Should your Christmas appeal include a fundraising premium?
Yes, but…
It’s Christmas appeal planning season. Somewhere right now a fundraising team is staring at a lodgement date that looked perfectly reasonable in August, a mailhouse quote that didn’t, and a timeline held together with goodwill and a shared spreadsheet.
And at some point in a lot of those meetings, someone asks the same question: Should we put a gift in the pack? A card, a decoration, a bookmark. It’s often called a premium.
My honest answer is yes. But it’s a “yes, but”, and the “but” is the part worth reading. Sometimes, once you’ve worked through it, the answer turns out to be no after all. Which is fine. It’s still a decision, which is better than no plan at all.
What the research says about fundraising premiums
If you go looking for evidence that premiums work, you might come back a bit deflated.
A University of Queensland team recently reviewed 153 studies on incentives for giving, going all the way back to 1980. On gifts, they were about as blunt as academics tend to get. Whether it’s a premium in the pack or a thank-you gift offered for donating, gifts generally don’t lift the value of giving. In some cases they seem to lower it. The authors go as far as suggesting fundraisers leave them out altogether.
Based on their evidence, that’s a fair conclusion. I’m not going to pick a fight with 153 studies. I’ve seen how that goes for people.
And yet, come December, plenty of Australian charities put a card or a decoration in the envelope anyway. Here’s the thing, and it’s another “but”. I don’t think they’re all wrong.
Why charities keep doing it
The usual reason for including a premium is to lift response. The hope is that a small gift gets the envelope opened and nudges a few more people over the line. Whether the average gift holds up is a separate question, and the honest answer is that it often doesn’t, quite.
So it helps to be clear about what you’re actually trying to achieve. A premium might pull the average gift down a little. If your objective is to increase average size, that matters. If it’s about keeping people, it may matter less. A donor who gives a bit less this Christmas but stays another five years is probably a trade worth making. Probably, but. I should look at the data first before being so sure
Which is a good reason to have that conversation early, with the numbers in front of you, rather than in the car park afterwards.
How the question actually gets asked
Last Christmas, one client’s appeal came in a little under target. Not far off, and the team were happy enough with it. The year-on-year comparison was where things got murky. The appeal raised slightly more than the Christmas before. But, strip out unsolicited gifts and new donors, the people who received email or mail gave about 2% less than the previous year – fewer responses at a higher average gift. So, the honest answer to “was it a good result” was “yes, but”.
What they did have was a test. Half the standard-value donors got a Christmas card in the pack and half didn’t. The card lifted response by about a 1.5 percentage points, which lifted return on investment slightly. It paid for itself, just.
The interesting part was where the premium did work. Among donors who hadn’t given for 13-36 months, the card roughly doubled response and turned a loss-making segment into a profitable one. Among donors lapsed longer than that, response went up, but not net return.
It’s one charity, so I wouldn’t build a theory on it. But it’s a good example of how the premium question tends to show up in real life. Whether a premium helps depends on who’s receiving it, what else they’ve been asked for that year, and how the rest of the pack is working. There are too many variables to give a definitive answer. The only reason this organisation learned something was because they ran a proper test, at a scale where the result was significant enough to matter.
Case studies and sector averages can’t make the decision for you. Not even this one.
Five things worth weighing up before you add a premium:
1. What is the premium for?
Lifting response, a bigger average gift, or keeping people. Pick one. It’s tempting to say all three, but then you’ll be arguing about what success looked like in January, and January is bad enough already.
2. Who’s getting it?
Long-term supporters, new recruits and high-value donors are not the same people, and we can’t assume they’ll behave the same way. Sending a premium to all your donors might not work for all of them – almost certainly it’s a bad idea for some of them. In the example above, a Christmas card helped to reactivate lapsed donors and did very little for anyone else. In the context of the Christmas appeal, the premium decision was a ‘modest win’. At a segment level, the conclusion was ‘send it to lapsed donors and save the postage on the rest’.
3. What does it actually cost?
Unit price, mailhouse handling, and whether the pack creeps into a higher AusPost price category. Then look at net income, not response rate. A premium that lifts response and costs more than it brings in is a very festive way to lose money.
4. Does it help the ask, or distract?
Your appeal needs a specific amount, a specific reason and a specific date, carried by a well-written letter and emails. If the premium becomes the most interesting thing in the envelope, you might have a problem. A nicely designed problem, but still.
5. Will you know if it worked?
For a lot of charities, honestly, probably not. Say 100 donors in a segment respond at 20%. That’s 20 gifts. Give half of them a premium – if nine of those give, you haven’t learned anything. The point of an A:B test is to provide confidence that you’ll get the same result if you did the same thing again. If the scale of the test is too small, the difference between A and B isn’t a useful result.
So, should you?
Yes, but. Include a premium if you can say what it’s for, who it’s for, what it costs and how it sits beside your ask. And go in with your eyes open, accepting the chance you might not know if it actually worked.
What I’d tell you to avoid is borrowing the answer, “yes” or “no”: sending a premium because other charities are doing it; not sending one because a case study said so. The only way to know what a premium does for your supporters is to ask them, properly: split the file, send the card to half, and read the result by segment rather than as one number. You’ll probably find it works for some people and not for others, and that’s your answer. Anything else is a question about other people’s donors, which is a strange thing to base your Christmas on.
Somewhere in December, a supporter is going to open that envelope wanting to help. Whatever’s inside should make that easier, not harder. If the premium does that, it’s earned its place. If it doesn’t, the Christmas ornament was probably nice anyway.
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