Tuesday, March 18, 2008

Up to 60% profit? You've got to be kidding!

60% profit?  You've got to be kidding.  What's the catch?  Why?  How can you do this?

No, I'm not kidding.  But it's UP TO 60% profit.

Yes, there's a catch, sort of, but in a good way.  The catch is that you have to WORK to earn the 60%.

Here's the Why and the How:

Why:  In the past two years we have seen the economy take its toll.   Schools need more money, but many schoolwide fundraising projects have been falling short.  The same is true of youth sports leagues.  As professional fundraising companies keep detailed records of sales, we have been able to see patterns that our client groups do not see, as we have the advantage of seeing emerging patterns over a large number of organizations.

What we are seeing is that those individuals that DO sell are selling just as much, or even more as in the past.  The problem is that far fewer individuals in each organization are actually selling anything. Ten years ago it was commonplace for 80% of an organization to sell with an average of about 55%.  Now we are seeing participation levels as low as 9% with an average of about 38%.  The decline in average participation almost exactly parallels the dollar amount decline in sales by the organization.

We attribute this decline in participation to several factors which are mostly "unintended consequences" of decisions unrelated to the fundraising product:

1. Schools are intimidated by "No Child Left Behind" and are eliminating kickoff assemblies to avoid sacrificing classroom time.

2. Because of the time pressure to teach to the test and achieve certain benchmarks, teachers do not promote the fundraising campaign in their classrooms. The project has lost the voice that is heard by the children daily and gets repeated at home daily.

3. Youth sports have developed from an activity to a competitive situation, making coaches feel pressure to win.  Their efforts go to their priority. Absence of vocal support by the coach implies that the project is not important, and that impression gets passed on by the players to the parents.

4. Past fundraising successes in youth sports leagues create a sense of entitlement among coaches, players and parents.  When the league gets large, a we-they viewpoint can develop with the expectation that the "board will provide."

5. The rise of government entitlement programs has created a "the government should" attitude that spills over to self-supporting volunteer groups. This has also influenced teacher support in the classroom.

6. Volunteer help in schools and leagues has declined because more families are two-job, three-job, or four-job families.   The type of family depicted on "Leave It To Beaver" or "Father Knows Best" is in short supply, so there are not as many stay-at-home moms to volunteer for PTA/PTO or as team moms.

7. Selling by parents in the workplace has changed because work schedules have changed.  The old pattern of 9-5 jobs on a regular schedule has been replaced by flex time, telecommuting, rolling shifts, and other creative approaches.  This means that a parent may not see the same people at order-taking time as they see at delivery time.

8. The increasing mobility of populations and the increasing debt load of families has caused a shift from postpay to prepay sales to avoid uncollected amounts.

9. Fundraising project sponsors and school administrators  without private-sector business experience will not accept uncollected amounts as part of "the cost of doing business" even though the end result of a postpay  sale with some uncollected amounts will be more than twice the amount of a prepay sale.

10. The requirement of collecting with the order deters students and parents because they are embarrassed to ask friends and family for money with the order, feeling that it implies lack of trust.  Emotional trumps practical every time. 

11. Some parents, teachers, and administrators insist that all children be treated equally even though they did not contribute equally to the success of the project.  In this case, rewarding "nonbehavior" has created a preference in the population toward "nonbehavior" rather than toward "behavior" we want to promote.  Parents and students quickly learn that they will be rewarded whether or not they do their fair share, so "why bother." This is often referred to as "shooting yourself in the foot." 

12. Most of all, teachers, coaches, parents and students have lost sight of WHY the fundraiser is being held and HOW the money earned will benefit them.   

***There are probably more reasons, but this list is long enough to illustrate WHY.

Now to the HOW we counter all these negative external pressures:

The simple answer is to apply good parenting skills to the fundraising project.  Just like we praise our children for doing something right to reinforce that behavior, we apply good behavioral management to the fundraising program.  We reward that which we want to promote, and remove rewards for behaviors that we want to "extinguish".  In this case we are rewarding the organization and the organization is rewarding the students and the parents.  Some of this reward is praise.  Other aspects of this reward are building a sense of  need and urgency... yes it is rewarding to accomplish a goal!   Other rewards may be more tangible such as money, free goods, prizes, certificates, placques, and special events.

For the organization, that means our company rewarding the organization's effort to increase the participation in the fundraiser by more of the students or team members.  We are doing that by tying the percentage of profit on certain product lines to the percentage of participation.  We thought about making this optional, but then decided to make it part of our regular program.  If you are one of our established customers and want to be "grandfathered" so you can continue doing it the "old way" that is just fine.  Doing it the old way will produce similar results to the past. We hope you want better for your children

The product lines for which we are offering this new approach include wrapping paper, cards, wrap accessories, and other "hard goods" (meaning non-edibles) in our major shopper catalogs. Because there are certain fixed costs in providing a program for your organization, and to protect your group from achieving a result worse than before, we have settled on a minimum and a maximum profit level.   We have chosen these items because we have a better margin on them and have room to give a higher profit percentage if we can recover our   fixed costs through higher participation from our client groups.    (Profit levels on food items are unaffected by this project option.   Also "tag along" brochures are unaffected by this option.)

Did we raise prices or cut quality?  No.  We are using the excellent quality
items from The Wisconsin Cheeseman... the same quality of items that they
use in their national mail-order catalog. Along with Harry & David, Swiss Colony, and Figi's, they are a premier mail-order food and gift company.  What we did cut out are items of marginal quality and value. 

Under this program we guarantee you a minimum of 40% profit on these specific product lines, even though you may have a participation level lower than 40%.  Percent of participation is simply the number of sellers divided by the number of brochures distributed, based on the enrollment figure that you give us when you register the project with us.

As your participation level increases, your profit percentage on these items also increases. If 41% of your students or team members sell, you make 41% profit. If 50% of your students or team members sell, you make 50% profit. If 55% sell it's 55% profit.  If 60% sell, it's 60% profit.  We cap it at 60% because of our fixed costs for your product and the services we provide. So if you get 70% participation, you make 60% profit, BUT you benefit from the extra sales, which will be considerable.  If you double your participation you will more than double your profit. 

We are hoping that you will "step up" and promote the sale within your school or league to the point that 60% or more of your students or team members sell.  If our past experience and the statistics on past sales continues to hold true, you will get an increase in sales almost equal to the increase in participation.  We say almost equal because as your sale reaches community saturation, the items per participant will decrease ever so slightly.  The increase in your profit percentage will much more than offset this slight decline in per participant sales, so all in all you should see an increase in profits equal to or greater than the increase in participation.

What do you need to do?  First, accept our offer.  Then, do the program the way we say to do it.  Yes, we welcome your good, innovative ideas, if they are well thought out.  Not only will we help you include them but will share them with our other clients, who can add their own twist to the process.  As you work with us in succeeding years, you gain the benefit of your experience and the input of all the other groups that we bring back to you.

Once you commit to this program, you will need to follow through and lead your teachers, room moms, or coaches and team moms toward the goal, and motivate them to lead the students or team members and the parents.

What are we going to ask you to do?  Simply tell your story clearly and in a way that will capture the interest and enthusiasm of your parents.  Explain WHY you are raising money, WHAT you will buy with that money, and HOW that will make a better life for THEIR CHILD.  This must be an ongoing effort starting well before the beginning of your sale and continuing every day through the sale, with every member of your organization doing their part as a cheerleader for the students and parents.

Did we as a company suddenly add a "risk" to our business by changing to this profit structure for our clients' projects?  

Yes and no. 

There will probably be some organizations that choose not to work with us because of this plan.  But we are sure enough that this plan will work to the mutual benefit of everyone to go forward with it.  Frankly, the high cost of fuel affects us, also.  Fuel to come to show you our programs, kick off your sale, bring your product into the warehouse, heat and cool the warehouse, deliver your product to the school...all depend on the price of oil.   So if we can help you increase your participation and can get more return on our investment, we win and you win because you have more funds from fewer fundraisers and you start to eliminate the parent burnout that has plagued fundraising in the past several years.  By getting much better results from slightly fewer clients, the clients win and so do we.

Unless everyone wins, everyone loses.

We ran this program through the Rotary Four Way Test:

First: is it the TRUTH?
Second: is it FAIR to all concerned?
Third: will it build GOOD WILL and BETTER FRIENDSHIPS?
Fourth: will it be BENEFICIAL to all concerned?

It passed.

Then we asked the all-important next question "And then what happens?"

As best we can foresee, the answer to that question is a string of very positive outcomes.