Every time a “new” channel has come into the mainstream, people have declared the death of the dominant channel before it. Radio was going to kill print. And we all know the TV was going to kill the radio star.
The reality is every channel that has come before has been generally safe — though each undergoes a revolution of it’s own. The telegraph did go away in lieu of the telephone. Parcels carried by horseback gave way to trains, planes and automobiles as the system of delivery.
Over the past decade however, it’s become clear that there is something about direct mail that is different from the channels before. This one force can single-handedly revolutionize how we use direct mail in fundraising and marketing.
It’s the United States Post Office.
The U.S. Post Office dilemma
It’s widely known that the USPS is an unsustainable business given it’s current model. In fact, the USPS itself declares this reality virtually every quarter. The most recent quarterly report, January to March 2015, saw a $1.5 billion dollar loss. In just three months, $1.5 billion dollars went down the collective postal drain.
As a Congress-directed agency, the USPS has been losing money hand over fist since a 2006 mandate to pre-fund retirement benefits.
Why are these losses acceptable? Part of the idea is that things like universal delivery are a basic American right, so we should put up with such losses for the post office to be able to offer such services.
But times are changing. People no longer cherish their direct mail like they did in decades and centuries past. But this isn’t the root problem for direct mail. It’s still a highly effective direct marketing channel. The real threat is what will happen when the U.S. post office is privatized.
Would the United States ever sell the post office off as a private company? I think so, because it’s happening elsewhere in the world. In 2013, the United Kingdom sold the Royal Mail. Here’s what the business secretary Vince Cable had to say in July 2013 when the announcement was made:
“The government’s decision on the sale is practical, it is logical, it is a commercial decision designed to put Royal Mail’s future on a long-term sustainable business. It is consistent with developments elsewhere in Europe where privatised operators in Austria, Germany and Belgium produce profit margins far higher than the Royal Mail but have continued to provide high-quality and expanding services.”
And yes, other countries have privatized their post offices — Finland, New Zealand, Sweden and the Netherlands.
All it will take is a couple aspiring politicians making the USPS a campaign issue — pointing to the billions of dollars lost by the USPS as an example of bloated, irresponsible government spending. You can hear the stump speech now: “If I’m elected, I’ll put an end to wasteful big-government spending practices. And we’ll start with the post office. When was the last time you appreciated receiving junk mail? It’s time we cut billions of dollars of losses, and give the post office a chance to succeed as a business.”
How could a privatized U.S. Post Office be a threat to direct mail fundraising?
Universal delivery and non-profit discount rates. That’s what’s at stake in a privately held USPS.
For-profit companies don’t tolerate unprofitable areas of their business without good reason. Universal delivery and non-profit rates are sure to come up as core areas to turn around profitability for the post office — let’s not deliver to every home (heck, why not make people pay for the right to have a mailbox, á la a post office box?). And can you imagine the billions of dollars the USPS “gives” to non-profits every year in the form of steeply discounted rates? It’s not a far reach to imagine these conversations in the boardroom of a Wall Street-run USPS.
How reducing or eliminating non-profit discounts would revolutionize traditional fundraising
Even moderate changes in non-profit discount rates will upend the direct mail mass fundraising model. First class postage is 49¢ right now, and with non-profit bulk rates, we can achieve 13.5¢. That’s huge. But let’s say a privately held USPS decides that’s just too steep of a discount. They could decide that this threatens the viability of the postal service, so let’s cut those discounts in half. Overnight, we could see postage rates double or triple.
If you know how direct mail works, you’ll realize the margins are very thin. Doubling or tripling postage would be catastrophic for how the channel has been used for decades. Overnight, hundreds of thousands of donors would become unprofitable to mail. Entire swaths of non-profits’ donor files will be upended.
When that day comes, it will be too late to leap into action. So what’s a non-profit to do?
How universal delivery could change direct mail fundraising
This one is pretty simple — if I can’t actually send mail to you, then that’s going to be a problem for direct mail fundraising!
Universal delivery is already a concern in the years since the UK privatized the Royal Mail. Last year, the London Assembly called for the Royal Mail to be re-nationalized:
“Labour member Murad Qureshi slammed the ‘cherry-picking’ of postal profiteer TNT in a motion to the Assembly on Wednesday, saying that private companies were choosing to deliver post in just the most lucrative of areas.”
Canada is another interesting study — it’s still publically held, but last year they began phasing out door-to-door delivery. So depending on where you live in Canada today, you can’t get mail delivered to your home.
So what’s a non-profit to do today in light of a future that might take years to play out?
What to do today to insulate yourself against this revolution
As I said earlier, direct mail is still one of the most effective fundraising mediums in existence today. So don’t be rash and slash your direct mail broadly. Just look at the sad story developing from the American Cancer Society’s decision to completely cut direct mail acquisition. Spoiler alert — new donors declined by 11% and they estimate the impact over 5 years to be down $29.5 million. And that’s not counting the losses in planned gifts that ultimately would’ve come from those donors over time.
Invest in integration across channels
Every fundraising effort should be integrated across multiple channels, with consistent messaging and offers. On your website, on radio, in print, in email, in social media, paid search — leverage every medium you have to reach donors and prospects.
Build and grow a monthly giving program
Monthly sustainer programs have always been an important component to non-profit fundraising. But in a world where direct mail is too expensive to use for huge segments of donors and universal delivery is at stake, monthly giving is more important than ever. Build that program and grow it now — don’t wait.
Set aside investment dollars to test (be willing to fail smart!)
I said don’t slash direct mail. But if I had a big enough budget, I’d look for smart places to set aside acquisition dollars to test — yes, even from direct mail. Be careful to only cut at the edges, though — tests that ultimately aren’t going to drive big lifts, or lists that are marginal performers.
Then deploy those dollars to smart tests that you know you will learn from, even if they “fail.” Failure isn’t failure as long as you test smart and learn effectively, applying those learnings to the next test. We’ve tested for years in social media fundraising, and finally we’re seeing positive net income and ROI from social media fundraising. But if we weren’t willing to fail early on, we wouldn’t have learned what we needed to know in order to succeed.
So, what are you waiting for? Let’s get to it!
As always, feel free to drop me any questions or comments at draley@masterworks.agency, or tweet me at @daveraley.