Using premiums in Direct Mail fundraising has been a commonly used strategy for decades, reaching peak popularity in the mid-2000s. But in recent years, fundraisers have (rightly so) questioned their effectiveness.
You know the packs. The ones with the tote bag, address labels or a lovely pair of socks - usually very bulky and very likely to be opened. But is that where the value of using premiums ends?
In this blog, we explore this question (and more) to help you determine when to use premiums and when not to use premiums in Direct Mail fundraising.
Give and you will get - Let’s start by looking at the argument for the use of premiums by considering a real-life experiment conducted by behavioural economics guru and fundraising expert Bernard Ross.
The experiment involved a museum in the UK giving away free badges. In experiment one, visitors were given a free badge following their donation. In experiment two, visitors were given a free badge prior to the donation ask. Guess which group gave more? Those who were given the badge prior to the ask.
Because they had been given a free badge, they felt more compelled to give. This is the concept of reciprocity in a nutshell. Or put another way: give and you will get.
So, those who are for premiums argue that including a “premium item” in your DM pack, particularly with perceived retail value, will generate greater results.
And it doesn’t even need to be connected to your cause, they say! Research has shown that the unbranded and lovely-looking tote bag outperformed the branded tote bag every time. Why? It had more perceived value, so people felt more compelled to give.
The issue of motivation and second gifts - Yes, using premiums might increase the initial response rate and first gift, but what about the second or third gift? Unless you have an extremely robust onboarding and stewardship process, the likelihood of donors giving again is very low (unless you’re prepared to give away a premium every time!).
According to fundraising DM expert John Lepp, this is exactly what happens when you start giving away premiums. If the motivation to give is because of a premium, then you need to keep giving them away, or the donor will stop giving altogether.
In a recent Q&A with The Nest’s Michelle Berriman, John said using premiums can work, but you need to ask yourself if that’s how you want to fundraise. For John: “I want the donor to give to the cause and the mission because they believe in it”.
The issue of transactional giving - So, the key question you need to ask is why do you want people to give? Is it because you have given them something and they feel obliged to give back, or is it because they feel a strong connection to your cause and like John says, “believe in it”?
In our experience, giving away premiums, especially if there is no connection to your cause, changes the dynamic dramatically. The exchange becomes transactional and guilt-driven, not relational and impact-driven. The latter is the type of sustainable fundraising we all need to be striving for.
The issue of trust and sustainability - Building trust with your donors is paramount. So, another key question to ask is whether giving away a premium with no connection to your cause builds trust in your organisation. Especially if it has a high-retail value. Even someone with very little business acumen will question the ROI (and you should, too!).
Not to mention the environmental impact of giving away premiums. Sustainability is an issue of increasing concern to Australians. In fact, 67% of Australians believe climate change poses a serious threat to our way of life over the next 25 years, up nearly 10% on similar concerns in 2010.
With sustainability in mind, if you do use a premium, consider using recycled paper or card, not plastic, where possible. Or provide something of lasting-value and not a quick throw-away.
Premiums that make sense - After exploring the issues, you might be wondering if including a premium in your DM packs is ever a good idea.
From our experience, yes, premiums can be very effective, but we would argue that the premium MUST have an obvious and strong connection to your cause or appeal. It needs to make sense to your donors. And consider whether it has lasting quality: something they can keep and use and remind them of your brand and ask.
Here are some examples of appeals where we used premiums that make sense:
Caritas Aotearoa New Zealand Lent Appeal 2024: We included a prayer booklet which donors could keep in their wallet over Lent. It featured a prayer for each of the six weeks of Lent to help guide their reflections over this period. It was genuinely useful, had a strong connection to the appeal, and was a regular reminder of the cause.
St John’s WA Acquisition Appeal: We included a First Aid pocket guide which was again genuinely useful, had a strong connection to the appeal, and was the perfect reminder of their great work.
Act for Kids Tax Appeal: We included a hand puppet to help adults teach children about safety messages. It not only had a practical use but was strongly connected to the case study in the appeal, which was about two children who had been removed from their parents because they were living in an unsafe family environment. We also included a bookmark for children with messaging around speaking to a ‘safe’ adult if they or a peer was experiencing abuse.
So, our final advice on whether to use premiums or not in your Direct Mail fundraising?
Consider whether the premium is connected to your cause or appeal, is long-lasting and genuinely useful, and is environmentally friendly.
If you can say yes to all three, then go for it!
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