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Weekly UpdatesNonprofit direct marketers spend their days managing fundraising programs to help their organizations carry out valued missions. But are these professionals doing everything they can to help the bottom line when securing a direct marketing vendor? The answer, probably, is no.
According to Geoffrey Peters, president and CEO of the CDR Fundraising Group in Bowie, Md., and also immediate past president of the Direct Marketing Association of Washington, nonprofits still are not doing themselves any favors when they seek a direct response firm. "Unfortunately, nonprofit managers' failure to understand certain details remains high," Peters said.
In seeking a direct marketing firm, "there are key issues that arise but are all too often overlooked by nonprofits," said Mal Warwick, founder and chairman of direct response vendor Mal Warwick Associates in Berkeley, Calif.
In a nonprofit industry that marls billions of pieces a year to just 300 million Americans, not getting the best deal can cost an untold percentage of the precious donations solicited by the very same direct marketing managers. Improve the deal with a vendor and save a small fortune.
REFINING THE REQUEST
One of the initial steps in engaging a direct response vendor is development of the request for proposal (RFP)--a critical stage by all accounts.
Jennifer Thomas, membership director of the Saint Louis Art Museum, facilitates the bidding process, which puts between 60,000 and 75,000 pieces in the mail annually. For the past three years, she has used the same direct marketing vendor for acquisition. Each year, however, the museum issues an RFP, "usually to vendors we have worked with in the past on direct marketing or other projects."
When issuing RFPs, "the size of the project has dictated how many RFPs we put out. In most cases, we do not issue more than three RFPs," Thomas notes.
Many nonprofits might not engage in the RFP process quite so often. "We have had a direct mail program for approximately 20 years. During that time we have used five different direct marketing vendors," said Alice Calabrese Smith, president and CEO of the Humane Society of Greater Rochester (N.Y.) and Lollypop Farm, which posted 369,000 pieces of mail last year. "Typically, if we are shopping for a new vendor it is to either increase response rates and/or save on mailing expenses."
Consultants Warwick and Peters think that using an RFP is a good idea. Warwick suggested that RFPs request a standard format for responses so that managers can easily compare apples to apples when evaluating the different companies.
Calabrese Smith suggested that at a bare minimum, the RFP should require:
* Samples of previous work;
* Results of previous mailings for like clients (cost per dollar raised, percent return, percent return of list groups);
* Processes for selecting mailing lists;
* Processes for data screening and de-duping; and,
* Frequency of running lists through the National Change of Address system
To their own detriment, however, nonprofits can diminish the proposal process, spinning their wheels for no apparent benefit, according to Peters. "Nonprofits are issuing more RFPs than they used to, but sometimes these RFPs are both perfunctory and illusory. The charity's decision unfortunately has been made before the RFP is even issued," he emphasized. "Such a meaningless process only does the charity and competing businesses a disservice."
THAT'S IN YOUR WALLET?
Thomas said that price is, of course, a leading determinant in the Saint Louis Art Museum's choices for direct marketing vendors. This criterion is likely paramount for every nonprofit across the board.
Despite the laser-like focus on money, sins of omission during the proposal evaluation process can be quite costly. Warwick warned against what he terms "misleading" fee structures, including tacking an "agency fee" or "commission" onto printing and other services.
"Firms that charge a commission--typically 15 to 17.5 percent--on vendor services often make huge amounts of money even though their monthly fees, charges for creative services, and/or other billings are low," said Warwick. "Time and again, I've seen nonprofits fooled by this practice, persuading themselves they're getting a bargain by not adequately looking at such markups."
Fewer nonprofits, Peters added," have direct marketing experts on staff who know how much a package should cost or have financial management who insist on competitive bidding. As a result, the opportunities for charities to 'overpay' are more plentiful."
He suggested adding a layer of scrutiny. "There are no arcane mysteries of direct marketing" said Peters. "Charities need to think about the simplest of best business practices: requiring your agency to get competitive bids on each package mailed and making sure you know what you are paying in fees, mark-ups, commissions, discounts, and so on".
SEE THROUGH
"How nonprofits cannot insist on transparent billing in this day and age of full disclosure and charity accountability is a mystery" said Peters.
He defined those terms as the agency showing the charity all of the subcontract bills (printing, lettershopping, data processing, envelope manufacturing, etc.) for the particular mailing.
"I have had charities express surprise that they were paying 20 percent markups on mail production in the form of hidden commissions from the printers and other vendors to the agency," recalled Peters.
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By "hidden" he means the printing bill given to the charity does not show that the price included a commission to the agency for performing this work with the vendor.
Charities, he asserts, should demand a contract guaranteeing transparency. Agencies that offer transparent billing agree to reveal all information about markups and to renounce taking funds from subcontract vendors, helping the charity feel assured that they are in fact receiving competitive prices.
HEAR IT ON THE GRAPEVINE
All nonprofit managers know that when they were hired, the organization checked their references. Now, it is time for managers to return the favor.
"Always check references from any vendors you are considering," recommended Thomas. "It seems obvious, but someone else might have already found that some charges are not included in the vendor's proposal or that the vendor has a history of over-projecting income."
A problematic reference recently derailed one firm's candidacy, said Thomas. "I do check references from like institutions to find out how their pieces performed and any challenges they faced when working with the vendor. We have declined working with one firm based on feedback from a trusted colleague at another museum," she said.
POST-SEASON PLAY
"I recommend always looking at what the vendor said it can do for you and compare that with your own past results," said Thomas. "If a new vendor is projecting to double your revenue for half the price you have to look at your market and past experience to see if this is reasonable."
Warwick pointed out another potential pitfall. "Do not be sold on the company by a dazzling senior person in the firm who then turns over the account to a junior, inexperienced person. Always find out exactly who will be managing your account and make sure you interview that person; said Warwick.
The relationship angle is most critical for Calabrese Smith, because, she noted, "price and product seem fairly consistent among those firms that specialize in animal welfare fundraising."
The last three times the organization put out an RFP for direct mail it was based "more on personal relationship with account executives combined with the track record and reputation of the company," she said.
Of course, price is very important, "but we have focused more on reputation and track record of the company, as well as our relationship with the account executive; she said.
Finally, Warwick advised, nonprofits ensure that any agreements are put into writing.
Rob Blizard serves as director, gift planning for George Washington's Mount Vernon near Washington, D.C., and as a board member of the Montgomery County (Md.) Humane Society. His 20 years in fundraising and marketing experience also includes both nonprofit and corporate positions at the Humane Society of the United States, Marriott and MCI.
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