You texted your three quid donation after you saw that advert on the TV or in the paper… and the next thing you know someone in a call centre rings you to ask for even more money for the charity. Pretty ungrateful eh?
This text-to-call-back fundraising mechanism is increasingly popular among charities, and increasingly unpopular among the rest of us. Like chugging, it seems an odd way to try to raise money by annoying people. This forum on Mumsnet is typical of the public mood. Yet anecdotally the level of complaints that the charities directly receive about these calls is very low. In my experience, only 1 in 500 or so people called actually went to the bother of calling or emailing the charity to complain.
The calling paradox
Most people agree that a good charity is one that spends as little of their (your) money on running costs and fundraising, and gets the biggest bang for every fundraising buck it does spend.
Most charities would broadly agree – which is why they use this call centre mechanism. Yet people don’t like it when they do.
Charities aren’t stupid. Between them they’ve tested a load of different ways of raising money, and this text-to-cll-back mechanic consistently generates one of the best Returns on Investment (ROI). They stick with it despite its seeming unpopularity precisely because it works so well.
Regular donors (like those with a monthly Direct Debit) are the lifeblood of mny charities and it’s what they’re all competing for. Calling people on the phone to ask them to set up a Direct Debit is way more effective than asking them to do it via a letter, and email or a Facebook post. Although you may think that no-one ever likes getting those calls, the fact is that it’s been tested over and again.
I already gave at the office
You gave them a £3 text donation yesterday, and now they’re ringing you up and asking for £8 a month. That’s very ungrateful/greedy is the gist of most people’s complaints. It’s a fair point. Again, from the charity’s perspective though, they’re much more likely to recruit regular donors from a pool of people who have already demonstrated that they have an affinity with the cause or Appeal. Ringing people who have already donated is much, much more cost-effective than phoning random people from a list you’ve bought, and way more effective than emailing or texting them back and sending them a link to your Direct Debit page. And you do like your charities to be cost-effective, right?
Amazon wouldn’t earn millions a year in revenue with a marketing strategy of ‘Ben already bought a book this year, let’s not try to sell him another one until next year’. It’s a basic tenet of marketing that repeat customers are cheaper to sell to than recruiting new ones every time. The same goes for charities and their donors. They do invest time and money in recruiting new supporters all the time, but they’d be crazy not to ask their existing donors to become repeat customers.
When they said they wanted your money, they lied
Kind of. Your £3 donation (and everyone else’s) probably won’t even cover the costs of the ads you saw them advertised in. TV and newspaper/magazine ad space is expensive, and very few charities even bother asking to get them for free.
No, what they really want is your phone number – that’s much more valuable to the charity than your £3. It could easily be worth £100 a year for the next 10 years.
Anatomy of a text campaign
Here’s why your phone number is so valuable: Let’s say a £3 donation charity appeal ad in the paper generates 1,000 texts in response. That £3,000 probably won’t cover the cost of getting the ad made and buying the media space in the first place. The real value of those phone numbers is that they’re a great ‘lead generation’ to use a sales term.
The charity hires a calling agency who charge about £5 per ‘decision-making call’ (i.e. one where the customer doesn’t hang up straight away) and they will ‘convert’ an average of 15% of them onto a monthly Direct Debit. On average they might sign up at £7 a month – that’s £82 a year – and with Gift Aid it amounts to about £100 a year for the charity.
The call centre will only get through and make a decision making call for about half of the total number of phone numbers they’ve been given.
The calling costs: £5 x 500 calls = £2,500.
The income: £100 p.a. x 75 (i.e. 15% of 500) = £7,500 per year.
That’s just in year one. If you assume an attrition rate (the number of people who cancel their Direct Debit during the year) of 20%, then in year 2 you make £6,000 (£7,500 x 0.8) and in year 3 you make £4,800 (£6,000 x 0.8). That’s £18,300 over the next 3 years – from an initial calling cost of £2,500. You want charities to use their money cost-effectively? then they’d be crazy not to be calling you back in that case!
Tragedy of the Commons
There is a problem though. People are getting wise to the fact that they’re going to get called straight back (research shows the best
conversion rates are achieved if you can call people within an hour of them making their text donation). Since most people don’t like being called back, fewer and fewer will text in response to those £3 or £5 ’emergency’ appeals.
The charities are aware of this. In part they’re all jumping on the bandwagon quickly before it runs out of steam. Each charity knows that it’s not a sustainable fundraising model in the long run if they all do it… but acting as rational individuals it makes sense for them to do it and hope that everyone one else stops. Economists call this ‘the tragedy of the commons’ for example to describe a situation where the farmers all let their sheep graze the common pastures, but doing so will cause them to become barren. To protect the shared resource, none of them should overuse it, but acting individually, there’s no incentive for them to stop whilst others carry on and enjoy the benefits.
Like street fundraising (chugging), this text-to-call back model of fundraising is likely to not be so prevalent in five or ten years time. You can now give monthly donations to charity via your mobile phone rather than Direct Debit. You get a text each month asking if you want to skip your donation for that month. It’s really easy to set up and to manage your payments. A few charities are trying out advertising this on their ads.
The conversion rate is lower than you’d get if you were using a call centre to persuade people to make a regular commitment. On the other hand, there’s no calling costs, and it’s a more ‘honest’ and transparent method of fundraising as it doesn’t involve any unexpected (and usually unwelcome) calls after you’ve sent your text donation.