Category Archives: Economics

Cars, Culture, Economics, Government

Dear President Trump:

Dear President Trump:

I voted for you. I understand your strategy of America first. But your decision to tariff Canadian auto exports to the United States makes no sense.  As you know, the automotive trade between Canada and the United States is virtually balanced. While Canada’s exports of cars to the U.S. may create a U.S. deficit, the United States exports an excess of automotive parts to Canada, balancing the automotive trade between the two countries.

This is clearly stated by the Toronto Dominion Bank’s economics team, January 28, 2025: “Potential Hazards Ahead” by Andrew Foran.

So why tariff Canadian exports of automotive products?

Your position to re-patriate the automotive industry to the United States is supposed to “bring back” jobs lost to overseas countries.  The truth is that in Canada, many of those jobs were created over a hundred years ago, long before you and I were born. Look at these Canadian subsidiaries, and their starting dates in Canada:  

The Ford Motor Company of Canada, founded 1904

General Motors Company of Canada 1918

The Chrysler Corporation of Canada 1925

Kaiser Willys Jeep 1954

American Motors Corporation (Nash & Hudson) 1954

Honda Canada Inc 1986

Toyota Manufacturing Inc 1988

The Big Three were building and shipping cars in Canada for Canadians long before WWII. Four, and five generations of Canadian families have worked in the factories, the shops, accessories and parts businesses feeding these successful companies. It’s in their DNA. They have taken loans to buy cars, mortgages to build homes, grow towns, and slogged to work for their families. The profits were returned to head office.

Sir, why are these companies in Canada? Market opportunity. This expansion wasn’t about finding cheap labor. This was about mining Canadian dollars.

Now you suggest that Canada is “ripping off” the United States by building cars and trucks. I think it’s a fair bet that every automotive trade investment that has been made on Canadian soil in the last seventy-five years has been supported by Canadian loans and a motivated labor force.

These industries existed decades before NAFTA. The 1965 US/Canada Auto Pact designed this relationship, which is balanced, and has been a cornerstone in supplying both countries equally.

I must remind you, Mr. President, that Canada is not just a neighbor. It is our friend and ally. Canadians have pitched in whenever the need arose: Dieppe, Vimy Ridge, Juno Beach, Afghanistan, Iraq, Iranian hostages, emergency 911-housing. Canadian first responders have convoyed to floods and tornados in the US heartland, quakes, hurricanes in the south, and to forest fires in the west.

These tariffs are worse than a slap in the face, they are a stab in the back.

Please explain why this balanced relationship is being burdened by tariffs which will harm citizens on both sides of the border.  Better yet, Mr. President, please stop the tariffs on the automotive trade.

                                                Yours truly,

                                                Phil Brown

                                                Libertyville, IL 

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Culture, Economics, Government, Marketing, Politics

Spin City: “Shop Local”

Last week I shared my frustration and shame at President Trump’s brutish and uncaring treatment of Canada, a treasured friend of the United States. My letter was to the Republican National Committee.

The gist of it was that under the pretense of stopping drugs and illegal immigration, Canada was forced into increasing secure borders, or risk tariffs. After complying to the President’s demand, the subject pivoted. It wasn’t about drugs and borders, it was about a $60 billion trade deficit between our two countries, favoring Canada. I called the pivot a “bait and switch”.

But I have finally settled on the ultimate truth of this pivot, and it’s not what we thought at all.

First, to confirm, a trade deficit exists when two bodies don’t equal each other’s bank accounts. To wit, Canada’s tills received $413B from Americans, and America’s tills received $349B. from Canadians. Canadians would be right in saying, “We need a bigger cash register!”

To put this in perspective, the trade deficit has not been $63B in recent history. In fact, from 2017 to 2020, the deficit has averaged $20B per year. So the latest is a jump.

This deficit phenomenon is not unique.

If I was mayor of a small town, and noticed with some gloom that my local residents all went to the neighboring town to buy groceries, because they were cheaper, or more varied, I would expect the grocer in my town to come banging on my desk, with a grievance. “Nobody shops here. I’m going out of business at this rate!” I would apologize, and hoist signs on every lamp standard, “SHOP LOCAL”. I would also tell the grocer to get smart: “Bring in better stuff, and lower your prices.”

This is logical enough, but it doesn’t necessarily work if the out-of-town grocer has better suppliers.

So placing this on an international scale, the USA is taxing imports, with punishing tariffs paid by American importers.

But here’s the real twist. I finally glommed onto this as I ate my last Dad’s Cookie which was baked in Toronto Canada. While the President has charged that “Canada is ripping us off,” what he was really afraid to admit is, “I am going to punish American consumers for purchasing desirable Canadian product. By collecting a tariff on those imports, U.S. consumers will learn to shop local.”

It would be political suicide to come out and just say that, so instead, this “rip off” language targets Canadians, and all other countries as bad actors. The end game however, is to bring offshore jobs home. And while it may seem that Canadians are the bad guys, they aren’t. We are the bad guys because we like our Dad’s Cookies. The President’s hope is that one day, those cookies will be made here.

You can see this happening now in Canada. With new Canadian tariffs on U.S. goods, Canadians are encouraged to buy Canadian: SHOP LOCAL. To which they are proudly responding.

Mean time, the home-wrecking language and bombastic posturing from the White House has had a toxic effect on the USA’s goodwill account. Who knows how long that major faux pas will take to smooth over?

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Culture, Economics, Government

An Open Letter to Michael Whatley, RNC Chair

Bait and Switch

Dear Chairman Whatley: I am staring at my Sustaining Member card for the Republican National Committee, and I am debating whether to return it to the RNC.

I am dismayed by President Trump’s transparent attempt to fool his electorate into believing he is imposing tariffs on Canadian exports to the USA just to stem the flow of illegal aliens and to stop the production of fentynyl. He revealed his real goal: to balance trade between our two countries.

You well know he announced his tariff plans were contingent upon Canada bearing down on illegal crossings and drug controls. When he was satisfied, the tariffs would go away. Canada responded and is working with US agencies to comply.

Now President Trump is accusing Canadian exporters of “ripping off” the United States over a $68 billion trade deficit. In a $762 billion trade relationship, this is a 9% differential. Never mind he negotiated this trade pact.

The outcome of this capricious and arbitrary action is that we have lost the best friends we could ever have. Canadians are rightfully angry and scalded by this abusive action and language. You will witness that our flag is lowered from Canadian businesses. The national anthem is booed at sports. Provincial governments are canceling contracts with US vendors. American sales people are refused entry to Canadian offices. One wonders how American tourists will ever be welcomed in Canada.

The numbing question over this infamy is whether Americans are even aware, and if so, do they even care? The tariffs have created 40,000,000 enemies without a single shot fired.

I would remind you of an important test for what we say, think and do. It is the operating rule of the Rotary International, here in Evanston, Illinois: The Four Way Test. Is it the truth? Is it fair to all concerned? Will it build goodwill and better friendships? Will it be beneficial to all concerned?

I believe that the President’s treatment of Canada fails this test abysmally.

I am urging you to communicate my anger and disappointment to the President with respect to this ridiculous and deceitful tariff ruling.

Yours truly, Phil Brown, Libertyville, IL USA.

CC: KC Crosbie, CoChair; Kathy Salvi, Illinois State Chair; Dean White, Illinois National Committee Man; Rhonda Belford, Illinois National Committee Woman; Daily Herald, Chicago Tribune.

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Economics, Government, Legal, Marketing

Open Letter to Kwame Raoul

To: Office of the Illinois Attorney General, 115 South LaSalle Street, Chicago, Illinois

Re: Kroger and Albertsons Merger

Dear A.G. Raoul: I am concerned that the proposed merger of Kroger and Albertsons grocery stores will create a disadvantage for Illinois shoppers. Here, in Lake County, we are fortunate to have two corporate branches: Jewel (Albertsons) and Mariano’s (Kroger). The stores face each other across Milwaukee Avenue, in Libertyville/Vernon Hills. They are connected via a major intersection.

The parking lots are full.

We are long term shoppers at Sunset Foods, Jewel, and Mariano’s . Despite the distance, we visit all three stores regularly to choose from a rich, wide selection. Each store continually makes competitive offers, which we enjoy. We are frequent shopper club members at all three stores, and take full advantage of the timely deals.

Over the past 27 months I have logged the dollars spent at each store.

As you can see, all three stores enjoy our business. If Jewel and Marianos co-exist under a merger, it would not be for long, as they will both get their product through the same purchasing department. So one of these stores will probably close. To me, that eliminates the competitive environment. Indeed, it is likely, with no competition, that prices will rise over time.

I urge you to be firm in fighting this proposed merger. It may be good for business, but it’s no good for shoppers.

Sincerely,

Phil Brown, Libertyville, IL.

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Culture, Economics, Marketing

Along The Amazon: The Real Invasion

The Brown Marmorated Stink Bug: perennial invader.

For the two previous summers, our community has been infiltrated by legions of quietly intrusive stinkbugs.  They seemed to magically appear, just out of the corner of our eyes, posing on a wall or lampshade.  

Amazon Prime van passes the broken shell of a Macy’s store.

Little did we know that these were just the first wave, doing reconnaissance for the main invasion: Amazon. Now, virtually on every street, at every corner, we catch a glimpse of an Amazon delivery truck slipping in and out of view.

Amazon first broke into our consciousness in 1995 with a simple concept: a place to buy books online.  Their ads claimed access to all of the world’s contemporary literature available, and their warehouse was in outer space, “The World’s Biggest Bookstore”.  We might have listened.

Today Amazon is the world’s second largest company, by market capitalization, following Microsoft, and just ahead of Apple.  It has the world’s second largest retail sales volume, following Walmart.  

Barbarians at the gate: Amazon vans use shuttered Macy’s parking lot in Northbrook, IL.

It has up-ended the retail business model.  In 1997 3% of its sales were attributed to third party sellers.  Today, 58% of its sales come from third party.    In response, 2019 saw the closing of 9,300 big brand retail stores in the U.S.  The shift will continue.

The most physical sense of Amazon’s presence is its growing fleet of delivery vans.  In 2019, Fedex and UPS and the United States Postal Service delivered approximately 13.9 billion parcels in the United States.    But on its own, Amazon dropped 2.5 billion pieces at our doors.  According to Morgan Stanley, that will increase to 6.2 billion in the next 3 years.

The Amazon convoy. Dispatched regularly in 10-15 vehicle sorties on Butterfield Road.

I remark on these stats primarily because we watch the daily procession of Amazon trucks that travel Butterfield Highway, between Libertyville and Mundelein. The company has leased space to stage its fleet in an available lot on Technology Way on Libertyville’s west side.   There, independent owners and employees are regularly dispatched in squads of 10-15 vehicles at a time to head south to Allanson Road in Mundelein where they will pick up their allotted parcels for delivery.  The system is efficient, and it is supported by a good road, courtesy of Lake County.

Staging area in west Libertyville.

Just over the Illinois/Wisconsin Line, there is a vast Amazon distribution center off of US Route 94.  It measures several football fields in size, plus parking lot.  Not coincidentally, directly across the highway sits an equally large U-Line facility that makes shipping boxes. One wonders if there is a tunnel.  According to Amazon’s 2018 statements, the company has 230 million square feet of fulfillment space.  Its premises house nearly 650,000 employees.  One might also wonder how many of those people used to work for Sears, Macy’s, Pier One Imports, Abercrombie & Fitch, Office Depot, Victoria’s Secret, The Gap, and Payless Shoes.

This is not a critique of Amazon in any way.  The company’s mission statement is in part to serve a “customer-centric obsession”.  To that end, it has grown from simply books to sales of more than 100 million items.  Its website lists not a few business diversifications, but a vast portfolio of divisions relating to fashion, video streaming, groceries, pharmaceuticals, publishing, music, movies, web services, home automation and home security.

We can mourn the loss of the local store, but we have gravitated toward a business model that for much of our wants and needs, is just plain easy.

I wish I could feel as good about the stink bugs. 

 

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direct mail, Economics, Marketing, Media, USPS

The Last Post

This is my last post on USPS performance. If you are in the direct marketing or direct mail business, you have seen these before, but unless things stabilize, I don’t want to report, thanks.

The USPS Postal Regulatory Commission has just released the latest Revenues, Pieces and Weights quarterly report. They call it FY Q1/2020.This covers October 1 to December 31, 2019.

Cutting to the chase, I highlight these numbers:
1. First Class revenues are off $161 million, down 2.3% just for the quarter. This was supposed to be the Christmas, Thanksgiving, Halloween and holiday greetings season.
2. Direct Mail or “Marketing Mail” as they have renamed it, down $252 million, or off 5.4% during what was traditionally a good season.
3. Direct mail volume for the quarter was off 1.7 billion pieces…down 7.9%. Hello??
4. Periodical mail continues its slide, revenues off 7.7%, volumes off 7.4%
5. Competitive Packages and Parcel mail, revenues up $137 million, or 2.1%, but quantities down 68 million pieces, off 4.0%.

I suppose I am naiively conservative, but I really expected for this past quarter to shine, and I have been rudely shaken to grasp what everyone else has been saying for years.

On an annual basis, the numbers are no more encouraging. I have created the chart below, converting the USPS fiscal year reports to normal business calendar years: January to December.

Compared to 2018, here are a few highlights about 2019 volumes:
1. First Class revenues off 2.2%; pieces off 3.4%
2. Direct mail revenues off 3.7%; pieces off 5.6%
3. Packages and Parcels revenues up 3.5%; pieces down 2.8%

Clearly, email, chat, web, and social media has displaced the need to use the mail. The only beneficiary in this trend is the package delivery business, which the USPS has carefully cultivated, though the decline in pieces is still a concern.

If there is any bright spot in this numbers soup, it might be that the direct marketers who mail to live know what they are doing; that it’s the small local businesses which used to mail have opted for web and social media instead.

We’ll see, but unless they do, this is my last post on the USPS.

Thanks for reading and sharing.  If you are in the DM business, and have an alternative observation to make, I would love to hear it!

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direct mail, Economics, Government, Media, USPS

USPS: A Six-Month Stagger Into 2019

What can you say about a cursory glance at the most recent USPS Revenues Pieces and Weights report other than “CURSES!!” ?

What else can one say? They raised their rates around 2.5% last January, and six months later, revenues, pieces and weights are down.

SPOILER ALERT: This is all about numbers, which mean little, unless you are thinking about money.

You can see the details for yourself, but a cautionary word: the official RPW report above covers 9 months, from October 1 to June 30.   I have extracted the numbers below to cover from January to June, 2019.

 

In First Class Mail, which is all about bills, statements, cards and letters to mom and the folks, volume was off 3.2%– 904,000,000 pieces less than 2018.

Marketing Mail– direct mail was off 4.9%, — down 1,839,000,000 pieces from a year ago. Even more disturbing, the weight of those direct mail pieces also shrank about 2% from 1.49 ounces in 2018 to 1.46 ounces in 2019.

Leavened economics: 4 for $8.00 or 1 for $3.50?

The lesson here is that when you raise prices, despite your dominant position in the marketplace, people will buy less. We experienced a similar phenomenon at our favorite bakery when they raised the price of a cinnamon bun from $2.00 to $3.50. We used to buy 4, for $8. Now we buy one. Who’s happy?

The only bright light in the USPS tunnel to perdition is the package volume. Thanks to Internet orders, parcel shipments are still growing revenues, up 3.6%, though pieces and weights are off 1.7% and 3.3% respectively.

For wholly different reasons, magazine volume is also continuing its slide. Pieces are off 7.7% to 2,345,000,000 total delivered to as many as 159 million addresses in each of the past 6 months. If these magazines are all monthlies, there are approximately 391 million subscriptions in effect. About 2.4 for every household in America. While that may seem like plenty, just 5 years ago, the USPS delivered just over 3 billion periodicals, honoring approximately 502 million contracts, or 3.2 for every household.  But face it: if it wasn’t for the waiting rooms outside doctors’ offices, lube shops and office lobbies, the count would be less.

None of these figures should surprise you.  We all know the effect of the Internet on hard copy, paper, ink, and postal delivery.  Still, it is distressing to see a vital communications channel slowly price itself into a retreat, fulfilling a prophecy of irrelevance.

USS Ronald Reagan, a meager 110,000 tons.

But it’s not irrelevant.  Total mail volume in the fiscal year 2018 was 146 billion pieces.  That weighed 12.3 million tons. For those of you who are counting, that’s 108 USS Ronald Reagan aircraft carriers, soaking wet.

I have said it several times before, that the USPS, as an independent government agency has lots to be proud of, starting with its relatively minuscule cost to the US taxpayer.  Its 2017-2018 annual report showed an operating loss of $3.9 billion.  Sounds like a lot!  It’s 0.095% of the total U.S budget.   Less than one tenth of a percent.

The reality is, the USPS is still the bargain of all the media choices: it’s part of our lives, 6 days a week, with door-to-door pick-up and delivery, costing the taxpayer household about $23 per year, plus stamps.  Beat that, Amazon Prime.

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Culture, direct mail, Economics, Government, Marketing, USPS

USPS: Hidden Good Fortunes

Every quarter the USPS publishes their Revenues, Pieces and Weights Report. For the numerical savants out there, this is a feast of numbers beyond one sitting, for sure.

But the big story is, the USPS continues to perform in a stellar fashion, despite the ravaging onset of online displacement of hard copy as we know it.

If you think the post office is in trouble? Have another think.

Q3 YTD Results–9 Months Only
~The bad news– and what is publicly perceived, First Class revenues have fallen from $22.7 billion in 2013 to $19.9 in 2018. (off $2.7B or -12%).

~In the same 5 years, Magazines and Periodicals dropped from $1.3 billion to $984 million. (off $276M or -22%)

These two categories accounted for a $3 billion shortfall in revenue.

~Direct Mail, which includes catalogs, has ceded $294 million over the past 5 years. (off -2%) to $12.5 billion in the first three quarters of fiscal 2018.

Now for the good news.

In 2018, competitive Parcel and Package delivery has grown from $9.8 billion in 2013 to $16.9 billion. That’s a $7.1 billion growth, or 73%!

So we can certainly see how internet and digital media have blasted the legacy paper and ink communications business to smithereens.

What we did not see however was that online commerce has grown so rapidly that the USPS has found its newest niche: order delivery.

Year to date, 9 months, FY 2018, the USPS has delivered 4.2 billion pieces. Compare that to 2.3 billion, 5 years ago.

The USPS has another interesting report available, entitled Public Cost and Revenue Analysis, Fiscal Year 2017.

I like this report because it tells you how well it covers its costs of operation.  For instance, First Class Mail has a cost coverage of 210%.  Basically, its revenues are double its costs.

Direct Mail cost coverage is 153%.  Magazines and Periodicals, only 69%.  But the Package and Parcel delivery business, in the competitive markets, cost coverage is 155%.

Overall revenues for 9 months are $53.8 billion, up 5% from $51.2B 5 years ago.

These numbers indicate the ebb and flow of the door-to-door, pick-up-and-delivery business, and how the USPS is responding to America’s choices in communications.  True, the numbers do not account for front office costs, and legacy benefit and pension challenges, where there is a different story to tell.

But for making their daily appointed rounds, no one does it better than the USPS.

 

Thanks for reading!  If you would like to see these reports for yourself, have at it!

Click here: Fiscal year 2018 Q3 Revenues Pieces and Weights

and here: Public Cost and Revenue Analysis 2017

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direct mail, Economics, Education, Fundraising

What It Takes To Raise A Buck

The Dream Catcher: the ultimate gift.

It may be a function of age, but we receive a fair share of fundraising direct mail. Occasionally we get kits that amaze us for their content, with the underlying question, how can this possibly make money?

St. Joseph’s Indian School uses a donor acquisition package that pushes the boundaries, but based on their frequent use, this kit makes money. But it still amazes.

A personalized lift note accompanies the letter.

The key to powerful direct mail is rolled up in this slogan: List-Offer-Format-Copy. You can figure it out. But a subset of “Format” is fundamental to understanding good design: Size-Cards-Labels-Diecuts-Personalization.

Take a look at St. Joe’s and how they go beyond the formula.

The 9×9-1/2 Flat kit is hard to ignore.

Size
The envelope is 9×9-1/2. No wait, it’s not an envelope. It’s more like a bag, a catch all, and it’s a half inch thick. Not normal! Right away, we are talking a Flat, not a letter. Odds are it weighs more than 3.3 ounces, so no kidding, this is a small trunk in the donor’s mailbox. Despite its bulkiness, it is still machinable, but I’ll bet the USPS would love to be rid of this mini-parcel bouncing through their multi-million dollar sorters. Remember, in direct mail, size counts.

The calendar is one of 8 personalized pieces.

The perfed donor form highlights what your donation will buy.

Cards
Many successful kits provide a card. It’s personalized, perhaps laminated or plasticized, embossed, and maybe delivered in pairs. Very common in retail, insurance, service and association mailings, cards convey belonging and entitlement. While St. Joe’s doesn’t have a card per se, they do include personalized memorabilia like calendar cards, and gift certificates.

27 address stickers, enough for every utensil in the kitchen drawer.

Labels
Do we have enough address labels? Maybe, maybe not. Until you have labeled all your electronic gear, computers, cell phones, 14 golf clubs, CDs, Vinyl, USBs, chargers, staplers, umbrellas, Christmas cards, 3-hole punch and entire library of Clive Cussler books on loan, you aren’t done. And beside labels, anything that is pressure sensitive, like Post-it notes, velcro and magnets counts as an involvement device that draws your reader in a tactile way to your mailing. St. Joe’s goes over the top to provide stickers and labels for the donor, their children and the next door neighbor’s cat.

Mood aubergine: more labels for every occasion.

Die-Cuts
Really a technical obsession for printers and origami artists, the die-cut is a subtle paper carving that uses perforations, kiss-cuts, windows and trimming to create a 3-dimensional or engineered aspect to your kit. The recipient will work those die-cuts intuitively, without thinking, to unfold and self administer a little presentation for their personal viewing. Again die-cuts precipitate movement and finger work, which is involving your reader.

The Post-it note doubles down on the ask.

Personalization
St. Joe’s knows how to attract the eye, and that starts with calling out to the reader repeatedly. 8 times in fact. Envelope, letter, donor form, certificates, address labels, stickers, calendar, lift note…no matter your persuasion, it is hard to casually throw out a piece of paper that has your name on it.

I offer an additional element that may trump the 5 attributes above–

A 24-page calendar with original art makes this kit indispensible.

Indispensibility
Above and beyond the formula I gave you, the appeal of the St. Joe’s piece is that you just can’t throw it out. Why? Because in addition to all of the features, the envelope is packed with gifts, and useful items: three shrunk-wrapped greeting cards, a note pad, a 24-page calendar with art, the stickers or course, and the piece de resistance: the Dream Catcher. Not to mention the 3 penny stamps affixed to the reply envelope. Almost impossible to throw in the bin…just can’t do it. Arrrgh!

So there you have a fully loaded kit.   But can it pay for itself?

The first rule of fundraising: donors don’t come free. So management knows they must develop their donor files, which is what this kit is for.

The note pad’s backer explains the mission and prayer of the Lakota community.

It’s a bit of a guess, but based on a nickel a page, this kit probably cost around $2.50 to print and assemble, plus the Dream Catcher…, maybe $3.00. Postage will be around 50-55 cents, based on a 6.4 ounce kit, automation rate, non profit.  Add in the lists, freight and data processing and it has to be $4.00 a kit.

Wow!  “Who has that kind of money?” fret the accountants, and by the way, a lot of donors, too.

But here’s the thing, because of its impact, its stopping power, this piece could have a 5-8% response rate.  Let’s say 7%.

Three tastefully designed greeting cards, individually wrapped, are an extra push for donation.

Then $4.00/7% = $57.00 cost per response.  And what is the average gift? They are asking between $8-$70.  Again say it’s $30.  So the net cost is $27 to get a new donor.  That donor will have a longstanding, profitable relationship with St. Joe’s and looking at the financial statement, there is about a 10% chance that the donor may make a final bequest in their will to the organization.

Overall, St. Joe’s has a fundraising efficiency of about 31%, according to their financial statement. 31 cents to raise a dollar.

This may seem higher than some of the nation’s largest, more well known non-profits.  But keep in mind that those have strong, pervasive brands, high impact causes like hurricanes and disease, and oodles of corporate in-kind support, too.

Thanks for reading!  Please share!

 

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direct mail, Economics, Fundraising, Marketing, USPS

The Mysterious Cost To Raise A Dollar

The tiny silver disc leapt from the shelf.

The convolution of three events today raised my antenna that there is a superior organizing force out there that is directing our path as we hurtle through space.

As I was cleaning off our bookshelf, a small battery dropped to the desk. These are the tiny nickel-cadmium dots that we find in cameras and calculators. Not the larger lithium incendiary bombs that we have in our laptops and hover boards.

The calculator that failed to light up.

The battery was all that was left of a calculator I tried to resuscitate a few months ago. When the machine didn’t light up, I undid about 9 tiny screws to retrieve the battery.  As I popped off the back, the entire calculator sprung into a hundred pieces of keys, buttons and circuit board.  Incalculable.   I saved the battery to take into the hardware store for a replacement, just in case the calculator could be reassembled.

The next thing that happened was while emptying out the washing machine, we discovered that I had left my Moleskine diary in my shirt pocket. We retrieved the diary cover, very soggy, and found the rest of its contents spread like a million flakes of oatmeal over all our clothes. So much for keeping notes on paper.

A misadventure, attempting to extract the battery for replacement.

As the morning progressed, Lonny the mailman came by, and stuffed our mailbox with lots of missives from people we don’t know, but asking for money. The largest piece in the delivery was a giant, lumpy, shiny, pebbled envelope from Disabled Veterans National Foundation.

The DVNF package was an exceptional “Flat”: 12″ x 15″.   So huge that all the other mail was folded in with it.

In direct mail, size counts.  So I opened it immediately to find, mirabile dictu––another calculator!  And—- another diary!  Wow.  I am completed.

The Mystery of Fundraising By Mail

After admitting that the USPS may be a supernatural force, most would ponder the imponderable: how does DVNF get away with sending out calculators, books and notepads, and expect to earn any money for their cause?

A “max flat” the 12 x 15 kit is shiny, pebbled and lumpy. It was folded to fit the mailbox.

That, dear reader, is one of the great mysteries of direct mail fundraising, and one that I will unravel for you now.  All you need to know is what the package really costs, response rate and average dollar gift amount.

To calculate the cost, I first took the kit down to the USPS post office for an official weighing.   Ranjit asked with a jaded smile on his face, “Why?  Do you intend to sue them?”

“No.  I want to calculate their postage, and how much this whole thing cost in the mail.”

Ranjit replied, “It’s non-profit, but don’t kid yourself, they are making money.”

I pulled out the new calculator and said, “Look at this!  That’s gotta cost a buck anyway…”

Ranjit smirked, “Nope.  Twenty cents.  About $2 dollars a pound. It’s from China.”  We weighed it: 3.3 ounces.  “That works out to 40 cents, ” I figured.  Ranjit countered, “OK so maybe $1 dollar a pound, that’s 20 cents.”

A new pocket diary, calculator, memo pad and pen, all personalized.

I stared at him as I pondered that number.  At the same time Ranjit extended his arm across the counter to flash a beautiful bejeweled wristwatch, sparkling in buttons, numbers, dials, and a bright yellow face.  “How much do you think this cost?”  He smiled.

“Uh, I don’t know.  Ten bucks?  A nickel?   79 cents?”

“Close.  It cost me $2 dollars.  Made in China. I bought 5 for $10 bucks, each a different color, for every day at work.”

Smitten with this new-found knowledge of international commerce, I bid him a good day and took my 20-cent calculator back to the car.

The whole mail kit, which included the calculator, the notebook, DVNF pen and some letters and envelopes weighed 9.1 ounces.  According to the USPS, this Flat was part of a 3-digit automation scheme, so I estimate the non-profit postage was about $0.59 a piece.

This pocket diary replaced the soggy Moleskine in a nick of time.

The envelope was made in China, as was the notebook.  Without asking, one can only guess that the components all assembled, shipping included, must have cost around $2 dollars.  Add another 50 cents for the 5-way match on name (envelope, calculator, notebook, donor form and notepad) and you have a kit that surely cost over $3 dollars to put in the mail.

And Now, Using The New Calculator:

That’s $3,000/m for you printers out there keeping score.

The donor form offers a $2.50 check as a tempting diversion. But they want $15-$25. Go figure.

When most mail kits ring in around $0.35 cents each, $3 dollars is a hefty challenge.   In their calculations DVNF finds a breakeven point by dividing the total cost of the kit by the average gift amount.   Looking at their donor card, they suggest a gift of $15-$25.  Taking the lower end, their breakeven response is $3/$15 = 20% response.  At the higher end, 12% response.

12% – 20% response is a steep hill.   This particular charity is known for its high fundraising costs.  According to Charity Navigator their fundraising efficiency is $0.71.  That means for every dollar raised, they spent 71 cents.

For this package, that translates to $3/.71 = $4.23 raised for every piece mailed.

If their average gift is $15, then their response rate would be $4.23/$15 = 28.2%.

And at $25, the response is 16.9%.

There’s no way to be certain, and DVNF is unlikely to share their response results.  But the package itself is a donor acquisition kit.  That is, a high pressure sales pitch to get a new donor.   If indeed it did generate a 28.2% response rate, with a gift of $15, the cost per new donor is:  ($4.23-$3.00)/28.2% = $4.36, which is pretty darn good, if not downright incredible.

It also follows that every new donor will be repeatedly contacted for further donations, which over time, leads to a real surplus, destined for program expenses that support the disabled veterans.

 

Thanks for grinding through these numbers with me!  Please note that Disabled Veterans National Foundation should not be confused with Disabled American Veterans.

 

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