What’s wrong with the following statement?
“We are mailing half as many people this time round, so we need to halve the income target”
Now, I guess that sounds entirely reasonable, but in fact, it isn’t.
If the number of people you mailed was in a direct proportion to the number of people that responded, then it would indeed make total sense. But fundraising doesn’t work that way. Why?
Let’s say I ask this question:
“Who wants a free ticket to see Cliff Richard?”
There is a finite number of people who would be interested in this question. Some people would probably take you up because it is free; some people would take it up because it is Cliff Richard; and some people would take it up because it’s free AND it’s Cliff. We have three distinct groups here:
- Cheapskates
- Cliff Richard Fans
- Cheapskate Cliff Richard Fans
The best responders will naturally be those who admire Sir Cliff and like free tickets. That’s a reasonable expectation because this offer is, like, ‘so totally up their street’.
There is a finite number of people who are ever likely to take you up on your offer – whatever that offer is.
Response rates are funny things. I could, for example, get you a 100% response rate by only asking myself and responding. However, that would just be me and Sir Cliff, which would be pretty uncomfortable for us both.
If you had the money, you could also contact everyone in the whole country. You would certainly have asked all the right people, plus a whole lot more. But the point remains – it’s only going to be people in those three groups who are ever likely to respond. Of course, you’d get a few randoms… people who were just passing, some lost tourists and the like, but they are going to be in the minority. However, even including this minority, the number of people interested in your offer is finite.
So what is wrong with the original statement?
The point is you need to optimize your outbound communications. Doing anything else results in what some people call junk mail. It is also what I call a terrible waste of money and you shouldn’t do it.
Regardless of that, at some point, you will hit the maximum number of people who are ever going to take you up on your free Cliff ticket.
I’m going to take the next section very slowly. Simon, who’s almost allergic to numbers and is looking pretty blank at the moment, is my litmus test. If he gets this bit, anyone can.
The relationship between the volume compared to response is not linear, it starts getting further and further apart the more people you contact.
(Simon’s nodding doubtfully).
In other words you’ll get a worse and worse response rate, while the costs go up and up. Knowing how and when to judge this optimum point is a real skill. When you hit it just right – you can get some brilliant results. The nifty thing here is that when judgement is applied in this area by someone who knows what they’re doing (alright I am talking about me, not Simon), you not only get brilliant results, but you know in advance that you’re likely to get these kind of results. They’re wonderfully predictable. You can’t predict what one person will do, but you can predict what 10,000 people will do.
Far from reducing your income target, you could well be in a position to increase your income at the same time as you cut your costs. It is possible to achieve a greater net income by asking half as many people, as long as you cut out the half that was not likely to respond.
(Nod and a wink from Simon.)
So if, by some curious twist of fate, you actually are wondering who to contact to get rid of a barrel load of free Cliff Richard tickets, the answer is: cheapskate Cliff Richard fans.
