Thursday, February 12, 2015

It’s Taking More Leverage to Generate Pledge Drive Contributions

Our last post covered how it is getting more difficult to generate contributions during public radio pledge drives. We introduced the idea of public radio pledge drive Leverage.  (Pleverage?)

Leverage is the weight of the incentives offered to generate a contribution or to raise a dollar. Leverage is the stuff – premiums, challenge grants, dollar-for-dollar matches, sweepstakes – offered during the drive to spike response rates and influence average gift.

We’re still working on the best way to measure this, but it is an important concept.  On one hand, incentives are a cost to the station – financial and in terms of listener perception. We know from Listener-Focused Fundraising research that commercial-like fundraising tactics create negative perceptions among many listeners and that is a cost.

On the other hand, incentives create an important value proposition for an significant subset of potential givers. This post focuses on the idea of value proposition.

But Wait There’s More!

It used to be that using one incentive at a time was sufficient leverage to meet hourly and daily on-air drive goals. Sometimes two incentives, such as a premium and a dollar-for-dollar match were offered simultaneously. Now, more stations are offering more stuff, simultaneously, to meet their goals.

The questions before us are how much leverage is really necessary for a station to get the results it needs?  And, is there a point where so much leverage is needed to meet the pledge drive goal that it is a sign of an unrealistic goal?

In the interest of full disclosure our company, Sutton & Lee, provides on-air fundraising consulting services to nearly a dozen public radio stations. We are helping many of those stations use increased leverage to meet their goals.

Below is an example of what one major market station offered as sweepstakes prizes during a recent campaign. The example below is not one of our client stations but it represents how a handful of stations have been operating over the past decade and we think it represents where much of the industry is headed.
  • Trip for two to Paris
  • Tanzanian Safari for two
  • Trip to Iceland
  • WWDTM Trip to Chicago
  • Galapagos trip
  • Rome and Florence trip
  • Mercedes Benz
That’s something like $60,000 to $70,000 of prize incentives for just one pledge drive. The station also had several challenges and dollar-for-dollar matches ranging from $10,000 to $50,000. Additionally, a few premiums were set at “loss-leader” pledge levels to boost response rates.

Depending on when a listener was asked, the enticement to respond during this drive would have been entry into sweepstakes for multiple trips, a chance to win a Mercedes, a $50,000 challenge grant, and an attractively priced premium.

The value proposition to the listener is this:

“Give $10 per month now to get a great thank you gift at a special pledge level and also support the station you depend on so you can maintain access to your favorite programs. You’ll also get many chances to win a dream vacation and a chance to win a luxury car all while turning that $10 per month into a $50,000 challenge grant the station can earn if you do it by the end of the hour.”

While this might seem extreme to the outside observer, leaders at this station obviously felt all of these incentives were needed to meet the goal over their planned fundraising footprint. That’s a lot of leverage.

And this station is not alone. Many stations are giving away multiple trips. Others are giving away cars and even tens of thousands of dollars in cash.

It’s Not a Bake Sale Anymore

And it’s not just the sweepstakes that are getting extreme. Some stations offer “early bird” discounts on premiums, where the pledge level starts low and goes up later in the drive. While very commercial sounding, this technique does boost immediate response rates.

Some stations offer “two-for-one” matches where every dollar contributed generates two additional dollars in match money. To the listener this is, “give $100 right now and the station receives an extra $200 donation from a generous major donor to the station. Right now your pledge has three times the buying power.”

These two-for-one matches can be very effective at generating immediate response. They are often four times more effective than incentive-free fundraising at generating contributions and dollars.

The value proposition of matches is also quite good from the listener perspective. Unlike a sweepstakes, which the listener may or may not win, there is an instant benefit to responding. The listener gives and the station gets even more. Instantly!

The primary downside of two-for-one matches for the station is that a dollar of leverage returns just 50 cents in revenue. The pledges come in faster, which is good, but the cash return on the leverage is lower than the value proposition to the listener.

We’ve seen stations raise less money in an entire day than they used for a two-for-one match during that day. For example, $30,000 in match money generates $15,000 in contributions over a few hours. Then the rest of the day generates $10,000 in pledges. The daily pledge total is $25,000 but it took $30,000 in match money to get it.

It’s a reasonable argument to point out that the any match or challenge in a pledge drive is worthwhile because the station leveraged the pledge drive to obtain the match money commitment in the first place. We agree. That’s one of the great strategic benefits of matches and challenges. They raise money twice for the station, once before the drive and once during the drive.

But from the potential donor’s perspective a two-for-one match is the antepenultimate pledge drive offer. It’s big leverage. The only thing that makes it better is getting a discounted premium and a chance to win a great sweepstakes prize while getting your gift tripled.

Circling back to the big question in front of us, “how much leverage is too much?”

Are we at the point where meeting goals requires offering incentives worth more than the value of the contribution itself?  Is there an ideal ratio of pledge drive dollars to incentive value.

Defining leverage in this way could help underperforming stations get better results or at least better manage their expectations. It could also help stations efficiently meet their goals without going overboard.

Another benefit is improved pledge drive benchmarking. It’s almost impossible to compare results across stations without considering the leverage applied at each station.

Finally, we can’t leave this discussion without asking if there is a point where greater reliance on commercial tactics makes pledge drives even less-listenable and/or erodes the bond between the station and listeners who value the non-commercial nature of public radio. 

2 Comments:

Anonymous Anonymous said...

Seems like there's an inexorable drift away from what was...still is?...the core reason for giving in the first place: the value proposition a listener feels they are getting from listening.

Presumably this is heavily eroded by the loss of monopoly on public radio content that local stations had, thanks to web streaming, podcasts, etc.

Something this made me wonder about: increasingly foundations and other grant-givers are getting very picky about demanding measurable impact from their grants/major gifts. I wonder if on-air pledge drives need to reflect this more. It's hard to give a lot of concrete metrics and details in a real-time audio-only format, but could it not be more impressive to regular donors that your gift of $50 results in X but $100 results in X + Y. That's oversimplifying but I think you get the idea.

We have seen some of this at play in successful pledge drivers already, but I think many stations have shied away from going whole-hog on it because it's too easy to insinuate that a $50 pledge is somehow "less worthy" than a $100 pledge, and that's risking insulting the $50 donor to where they don't donate at all.

Assuming getting more metrics into pitching is valuable, I wonder how you do that without getting into that value judgment problem?

10:45 PM  
Blogger RadioSutton said...

Listeners still give to help support the service they value. On-air Case messages, such as the example you give, are still vital to overall fundraising success.

We know listeners give out of enlightened self-interest and they give when they believe their contribution makes a difference. Empowering messages during on-air drives can persuade them that they should give.

But just because they are persuaded to give it doesn't mean they will act immediately. First-Time Givers are famous for saying "I've been meaning to do it for a while."

Getting them to stop what they are doing in their busy lives to support the station on the station's timetable, such as during the on-air drive, requires a separate set of tactics and messaging. We call those Close messages and that's where Leverage plays a role.

Part of the science and art of producing a pledge drive is getting the Case/Close message mix right.

Case messages are a medium to long-term investment of on-air messaging time. They don't necessarily deliver immediate results. Close messages need to deliver an immediate return to help the station meet hourly, daily, and drive goals.

The station's overall goal for the drive also plays a role. When the primary goal of the drive is raising money for immediate clash flow, then Case messaging suffers. It's easier to raise money from previous givers than new ones.

When the primary goal of the drive is getting more givers, then more Case messaging is needed. The downside is that overall pledge drive revenues will be lower.

3:52 PM  

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