Our mailbox opened this morning to present a gorgeous golden Flat from Veterans of Foreign Wars.

It is highly improbable that the recipient of this gilded kit would toss it in the bin without at least checking to see if there was a $10 dollar bill waiting inside, too.

Just might have been too, considering the total payload we discovered:
-12 Christmas cards and envelopes

-1 gift bag

-1 pen

-1 calendar card

-1 set of gift & address labels

Of course, there was also a letter/donor form and BRE.

But two unusual items cropped up.

First, the headline alerted us: WOUNDED VETERANS ARE IN CRISIS.

If you are at all disposed to the plight of these warriors, as countless Americans are, you are going to open this labeled treasure chest to see what the crisis is.   Foreclosure on the home?   Withdrawal of benefits?   Family disintegration?   What is the crisis?

Inside, the letter launches in to a completely different train of thought: “When we began sending out these free special edition Christmas cards and other gifts, people said we were crazy.”  Only three paragraphs later do they mention the main focus of their cause: the wounded Veteran.

While this may seem nitpicking, the golden rule of good headlining is to pay it off.   VFW brings the reader to the edge of their seat, and then chats away on the frivolity of costly free gifts.  Crisis takes a back seat.

The second wrinkle is more about economics, and a good lesson is taught here.  This 6.8-ounce kit probably cost $2-$4 dollars each, all in.   Conventional marketers would roll up their eyes, cross themselves and close the garage door before spending that kind of money, especially when the response might not break 5%.

But what if it does?   The real question is, what’s the average gift, and how long before it pays itself off?

So assume for a moment this scenario:

Mailed 10,000 at a cost of $40,000.  700 donors, at a cost of $57.14 each. Response, 7%.  $17,500 in gifts.  Average gift, $25.

What does VFW have? 700 new donors at a net cost of $32.14 each.   What are the odds that over the next five years, the group will turn in another $100,000 through renewal mailings, bequests and planned giving?   Pretty good, actually.

It’s all speculation, of course.   For some background on VFW’s fundraising success, check their website for its latest financials.   Total gifts, $66.8 million, fundraising expenses, $25.6 million.  Roughly 2.6/1.  By comparison, its major competitors turn in gift/fundraising ratios of 3:1 up to 7:1.

The challenge is knowing in advance what the numbers can, and need to be.  Here is a formula worth knowing–witnessed by a fly on the wall of VFW, where for a fictional moment, you are now working.

Budgeted Cost per Piece

Your boss went sideways over the cost of the Gold Lame’ package.  Piqued, she said the gross cost per response can’t exceed $32.14.  You blurt out,

“But that’s the net cost on our Vanilla kit.   Gimme a break.”

“Give you a break? I have to explain this gold cadillac to the board.   If it doesn’t beat Vanilla, I will be back in community service, and you will be on the phones while you are licking envelopes.   Got it?”

So you have a ceiling: the cost per response must not exceed $32.14.   Historically, you have generated a 3% response on the Vanilla conventional mailing format.   The all-in cost of the Gold Lame’ must not exceed $32.14 times 3% = $0.964 each.

Impossible.  The vendor stares through you with crocodile eyes.  Three bucks without postage, he grins.

But you feel strongly about Gold Lame’.  Your all-in piece cost totals $3.75.  Divided by the boss’s ultimatum, $32.14, you need 11.67% response.   Phew.

At this point, you wake from this disturbing nightmare.   Will Gold Lame’ quadruple Vanilla response?   We may not know, but at least you know the formula to weigh the risk.

Remember: ($ piece cost) / ($ response cost)  =  % response

Now, back to our piece.

1.  Fix the headline to set up the letter, or change the letter to pay off the headline.
2. A bold choice of cards: an unabashedly Christmas theme.  Just make sure your list is of that persuasion.
3. The donor form offers 8 gift choices, from $10 – $500.   Good!
4. Lastly, the prepaid BRE is worth it.   Whole campaigns can falter for want of a postage stamp.
5. Mail it.   Whatever the response, whatever the gift, if you don’t test, you will never know.

Lastly, find a good quote to share with your boss, something like Teddy Roosevelt’s, “better to have failed while daring greatly than to live with those cold and timid souls who have neither known victory nor defeat.”

A little wordy, but it may work.