Thursday, Mar. 17, 2011

Using Business Savvy to Help Good Causes

Brian Mullaney is raising $25 million to send out 200 million pieces of junk mail. This qualifies as good news because all the letters he sends will be asking for money. Still not seeing an upside? Mullaney, who has a way with an envelope, believes he can fix at least five of the world's problems with his direct-marketing campaigns: clubfeet, burns, holes in the heart, cataracts and hydrocephalus.

His plan would sound like the scheme of a hopeless idealist if it weren't for Mullaney's track record. He's one of the founders of Smile Train, an organization that funds cleft-palate operations in countries where people are too poor to pay for them. Smile Train, set up in 1999, raised $91 million in 2009 with a fundraising staff of four and had $101 million in assets, according to its tax records. The charity claims that, because of its work, 600,000 people no longer have cleft palates.

Mullaney is a believer in scale, which is partly why he loves direct mail. From the more than 100 million letters a year Smile Train has sent out, he and his team have reams of data about what appeals generate the most money. He knows which of the 49 faces he tested on the envelopes — presurgery, postsurgery, children, grownups — elicited the best response. (American-looking kids, presurgery.) He knows whether promising to never send another request for money is more effective than enclosing address labels. (It is.) Smile Train's team analyzed the mail so thoroughly, they can not only predict the most generous ZIP codes, but they can also foretell that Alysons will give more than Suzies.

Now Mullaney, who has parted ways with Smile Train, wants to take those data-analyzing techniques and apply them to a new set of problems — which, like cleft palates, can be solved with surgery performed by local medical clinics at non-Western prices.

His new foundation, Surgery for the Poor, hopes to be the invisible marketing and fundraising arm for a family of what he calls "charity brands." It will function like a wholesaler, a big donormaking factory gathering money cheaply for different causes, each under its own name. If the trends at Smile Train hold, spending $36 million on direct marketing the first year and $60 million a year thereafter will yield a surplus by the second year, and by the fifth, $146 million annually to spend on operations.

Why doesn't everybody do what Mullaney's doing? Similar techniques are used by credit-card companies. But, says Mullaney, whose background is in advertising, most foundations reject direct mail because it's expensive, annoying, and déclassé. Less than 0.5% of people respond to the initial letters. (But about 60% of those who do will give again sometime in the next two years.) Nonprofits are also wary of spending donors' money on getting more donors. "The whole charity industry is very dysfunctional when it comes to this stuff, because they're antibusiness and antimarketing," says Mullaney.

Raising lots of cash just for direct mail is not uncontroversial. Several fundraising experts said they'd never heard of a campaign so big. But Mullaney is meeting with billionaires to get the first $25 million and claims he's 80% of the way there. And he's unapologetic about spending that much to raise more — or about the junk mail. "Do-gooders run 9 out of 10 charities. They don't understand why they have to market," he says. "It's time for marketers to step up."