The costs of DRTV

We have a new white paper out called So you think you want to do DRTV. It’s an honest look at the time, cost, and effort necessary to run a DRTV program successful, as well as the potential rewards. Once again, rather than force you to download it to see if it is something you want, I’ve put the opening here. Hope you enjoy!

Nonprofit donors are shifting to monthly giving. At the same time as donor files wane across generational , age , and religious lines, sustainer numbers have increased by more than half over the past three years. These committed, sustaining donors are likely to be the backbone of charitable giving because of both growth and the consistency of their giving. While cost to acquire is significantly higher, these donors also are higher value ($200‒300 in annual value per year) and better retaining (54% to 60% versus a one-time digital donor’s first-year retention rate of 24% ).

Where then to acquire these new sustaining donors? While there are opportunities to convert single-gift donors, this is not highly scalable. That’s why about two-thirds of all recurring donors are acquired directly to recurring giving. With social distancing eliminating face-to-face (F2F) recruitment for the near future, direct response television (DRTV) and digital are left as the primary means of attracting and retaining sustaining donors. Digital is an excellent means of acquiring sustainers but is difficult to scale; for example, strategies like search engine marketing fall off significantly once you exhaust brand and topical search terms.

That leaves us with DRTV. This is the most scalable channel; with hundreds of channels 24/7, you could not saturate the market if you tried. While it has a higher cost to acquire than media like F2F and digital, it also acquires a donor with a higher lifetime value. The goal is for this increased lifetime value to more than pay for the initial costs. It also is the rising tide that lifts all boats, helping all direct response (plus some non-direct-response) channels.

But it is not for the unprepared. In this white paper, we explore the costs and benefits of DRTV and how to set up a program, from message to logistics.

The cost

Make no mistake: DRTV requires a larger budget than any other form of sustainer recruitment. This is because there are substantial fixed costs in creating the advertisements you would aim to place. Usually, you will want to create at least three different spots to test and, if successful, rotate. Depending on factors like what video assets you have, what is required to get additional footage, how many spots you are creating at once, and what pre-testing you do, this cost is likely at least $250,000‒$350,000 for those three spots.

This is before your ad ever airs. For an initial test, you would want to budget about $700,000. That’s about $300,000 for creating the spots (three, for testing), $300,000 in placement costs, and $100,000 in set-up. This is the bare minimum to see if your message is working and where specifically it is most successful.

From there, you’ll want to do a ramp-up test of at least $1 million in placement costs. This will not only verify what you have learned in the initial test, but also measure the success of your message on additional media properties. By the time this initial testing phase is done, you will want to retool some of your initial spots and expand to a media buy of at least $2 million annually.

If you feel you would not be able to get up to this full scope even if tests are successful, DRTV is likely not the right fit for you. Most donors don’t donate after seeing an ad for the first time. It usually takes multiple viewings before a view converts. Thus, frequency of airings is necessary for an ad campaign to be effective. You also need to be able to spread your fixed costs from the creation of the ads over a larger volume of airings. Because of decreased costs and increased effectiveness, DRTV is a rare channel that, to a point, gets cheaper the more you use it. Thus, it’s necessary for the future of a program to be able to scale once winning strategies and tactics are found.

This may not always be the case. Connected TV and over-the-top services make it easier to target vehicles with greater focus. If this becomes substantially more effective than traditional airings, it would be possible to run a smaller DRTV program that is still effective. However, the cost per thousand (CPM) viewers on connected TV is about $18 to $20; this has held steady during COVID-19, even as traditional TV ad rates have fallen because more people are moving to streaming services. The CPM of traditional DRTV is usually less than half this amount. Thus, connected TV would have to have twice the response rate to have the same return on investment. In our testing, it hasn’t generated that bump in response. We continue to test this, as connected TV is becoming a greater part of the average individual’s life, but it is not a magic bullet.

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