measure the advertising’s effectiveness on other one-to-one online or offline marketing channels.
 
Using the “legacy” model of online advertising effectiveness, current click-through rates for top performing nonprofit online advertising programs average 0.04% (4 clicks per 10,000 impressions served), with daily results typically ranging from 0.03% to 0.07%. Conversion rates (donation per ad served) range from 0.001% to 0.009% (1 to 2 conversions per 100,000 ads served). Return-on-ad-spend for such a campaign would typically yield 0.25:1 to 0.45:1 at best, depending on media consumption and request amounts. Clearly, this is a losing proposition in terms of pure marketing ROI.
 
New online household-level targeting, however, enables nonprofits to specifically target audience segments consisting of active donors, lapsed donors, or prospects generated by their previous philanthropic characteristics. This strategy moves the advertising paradigm away from low-value, inference-based profiling to more effective strategies involving actual donor behavior. Essentially, the paradigm changes targeting strategy from “where” (e.g., what sites likely donors may visit) to “who” (e.g., targeting specific households on any website they visit).
 
Beyond the benefit of improved conversions, moving to household-level targeting enables closed-loop reporting – the ability to calculate the effect of impressions not only for online conversions, but also increased response across direct mail, telemarketing, email, and other one-to-one solicitation channels – more accurately.
 
For example, with new household-level targeting, a nonprofit can exclusively target their lapsed donor file with an appeal to reactivate as part of a sustainer campaign. Not only can the appeal be specifically tailored to this audience segment, improving online conversions, but such a campaign can also be run in conjunction with a postal direct mail campaign. As a result of the household targeting, the online advertising can be measured in terms of improved conversion, and the closed-loop report will forensically measure the impact of brand reinforcement on improving the postal direct mail response.
 
Via this new model, and the ability to understand cross-channel impact of brand impressions on all one-to-one solicitation channels, nonprofits are seeing return-on-ad-spend of 3:1 to 5:1 on campaigns targeting active and inactive donor populations, and 0.25:1 to 1:1 on campaigns targeting prospects – a substantial lift relative to legacy online advertising techniques and measurement.
 
In Practice: Improved Results with Household-Level Targeting

In a recent campaign conducted by a major U.S.-based relief organization, 183,160 households, comprised of active and inactive donors, were targeted with an online request for donation.
 
Ads were delivered over a three-month campaign period, with the goal of delivering 10 ads per household per month. (Best practices indicate that 8-15 impressions per household per month optimizes media spend relative to desired consumer behavior).
 

Brand Exposure During Campaign Period
Total Number of Households Served During Three-Month Campaign Period	183,160
Total Number of Ads Served	5,229,916
Average Number of Ad Impressions Per Household	28.6
Average Number of Ad Impressions Per Household Per Month	9.5

 
During the three-month campaign period, 2,003 unique households clicked on the ads, a 1.09% click-through rate per household. Online conversions were a strong 0.00126%, resulting in $94,355 in online donations.
 

Online Donation Activity Associated with Campaign
Online Conversions	660
Conversion Rate Per Ad Impression Delivered	0.00126%
Conversion Rate Per Household	3.6%
Conversion Revenue (Online Donations)	$94,335
Average Online Donation	$142.93

While conversion rates per ad impression delivered were in line with legacy online advertising models, the conversion rate per household was an astounding 3.6%. Compare this metric to traditional 1:1 marketing channels such as direct mail. By effectively targeting active and inactive donors (an audience with a demonstrated passion for the organization), as opposed to unqualified anonymous users, a remarkable average gift of $142.93 was achieved, nearly triple the expected average for online donation.
 
At this point, the return-on-ad-spend for the campaign was nearly 2X.
 
The effect of online advertising, however, extends beyond online donations. By targeting at a household level, the impact of online brand reinforcement can be measured against a direct mail piece that was delivered during the online campaign period.
 
For this forensic analysis, a control population was created from 335,242 households: active and inactive households from the nonprofit’s database that had not been served (but were capable of being served) online advertising during the campaign period and did receive offline postal mail based solicitations during the campaign period, at the same frequency as the test group. Using the control population, 200 random samples were created, with the median in revenue used as the control group.
 
Examining the impact of online advertising across all online and offline channels during the campaign period, the forensic analysis demonstrates that online brand reinforcement drives substantial lift in overall campaign performance. Notably, postal mail direct response was substantially lifted as a result of online impressions delivered throughout the integrated marketing campaign period.

 

Incremental Lift in Campaign Response and Donations
When Online Advertising Is Used to Reinforce the Brand During a Campaign

	Control Group Ads Served = N Direct Mail = Y	Test Group Ads Served = Y Direct Mail = Y	Lift
Unique Households	183,600	183,600
Total Conversions	12,999	16,642	3,643
Total Revenue	$906,729	$1,165,136	$258.407
Total Conversion Rate	7.10%	9.09%	28.0%
Average Gift Per Donor	$69.75	$70.01	0.4%
Amount Per Household	$4.95	$6.36	28.5%

As demonstrated, a 28% increase in response rate occurred across all solicitation channels when online advertising was used to influence the target audience, resulting in a 28.5% increase in amount per household.
 
Overall, the return-on-ad-spend yielded a 5:1 return on investment.
 
By most any point of comparison, these results demonstrate the necessity of online brand reinforcement, the power of household-level targeted online advertising, and the absolute need to measure holistic performance within an integrated, multichannel marketing campaign.
 
Conclusion
 
True integrated, multichannel marketing programs are sequence-optimized, brand consistent, and programmatically measured.
 
The failure of too many organizations is the insufficient integration of online advertising with their multichannel marketing program and, most importantly, the failure to leverage forensic measurement techniques to confirm a complete calculation of return-on-ad-spend.
 
Savvy marketers in all nonprofit micro-segments, including advocacy, international relief, health and wellness, and higher education are embracing the new online advertising model – household targeting – to strengthen their overall campaign results.
 
Ultimately, marketers must ensure they intelligently embrace emerging channels of donor solicitation and outreach. While the rate of technology moves quickly, offering new ways to boost performance, marketers must not lose sight of the basics:

• Effective multichannel marketing must be integrated.
• Only use marketing channels with clear performance measurements.
• Prior philanthropic behavior is the best indicator of future philanthropic behavior.
   

Adherence to these cardinal rules, along with awareness of superior marketing models such as household-level targeting for online advertising campaigns, will significantly improve marketing return on investment.
 

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An Emergency Fundraising Appeal We Can All Learn From

I wish I didn’t have to write about this.

I wish we didn’t ever have to make an emergency appeal. But, disasters happen. And when they do, it costs money to feed the hungry, clean up the mess, and begin to rebuild the lives of those affected.

So when a string of devastating tornadoes tore through the Appalachian area of Kentucky last March, victims needed help, and they needed it right away.

The Christian Appalachian Project (CAP) has served the people of Appalachia since 1964, and is no stranger to emergency appeals. So CAP, with the help of their agency, CDR Fundraising Group, sprung into action to deploy a three-pronged integrated fundraising appeal composed of direct mail, email, and an online appeal. Oh, and did I mention they did all of this within 4 days?

Here’s what the campaign looked like:

Direct Mail
Don’t ever accuse CAP or CDR Fundraising Group of being unprepared. They keep a stock of emergency appeal letterhead and envelopes on hand, as well as proper database segmentation so that no time or money is wasted when the community is in need.

When the mail dropped, it stuck to the basics: it was timely, had a strong call to action, used tangible price points, and gave supporters a variety of giving options. If they wanted to donate online, a unique URL was provided to ensure the funds would directly support tornado victims.

Email
The speed and adaptability of email allowed CAP to share footage and video interviews with volunteers and victims. From an accountability standpoint, these ongoing reports on funding are invaluable to CAP and its supporters, regardless of whether they give online or offline donations.

Web
When disaster strikes, more and more people are going straight to the websites of charities that they trust before an appeal lands in their inbox or on their front porch. This is why CAP immediately adjusted their homepage so that visitors would know exactly how and where to donate.
 
So what were the results of the campaign?

• Direct mail grossed just over $400,000, average gift of $48
• Direct mail recipients that donated online had an average gift of $98
• Email grossed just under $30,000, average gift of $76
• Web traffic resulted in just under $5,000, average gift of $231

Let this be a lesson to any nonprofit out there that may be expected to respond in any way to a crisis like this. By having a plan in place that allowed them to get a multi-channel appeal out immediately, CAP was able to deliver more money to the immediate relief effort.

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Getting Started with Integrated Fundraising

You may be a grassroots organization using an online CRM to set up, deploy and track every marketing endeavor. Or perhaps your organization uses an offline database to track direct-mail efforts and an online marketing tool to track online activities. Whatever the case, it’s vital to integrate all the supporter data you have in order to holistically understand their behavior and preferences.

Consider this example: You send a direct-mail appeal to Mr. Smith, and he sends you a $100 check. One month later, he goes to your website and makes a $50 donation. If you use only the online transactional history stored in your online marketing tool in your next email fundraising campaign, you could inadvertently downgrade Mr. Smith by asking for a $50 donation. But, if your data was integrated, you’d be able to format your ask string based on his entire giving history and go for that $100 gift.  

Whether you’re using online-only marketing channels or a combination of digital media, direct mail, events, telemarketing, television and more, the key to understanding campaign performance is to set up your marketing campaigns for proper tracking and analysis. While 100 percent clarity in attribution is nearly impossible in integrated campaigns, you want to understand the direct correlation and impetus for each donation you receive.

Consider this example: Your organization uses social media, email, direct mail, website and search engine marketing to drive awareness for a matching gift campaign. Ms. Jackson receives an email announcement about the campaign on May 1. On May 4, she receives a letter in her mailbox about the matching gift campaign with a specific URL (e.g., www.yourcharity.org/match2012). On May 5, she sees a campaign announcement on your charity’s Facebook page. On May 10, Ms. Jackson receives a reminder email telling her there are five days left to donate to the matching gift campaign. On May 12, Ms. Jackson makes a $35 gift to your charity on your website through a matching gift campaign button graphic that leads to a donation page. You reached Ms. Jackson through four touch points (two emails, Facebook, direct mail), and her gift came through a separate channel.

At the end of the campaign, your analysis shows: 72 gifts from email #1 yielding $3,672; 221 gifts from the direct-mail appeal yielding $7,514; three gifts totaling $31 from Facebook; and 92 gifts totaling $5,704 from the final email.

Channel	# Gifts	Total $
Email 1	72	$3,672
Direct Mail	221	$7,514
Facebook	3	$31
Email 2	92	$5,704
Website	23	$1,150
Campaign Total	411	$18,071

In using unique donation forms or source tracking for each channel, you are able to understand the overall campaign performance and how each touch point contributed to the total, but perhaps not what contributed to the donors’ behavior. Ms. Jackson’s gift would be technically attributed to the website, but which contact point truly drove her behavior? Was that final email reminder the piece that caused Ms. Jackson to give? Or did she see the direct-mail appeal in her mail pile and then go to your website?

To ensure your campaign’s success, make sure to set up each channel for optimal tracking, and formulate your ask strings based on complete donor data. Look at the total campaign performance to measure success, but drill down to each individual channel for campaign highlights or to find areas for improvement.

Don’t get overwhelmed -- focus on incremental improvements
New York City wasn’t built in a day … and you won’t achieve full integration in one campaign. Obstacles such as lack of data integration, staff resources, departmental siloes or technological barriers can make the process of integrated marketing a challenge. Some tips:

• Focus on incremental steps, incorporating one campaign at a time to reach your goal.
• Set up each campaign with a clear objective and for measurability.
• After each effort, assess the campaign performance -- did you achieve your objective? -- and then determine your next step forward toward integration!

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In Defense of Telemarketing

This article originally appeared in the Avalon FYI blog.

From the recent Bloomberg article, to the feature on the Today Show to the cover of the Washington Post Business section, it’s clear that telemarketing is under attack -- more specifically, the ethics of telemarketing fees -- and this issue is not going away.

I want to draw this issue to your attention so you can be prepared to answer the tough questions being asked by your leadership, boards, and donors in reaction to the extensive media coverage. It’s critical that those of us who use telemarketing as a key tool in our effective multi-channel direct marketing programs, can clearly articulate our response to these attacks, and communicate that we have the controls in place to ensure best practices and ethical behavior in all of our fundraising.

At its root, the issue is really about transparency. The case study cited in the Bloomberg article is specific to the American Diabetes Association and highlights a certain type of telemarketing campaign that is atypical in nonprofit fundraising. 

The overarching issue, and the media scrutiny, is all about the ethics of the telemarketing fees themselves. The firms that Avalon works with do not charge nonprofits a percentage of the total amount raised in a campaign. They charge a flat per-contact fee -- which is standard in the telemarketing industry. 

There is nothing unethical about the way our telemarketing partners do their business, and these companies are fully accountable to their client organizations and donors. Of course, it is also critical to manage telemarketing campaigns very carefully and to have quality-control checks in place to help ensure an effective program.

We know that a telemarketing point of contact, when done well, improves overall donor value, even if the person contacted chooses not to give over the phone. That personal touch point is beneficial to each donor’s long-term value and, in most cases, telemarketing is still an incredibly effective channel for fundraising – more successfully reinstating lapsed members, recruiting  monthly sustainers, and renewing first-year members than any other channel. But it’s critical to ensure you’re using a strong firm with well-trained callers, and that you strictly adhere to your donors’ requests about being contacted by phone.

The media frenzy around this issue would be significantly helped by a better informed media -- journalists who understand the cost of fundraising metrics, and who will take the time to learn about the true costs of fundraising and the need to spend money to raise money. 

It’s our responsibility in the nonprofit sector to take on the difficult questions and speak accurately and effectively about how fundraising works. And it’s our responsibility to communicate the integrity and seriousness of those involved in fundraising.

What do you think? Let us know using the comments link below.

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Big Wins for Small Organization: The Nature Conservancy, Connecticut Chapter

This past August, the IMAB recognized some of North America’s best nonprofit campaigns and projects that demonstrated the power of integrated marketing. When evaluating the submissions for the 2012 Integrated Marketing Awards, the IMAB saw that charities of any size can employ an integrated marketing approach.

Connecticut’s chapter of The Nature Conservancy (TNC) is proof in practice. Last summer, this small chapter was able to partner with an established event, and then use their strong community connections to involve local celebrity chefs in a unique fundraising event that went viral.

Here’s how they did it:

The Challenges

• The Connecticut chapter is one of TNC’s smaller chapters with a small staff.
• The chapter faced a crowded marketplace of fundraising around Earth Day.
• The staff needed to market an event with minimal marketing budget.

The Campaign
At the beginning of the summer, Connecticut’s TNC chapter had two immediate opportunities to raise money and make a splash in the local scene. First was an annual (non-TNC) fundraising event called Rock-to-Rock which gathers over 1,000 cyclists to cycle across New Haven. The second was an annual TNC event called Picnic for the Planet.

For a small organization with limited resources, the easy choice would be to pick one of the two events, and go all in.  But, knowing that Earth Day is the best opportunity for an environmental organization to engage their supporters, Connecticut’s TNC decided to take on the challenge of both events. And let’s not forget, executing an event (or two) is one thing, but marketing two events simultaneously is another.

To make the most of Rock-to-Rock, the chapter entered their own team and set an ambitious goal of $10,000 in peer-to-peer revenue. If successful, it would be a great way to engage their base and bring in much-needed fundraising revenue.

Picnic for the Planet wasn’t promoted as a fundraiser; rather it provided an opportunity to reach new audiences in the community. The team’s strategy was a spin on the picnic theme. Chef-to-Chef: Picnic Battle for the Planet became the core idea, in which local celebrity chefs face off in an on-stage cook-off using sustainable ingredients that would be suggested by fans via Facebook.

Some of the marketing channels they used for the events included:

• Weekly email communications to registered Rock-to-Rock riders to boost fundraising
• Email promotions for rider sponsorships to all members and trustees
• Print ads
• A text-to-donate campaign in local restaurants

The Results

• Rock-to-Rock raised over $10,000 from 154 donors, and then one of their trustees stepped up and matched every dollar raised. Their total finished at $21,750 -- more money than any other team on the ride.
• Promoting the Picnic Battle via social media was risky, but paid off -- 1,000 people attended the event.
• Targeted ad buys purchased in the two months leading up to Earth Day attracted 1,600 new Facebook likes.
• Over 500,000 impressions via the Facebook page, due largely to the active participation from the celebrity chefs, and by engaging the audience to let them choose dishes and ingredients.
• A quarter-page ad in the local paper and earned coverage in industry e-newsletters.
• 11 new community partners engaged with the chapter and look forward to participating again next year.
• The event model was a first for a TNC chapter, and is now being used as a model across the country.

Now that is what we call success with integrated marketing! Our hats off to The Nature Conservancy, Connecticut Chapter!

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The individuals who post here are members of the Integrated Marketing Advisory Board. The opinions expressed here are their own, are not necessarily reviewed in advance by anyone but the individual authors, and neither Convio nor any other member of the Integrated Marketing Advisory Board necessarily agrees with them.