The players in the direct mail fundraising world are usually led by the creative agency, of which Base Connect is one. Then there are the list agencies and brokers and the data companies. The list agencies are the keepers of the donor lists—these firms rent lists to campaigns and organizations for prospecting purposes. Often, a creative firm will own a list company and/or a data firm. Base Connect owns Legacy Lists and Century Data. Another GOP direct mail fundraising firm, HSP Direct, owns Sunrise Data. Most people in the political fundraising world seem OK with the connections between firms, given that the client is fully aware of them. In the case of Base Connect, some previous clients have claimed they weren’t. The firm disputes that, noting that there’s no attempt to hide ownership of the companies—Base Connect, Legacy Lists and Century Data all share the same office address in downtown Washington, D.C.
The basic process for prospecting holds true for most direct mail fundraising consultants and programs—with some variations of degree. The most interesting differences come over the question of cost. Does the firm offer “no-risk prospecting,” where the creative firm and vendors essentially offer the campaign credit to get the program off the ground? Is there a per-piece fee or will the company work on a monthly retainer that covers the creative and the mailing?
”I’m always a little nervous about people who proclaim that there’s no upfront investment,” says Pruitt. “You might have long shot candidates who are so desperate for dollars that they sign anything. If you say, ‘We can get you $50,000,’ forget the fact that it may cost $950,000 to get it. We don’t work with any campaigns that start that way because we just don’t think it’s fair.”
Untangling The Costs
As a consumer of direct mail fundraising services, the decision on who to trust to build a list for your campaign is as important as how they do it. Republican Dan Hazelwood warns campaigns to resist the temptation to take the easy way out when it comes to building a program. “The strength and weakness of direct mail fundraising is that it does not require much candidate time,” says Hazelwood, who heads Targeted Creative Communications, a direct mail firm that does some fundraising work. “And the tools that make it successful are the same tools that can be abused.”
The biggest pricing difference is between firms that work on retainer or do direct billing and therefore require some upfront cost, and those that offer no-risk prospecting. On the one hand, extending credit to a client in order to get a program up and running means a higher level of risk on the part of the fundraising firm and vendors—if the program doesn’t return dollars, it’s the firm and vendors who have to eat the cost. On the other hand, it’s an arrangement with the potential to place most decision-making power with the firm and vendors rather than with the campaign.
“No risk prospecting,” is a term Richard Norman says he started using in the late ‘80s while working for the Republican direct marketing firm Eberle & Associates. In 1987, Norman left to form his own firm, The Richard Norman Company, and as soon as it was financially able to the company started offering no risk prospecting for campaigns. The conservative organization Citizens United—famous now for its Supreme Court case—got off the ground with a no risk direct mail fundraising program. Oliver North’s U.S. Senate campaign in ’94 was another example—Norman’s firm was one of several that were part of a record direct mail haul for a statewide race—$16 million—in what ended as a losing effort.
”The whole point is that the client cannot get left holding the bag,” says Norman. “The downside to no-risk is that the organization doesn’t have the controls they would or should have.”
The kicker is that the man who coined the term, no longer employs the no risk prospecting model in his own business. “We’ve done away with all of those programs with the exception of one that was grandfathered in,” Norman says. “There are just too many inherent problems with the no risk concept.” He says it became increasingly difficult to satisfy vendors to whom money was owed and “most clients don’t want their list out there these days.” With no risk agreements, the firm almost always has co-ownership of the campaign’s house file and is able to immediately start generating income to recoup its costs by renting that list.
Another question is who really benefits from a per-piece fee. A program based on volume, warns Craver, incentivizes mail firms to mail more and it isn’t all that tough for the firm to justify it. In very basic terms the more you mail, the more responses you’re likely to get, but it’s not the best way to increase efficiency or net more for the campaign. “Anytime you see unit pricing, the incentive runs to the fundraiser to mail as much mail as possible,” Craver says. “Early on in my business, I put in a graduated scale. So if I were charging $50 per thousand, I would only do that up to a certain point. Once I reached a certain threshold, I would drop that rate.”
For a campaign thinking about embarking on a direct mail fundraising program, Hazelwood offers some questions about cost that should be answered first. For starters, he says, ensure you know who approves the cost of a mailing and who picks the vendors. Then:
• Do the production vendors have any other financial ties to the firm that selects them?
• Who decides when money generated by the mail is transferred to the control of the candidate’s campaign?
• How does the mail effort ensure it maximizes net return, rather than just total return?
• Is the caging firm (the company that processes the donations) independent from the fundraising firm?
• And who owns the names acquired in the prospecting mail?
With the caveat that he doesn’t have direct knowledge of any other firm’s practices, nor is he aiming his comments at any firm in particular, Hazelwood notes that his own firm Targeted Creative doesn’t own or receive compensation from any sub-vendors used by the company. “A direct mail fundraising firm has a giant economic incentive to own and control all its sub-vendors,” he says. “That incentive is jacked-up prices that cost the client huge amounts, while the client is led to believe they are getting some kind of competitive pricing.”