It’s autumn, and you know what that means; you have either just started your fiscal year or are planning for the upcoming one. And, if you are like most of us, the budgeting process has to somehow squeeze in amongst your other daily responsibilities.

Are your crystal balls, magic 8-balls, and other fortune telling toys, tools, and devices handy? Or did you smash, burn, or throw them out the window when 2009 results didn’t turn out the way you envisioned? Is it the latter? Good. There is enough uncertainty in this environment and there are better ways than a “game of darts” to project your organization’s future acquisition. Many of the same considerations and tools to manage risk can also be used to capitalize on opportunities.

There may not be a more important budget in the organization than acquisition. Renewals may get the star treatment, but what might those revenues look like had you invested 10% more in acquisition two years ago? Bet you wish you could have done that... Do not sell this upcoming year’s acquisition budget short as you will pay for it when 2012 budgets roll around. So where do you start…

Leverage What You Know: Despite what you may think, your past results yield much information about the future. So often, past results are cast off for being affected by factors ranging from deliverability issues to package changes and deemed useless as a result. In fact, they are the most underrated piece of information in budgeting. Within these results are trends to help project future performance. Unless your list mix changes dramatically from month to month, there is built in consistency to the names and behaviors affecting your plans. Additionally, most mailers have main control offers that are mailed often throughout the year. By combining list and package trending together you have a stable set of results and trends to review.

The idea is to remove the “clutter” from your history and avoid looking at individual campaigns within the context in which they were mailed. Review trends across mailings, isolate the factors, volumes, and packages that unite them vs. isolate them. One such method is reviewing top performing lists across mailings to gauge their seasonality against the bottom tiers of your mailings. What can these lists tell you about leveraging seasonality or opportunity for expansion? Another example of isolating data is by way of package results. How are your packages faring against one another or across mailings? Don’t have this information handy from 2009? Set up panels for 2010 mailings to gauge the changes over time. Plant the seeds for 2011 and reap the performance you can leverage in 2010. Either way, organizations often have more reliable data than they realize. When leveraged appropriately, one can avoid making assumptions for the coming year.

Manage Program Needs: When building your budgeted volumes, consider the impact your acquisition budget has on the renewal budget. Evaluate the optimal mix of volume and seasonality that will drive in more donors and revenue earlier in the fiscal year, manage risk in investments, and allow your team to be more reactive to possible changes that need to be made with time to make changes and adjust expectations and plans.

Plan for Change: As much as we may be in denial about factors such as postal hikes, paper expenses and so forth, plan for what changes seem the most likely. Change will occur; it’s inevitable. Therefore, manage the amount of change that comes as a surprise and factor in adjustments to include costs hikes.

Another area of potential change to consider is how your renewal strategy will impact acquisition efforts. We have seen mailers change the way they treat deeply lapsed names by putting those names into their acquisition program, yet they did not adjust for the inevitable decreased output from outside lists that will occur when those lapsed pools take priority over outside list universes. Make sure you consider how these two pieces of your direct mail program interact with each other.

Another plausible change some organizations had to deal with in 2009 dealt with cuts in funding (end of year vs. beginning of the year). Is this a possibility in 2010? Incorporate what you know about past cuts and how to thwart them in the coming year. Acquisition is often the first place organizations turn to in an effort to cut costs during the year, but it can have devastating effects on revenues and donor counts in just a year or two. If forced to make cuts, make sure the board understands what 2011 and 2012 will look like.

Evaluate Risk: Risk, risk, risk… how does one evaluate it throughout the year when you’re in the midst of managing it daily? Most pertinent to 2010 budgets are the management of three key risk variables that affect most organizations in varying degrees.

Economic Impact. How do you weigh last year’s economy against the projections for the coming year? One way to judge the impact of last year against the coming year is to understand the trends in first quarter 2009 mailings against second or third quarter trends. In other words, was there less of a year-over-year drop in response in later mailings that can be attributed to an improved economic environment? This should help you understand how much each mailing was impacted. Back out the assumed 2009 economic impact to response and start with a fresh baseline by mailing for 2010. From there, one can more easily add in further fatigue (if you are more pessimistic about the coming year) or a boost for an improved economy (if you believe the worst is behind us) without the worry of overstating the impact of the 2009 economy.

Package Fatigue. This is another risk variable organizations may need to factor into their budgets. This is especially pertinent to building budgets if the organization has a single premium-focused mail piece. When evaluating how much fatigue to layer into budgets there are a number of variables to consider. Although it is easy to view your budgets in reference only to your own mailing trends and results the competitive landscape is something to consider. How many other mailers in your category and beyond are using your same offer and creative? If the answer is “most” or “many” or there are reported increases in premium use this should be weighted into your budgets as a negative variable. How long have you been mailing the budgeted creative? Was 2009 the first year you mailed it? What can old results tell you about package fatigue of a new creative? Implement this into your budgets. It is better to set an expectation up front that a package’s lift will not hold at the levels of the previous year.

As it pertains to fatigue, not all mailers will see fatigue. Many of our clients have weathered this latest economic storm by way of having multiple controls that they’ve rotated throughout their acquisition program, prolonging the life of each control and keeping the audience engaged. This brings me to the third risk factor…

Testing. More than ever, nonprofits cannot afford to cut testing. With limited budget dollars and more focus on ROI, what gets tested and at what risk level is under greater scrutiny by boards and donors alike. What are your organization’s goals? Do you need to bring in higher gift amounts to feed better performing renewal pools? Then make sure you budget for ask array testing. If package fatigue is a big factor for you, then package testing needs to be budgeted for early in your fiscal year. Evaluate what you need to learn over the course of the year, so that you’re set up for success in the following fiscal year.

By seeking out some of the information outlined above and ensuring that you weigh potential risk factors, you should be able to build an acquisition budget that your program results adhere to with minimal tweaking throughout the year.

Britt Fouks, Director of Account Management, ParadyszMatera, Minneapolis Office 763.647.5134 or bfouks@paradyszmatera.com