Charities get a generous return from 'freemiums'
By sending address labels, umbrellas, backpacks, and other gifts, nonprofits reap greater rewards. But do they go too far?
By Caitlin Carpenter | Correspondent of The Christian Science Monitorfrom the November 19, 2007 edition
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It's that time of year again. The time of greeting cards and gifts. For nonprofits, these gifts often come in the form of address labels, umbrellas, even backpacks or sandals sent unsolicited to people's mailboxes. But contrary to the spirit of holiday giving, recipients are expected to send a specific gift back: a monetary donation.
These gifts, known as front-end premiums or "freemiums," get mixed reviews from fundraising experts and the public alike. While freemiums typically bring in more money than they cost, the feelings of guilt and cynicism they can inspire may hurt nonprofits in the long run.
"[Charities] wouldn't use this strategy unless it worked and brought in a good return on their investment," says Tom Pollack, director of the National Center for Charitable Statistics.
And how. In the short term, nonprofits generally lose money when they try to recruit new donors through direct-mail campaigns, recouping only 60 or 70 cents for every dollar spent, says Adrian Sargeant, chair of fundraising at the Center on Philanthropy at Indiana University. "Direct-mail campaigns can be called 'the art of losing money in small amounts,' " he says.
But when a freemium is included with the plea, there is a positive return. Particularly successful nonprofits might rake in $15 in donations for every dollar spent, Dr. Sargeant says.
Overall, 70 percent of first-time donors come through direct-mail efforts that include a premium of some sort, says Mal Warwick of Mal Warwick Associates, a fundraising consulting company.
Freemiums work on several levels, experts say: They grab attention, they inform, and they encourage reciprocity.
"The idea of [freemiums] is that 'the nonprofit has reached out and engaged me at a higher level than with words.' That gets people's attention," says Paul Schervish, director of the Center on Wealth and Philanthropy at Boston College.
One example of an inexpensive but effective donation-request freemium has been sent by a charity for deaf and blind children, Sargeant says. The potential donor receives a letter and a drinking straw apparently from a child who was sent on a vacation by the charity. The letter describes the vacation and how much they enjoyed a special piña colada or smoothie. "Then you think, 'Wow, I guess if I were a blind child, something small like that could be a highlight for me as well,' " Sargeant says.
Other examples of freemiums include a foldable vase or gardening gloves (given by a veterans' group around Memorial Day) and the yellow Livestrong bracelets from the Lance Armstrong Foundation, says Corinne Biggs, senior vice president of strategic development PEP Direct Inc., a direct-marketing firm. Such bracelets have become hip fashion accessories.
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