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?

from the November 19, 2007 edition

Page 2 of 2

Page 1 | 2

Generating experiential empathy with a charity's recipients is key to acquiring donations, Dr. Schervish says. "Charities need to show the donor how or who their money is helping, not why their charity is a good organization."

Some donors like to show off their connection to a cause. For example, the Sierra Club engages potential donors by sending them backpacks with the organization's name on it. The packs are right on target for the typical Sierra Club supporter and something they want to be seen using, says Emily Wenzler, a strategist at Kintera, a San Diego-based company that helps nonprofits fundraise online. A less successful method was an environmental group that gave away polar bear stress balls made of polyurethane, a product many environmentalists avoid.

Clearly, not all freemiums are a good move, Mr. Pollack says. He suspects most people perceive such gifts as wasted money. "There's increasingly a sense that we've got serious problems in the world that we need to solve, and people want to give their money to people who are serious about making a direct impact," he says.

There's also the issue of whether potentially guilt tripping people into donating is wise over the long term. Sargeant says nonprofits must walk a fine line when using freemiums. He doesn't approve of charities that send a donation letter with two dimes attached telling potential donors to send the dimes back with a donation. Even though that strategy can be successful, "This is really targeted at making elderly people feel guilty, because they remember when a dime was worth something," he says.

He adds that freemiums are usually targeted at middle-age or older people who are more likely to feel obliged to give something back to someone who's given something to them.

Freemiums have another drawback. Studies show that donors who first respond to a charity as a result of a freemium are less loyal and less generous in the long run. "There's a considerable amount of controversy in the direct-mail community about [premiums] despite the good return," Mr. Warwick says.

In Britain, the Institute of Fundraising is rewriting its code of practice for direct-mail fundraising and debating whether freemiums are an acceptable practice, Sargeant says. The same sort of debate is occurring among US nonprofits, he says.

In the future, Wenzler predicts that more charities will shift toward the Internet and away from by-mail campaigns to avoid rising postal rates and the potential of offending an increasingly conservation-minded public.

1 | Page 2