Cover Story: Prospecting for Smiles

Talking with Priscilla Ma, it sounds as if she wishes for a utopia where no child would be born with cleft lip or palate. And that would mean the world wouldn't need Smile Train. But the executive director of the New York-based nonprofit knows children are born with facial deformities, so she just wants her organization's mission to come true: a world without visible cleft lip and palate.

"Some of the villages where I visited, the parents didn't even know that their children could be helped," Ma says of her time in Indian villages outside the city of Varanasi. "They thought that they were cursed. And the entire family, especially the mother, is shunned and sent away. Sometimes to alleviate the so-called curse, the parents are asked to abandon the baby. … There are about 6,150 cleft births a year in the U.S., but you don't see children walking around with a facial deformity because they're helped as early as three months."

So that wish of hers is amended—to bring smiles to the faces of children in the developing world just as quickly as they're brought to the faces of American babies, and with the same standard of care. But that hypothetical needs money behind it to become a reality. So when soft-spoken Ma firmly states that her purpose ever since joining Smile Train seven years ago has been to grow the donor file, there's almost no jolt in hearing that the file grew from 335,000 donors in July 2005 to more than 2.6 million during her tenure—a nearly eight-fold increase in seven years.

However, as donor acquisition costs rose, Smile Train wanted to cut costs. Ma looked for options and successfully negotiated lower printing costs, but she needed to do more. That's when, in discussions with Smile Train's list broker and manager since 2009—Papillion, Neb.-based data provider Infogroup—the two entities created Smile Train's prospect database.

In the fall of 2010, Smile Train implemented the program on half of its 98.9 million pieces of direct mail sent to prospects and saved 40 percent on list costs for fiscal year 2011. What's more, Ma says "a significant portion" of the 300,000 donors acquired during that timeframe resulted from using the prospect database.

"When other nonprofit direct marketers come up and ask me, 'Well, who should really be considering doing something like this?'" Ma adds, "I say, 'Well, if you're a nonprofit that's highly dependent on direct mail, like we are—70 percent of our fundraising revenue comes from direct mail—and you're also a high-volume mailer with increasing costs, this is a great opportunity to test a prospect database concept."

Being a high-volume mailer, because so much revenue depended on the channel, Smile Train was using a wide variety of lists and managing numerous campaigns each year. "As a result of mailing so much," says Ma, "we were netting less than 40 percent of names coming out of a traditional merge/purge environment."

Building a Database
"The organization was trying to think creatively about how it could more efficiently operate its acquisition program to lower costs, so it could reach a greater number of potential donors, but also the right potential donors," says Gretchen Littlefield, president of Infogroup Nonprofit, the marketing agency within data provider Infogroup that serves nonprofits.

"So it was those two factors that were coming in: How do you reach the right ones, but how do you do it also in a really cost-effective way so that they're able to save money and put it into other things?" says Littlefield. "It is a very different way of thinking than I have seen other charities focus on their acquisition efforts, because it's very much something that you see commercial mailers do."

Ma notes that she knew this option of list optimization was possible when she came to Smile Train, because she has a direct marketing agency background in the "for-profit world." Those agencies included Ogilvy, McCann Erickson and Saatchi & Saatchi. That work meant overseeing accounts such as General Motors, Motorola and Nestlé.

She just wasn't sure how to tailor that agency experience for this nonprofit until discussing it with Infogroup and starting the program in the fall of 2010.

"We started just testing it, initially," Ma says. "So how we built it is we took response files—people who'd responded to our direct mail acquisition programs—and, obviously, our house files and our suppression files, to make sure we removed anyone from that pool.

"After all the de-duping and removing names that were on our suppression files and house files," she continues, "we were left with an available pool of prospects of 117 million households." Smile Train then:

• Appended data to those prospects (demographic, transactional, lifestyle);
• Ran regression models to identify key predictive variables;
• Scored the prospective pool of 117 million records;
• Identified approximately 29 million households that would be most likely to respond to direct mail; and
• Segmented those households into 20 tiers for targeting.

The process helped Smile Train find prospects who were most likely to become donors—people who looked a lot like responders to the charity's past direct mail acquisition efforts.

"We initially tested into it, back in the fall, using a mix of compiled data (prospect database) and external lists," Ma says. "We were doing about 50 percent from the prospect database and 50 percent from the continuation/external lists. ... And, obviously, we did some tracking to test, to make sure that we were able to track the results coming from the prospect database." She adds, "when we actually compared results, we found that the compiled names from the prospect database performed on par with our average external continuation lists and outperformed the middle to bottom third of a typical list plan."

Direct Mail
Direct mail is Smile Train's fundraising workhorse, Ma says. That's not by accident.

"We call it our 'investment analysis approach,' where we take a look at every single channel," Ma says. "We take a look at how each list or how each newspaper title or magazine title is performing with initial donation, as well as with one-, two-, three-, four-, five-year payback. And [we look at] how the donor is acquired from each list or each newspaper title or magazine title or TV station."

Smile Train then evaluates how well each channel is performing in the short-term and the long-term, and makes monthly planning decisions based on the analysis.

"If you see us in a newspaper, like you pick up the Boston Globe or New York Times and you see us in that ad, that's because that newspaper is performing well enough for us and bringing in a valuable enough donor for us to continue advertising in it," Ma says. "Same thing if you see us on a website in an online banner ad."

If Smile Train's not in a channel, the organization hasn't yet tested it or it didn't perform well. One such channel, which Ma emphasizes she hasn't given up on, is radio.

So direct mail greets Smile Train donors every year. From July 1, 2010, through June 30, 2011, Smile Train's core retention program sent out 15.6 million direct mail pieces. The 33,000 major donors also received postal correspondence during fiscal year 2011.

And then there were the 98.9 million prospect mailings that represented the largest change in Smile Train's direct mail list marketing efforts for the year.

Smile Train's efforts to branch out into other channels are prescient, Littlefield says, because while the majority of donations still come through direct mail for most charities (a statistic backed up by Blackbaud's "2011 donorCentrics Internet and Multichannel Giving Benchmarking Report," see the chart below), many nonprofits are struggling with the fact that direct mail costs are increasing while their response rates are decreasing.

"Part of the reason why that's happening is print costs are going up," Littlefield says. "At the same time, outside response lists are starting to cannibalize each other." So organizations retain fewer and fewer donor names after a merge/purge because of the overlap.

"Some of that," Littlefield continues, "is just due to the maturity of our industry, as direct mail has grown and as these charities have grown over long periods of time—for most cases, 30 years of direct marketing—the lists are starting to look more and more alike."

That means charities have to be smarter and more efficient, Littlefield says, instead of operating the way they did 20 years ago.

"So, actually," she says, "Smile Train is ahead of the curve in that 70 percent [of its fundraising revenue] is coming from direct mail and other channels provide the balance."

Future Prospects
Ma is quite aware of the potential for channel fatigue. Plus, she knows strategies can wear out. Before implementing the prospect database, Smile Train employed a traditional list plan, exchanged lists with other charities, rented lists and used list management. It just wasn't enough.

"Like Gretchen was mentioning, there's cannibalization of list rentals and … traditional response lists," Ma says. "So I think nonprofits are always challenged to identify new ways to attract more donors. But, for now, direct mail is still the high-volume way for us to acquire new donors."

That means, for now, the prospect database helps direct mail continue to be the best way to raise money to fix 120,000 children's cleft lips and palates each year.

As she's been doing since 2005, when she came onto Smile Train as its vice president of marketing and development—responsible for worldwide marketing and fundraising—Ma will still be looking to help the organization improve its marketing and grow its donor base.

After all, children are still born with deformities that can be fixed in "as little as 45 minutes" and for "as little as $250 in the developing world." (The surgeries Smile Train provides are free to the children and their families.)

While Smile Train's work is far from finished—that wish of Ma's that cleft be as invisible worldwide as it is in the U.S. sure wasn't true for Smile Train's 750,000th surgery recipient, Jhoanna Galut of the Philippines who, at 6, was far from 3 months old at the time of her 2012 surgery—donations are definitely growing to help come closer to the goal.

In fiscal year 2009, Smile Train's fundraising efforts brought in $91.5 million in gross contributions. By fiscal year 2010, gross contributions had risen to $121.6 million and, when the prospect database entered the picture, that helped fiscal year 2011's fundraising surpass $126 million.

"When you're saving money, it allows you to devote it other places and grow more," Littlefield says. "It's a very forward way of looking at acquisition programs and Priscilla has really been a trailblazer in the nonprofit sector in this space, and it's growing much faster than the other charities that are in the industry right now."

The faster the charity grows, perhaps the faster it can provide surgeries.

Galut's new smile was announced on May 18 and, as of July 10, Smile Train had already performed another 26,286 surgeries, according to the ticker on its website.

"[Our goal is] addressing the backlog, so there's no more backlog in children and adults having cleft," Ma says, and to be "able to keep up with every newborn around the world that's born with cleft. Providing them with safe and timely surgery."

If that goal is fulfilled and the problem goes away, one can easily imagine the smile that would bring to Ma's face.