The danger of nonprofits chasing discounts

NO DISCOUNTS

A few years ago one of our nonprofit clients fired our firm because they found another fundraising agency that quoted them a cheaper price for their direct mail services. This other firm was cheaper. By almost six figures. That’s big.

However, focusing on cost only, rather than on value, is dangerous. 18 months after moving their business to this discount fundraising agency, my client came back asking for help.

This discount agency was able to cut costs because they didn’t segment the donors they mailed, didn’t tailor the ask strategy to each individual donor based on past giving behaviors, and sent every donor the exact same mail piece, whether they were a one-time $10 donor, or a multi-year donor that had given $5,000 in the past.

These changes saved the organization $100,000. And in the process lost them an additional $200,000 in revenue year-over-year, and decreased their retention rates!

Chasing discounts looked promising on the front-end, but was incredibly costly for this organization in the long-term.

Just because a service or a product is expensive doesn’t automatically make it bad. And just because something is cheap doesn’t mean it’s good.

As you seek to make smart investment decisions for your nonprofit, I encourage you to focus first on value rather than cost.

Cheers!
Andrew

 

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

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