TPM trying to deligitimize direct mail fundraising

Talking Points Memo has tried to delegitimize certain Republican or conservative strategies  and tactics over the years. For example, Josh Marshall has tried to undermine conservative claims of voter fraud. (Thank God that we now have Election Journal, which is beginning to document the crime that is so systematic in the functioning of machine politics and which so many Democrats defend either implicitly or explicitly) This strategy may have reached its crowning success in the US Attorney scandal. I have heard from a number of sources that TPM's actions have stalled nearly all election fraud investigations at DoJ.

Now TPM Muckraker reporter Andrew Tilghman appears to be after direct mail fundraising, with an extraordinary series of posts targetting BMW Direct, a conservative direct mail firm based out of DC.

I have two points in writing this. First, direct mail needs to be defended. Second, the reporting by Tilghman is either dishonest or ignorant. The reporting of facts is solid but he does absolutely no work to place it in the context of direct mail practices.  Again, his goal is to smear the practice.

First, the defense. Direct-mail fundraising is one area in which conservatives (more than Republicans) have a significant tactical advantage over liberals. A substantial delegitimization of direct mail fundraising would have the effect of defunding conservative candidates and organizations.

While direct-mail fundraising may not always be super-attractive in the days of internet fundraising, it provides an effecttive method of participation for people who do not trust giving over the internet, especially older voters. Hopefully, over time, we can educate our grassroots over time and move them into lower-overhead forms of fundraising with phone calls or, eventually, email. This is an important point to make. When some Republican consultants deride direct mail as not "effective", they need to ask "effective for whom?" It is still the most "effective" way of engaging some of our coalition.

More on Tilghman's reporting and the actual practice of direct mail after the jump.

Now to the actual practices that Tilghman discusses. But first we need to understand two things about direct mail: the relationship between the house list and prospecting and the high fixed costs of direct mail.

A campaign or organization will maintain a house list that contains regular donors. Generally, mailing the house list will turn a net profit. However, building the house list through prospecting is extremely expensive. At the beginning of a fundraising campaign, significant costs are incurred by organizations or direct mail firms.

One of themes of the TPM stories is a distortion of these facts into something nefarious. For example, from one story, they find that sitting Members of Congress, presumably with substantial house lists, get an excellent quarter-on-quarter ROI on their direct mail contract. On the other hand, new candidates and candidates with low-profiles and no house lists are spending an extraordinary amount of money in upfront costs, translation "prospecting."

In other words, TPM is reporting as news something that an intern at a direct mail firm would be fired for not understanding after a week or two.

The upfront costs are so high because ... putting a letter in the mail is really expensive. Sending out a mail piece in a prospect may have over $1 in fixed costs, including postage, printing, list-rental, etc. Most of these costs are fixed, making direct-mail fundraising a very low margin business. During prospecting you may get only 1% or 2% response rate, sometimes getting only $5 or $10 return per $100 spent on prospecting and only very rarely breaking even in the initial prospect. The early part of the process is awful. That's why candidates with no house list spend a lot of time prospecting, getting little return on investment.

It should be pointed out that there are analogues on the Democratic side. In 2006 and 2007, there were reports of Hillary Clinton building up her fundraising lists by ... prospecting. These were generally identified by reporters as large postage expenditures.

In other words, there is nothing here. Unless you confuse a reporter who either has no idea what he is talking about or has an agenda with an actual story.

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This is really not a very

This is really not a very persuasive rebuttal.

In Tilghman's 6/30 post, he points out that Deborah Honeycutt, a relative unknown with no chance of winning a "safe" Democratic district, raised $500k through BMW.  As Tilghman states, "[a] half a million dollars in a single quarter is a substantial haul for even well-financed, high-profile candidates, let alone someone like Deborah Travis Honeycutt, who ran for the seat in 2006 and lost by 38 points."  Is that or is that not true?

OK, assuming that is a lot of money to have "prospected," how much of Ms. Honeycutt's haul went into BMW's coffers?  Of $500k, Tilghman reports (and you state that his facts are "solid") that $314k went to BMW.  Just how expensive is direct mail prospecting, Soren?  That's 63% of what Honeycutt raised.  Moreover, assuming building a "house list" really is as expensive as you say it is, Tilghman also reports that this figure ($314k of $500k) does not "includ[e] the other large payments to other Washington-area firms for direct mail-related expenses."  Did you read that sentence, Soren?  Apparently, in addition to the $314k that went to BMW, another $50543.85 was paid to other vendors for direct mail-related services.  Add it up: of Honeycutt's cool half-mil, she spent $364543.85 on direct mailing--i.e. 73%.

I understand what you're point is: you're saying that there is a high cost associated with building a house list, and that the associated ROI will be a lot less for a newcomer than for a sitting congressman.  Fine.  But half a mil is a lot of money for a newcomer in a district where she lacks any realistic chance of winning.  And three-quarters of half a mil seems like a lot of overhead.  I am no expert in campaign fund-raising, or in direct mail campaigning.  But I still think the inference of fraud is fair here.  You're going to have to do more to persuade me that Tilghman is up to something "nefarious" by reporting this, or by leading readers to draw obvious inferences.  And Tilghman's not alone, of course.  The story was triggered by the Boston Globe, which apparently also thinks this is weird.

TPM displays a basic ignorance about direct mail

BMW's method entails sending out letters. Lots and lots of them. Each of those letters costs whatever the bulk rate is plus printing. 

In direct mail prospecting, it is not uncommon to lose money. Your goal is to break even after a short period. Obviously, if you continue to lose money, you stop. But if the operation is profitable, even with a ridiculously low margin, you keep on going.

This isn't some nefarious plot to defraud donors. This is how any business in America operates. Is it suspicious that 94% of Amazon.com's revenue goes to pay for warehouses and its operating expenses? Or that the majority of direct mail expenses go to pay the Postmaster and the printer?

I am on BMW's list and I get the Honeycutt and Sand letters. Though these are longshot races, the letters pitch unique personal attributes about the candidates. In Honeycutt's case, she is a black conservative female. Duane Sand I believe is a veteran.

You couldn't duplicate this program in any race with a standard incumbent or a candidate without a compelling hook. If you could, every candidate would latch onto this program, because though it would entail a high burn rate, it would be be profitable for the campaign.

In my professional opinion, I think the money for these candidates could more effectively be raised elsewhere (if direct mail is (barely) profitable, direct e-mailings to conservative lists should be very profitable). But is what they're doing legal and proper? Of course it is.

Sure it's legal

And the article does not suggest otherwise.

As I read it, Marshall was pointing out that this company is making a killing taking on clients who don't have a chance in their elections.

In other words, since losing is expected, they fleece the candidate's contributors and don't have to provide any meaningful performance.

Maybe it's legal, and under some systems, it might even be moral, but it does nothing to help the GOP win elections.  Of course, if that is not the desired goal, then they sure are making money.

What a country!

Based on what?

As I covered in a previous comment, the vast majority of these expenses are postage + printing. It takes lots of letters to generate $1.5 million in contributions mostly through direct mail.

The vast majority of BMW's payment doesn't go to pay BMW. It goes to pay to print and stamp probably hundreds of thousands of letters.

And most direct mail vendors typically roll up these costs in their final bill so as not to let the opposition surmise how many letters were sent based on the postal line item.

Most likely, BWM's margin on "longshot" candidates is the same or less as with traditional incumbents like Geoff Davis, depending on if they're paid on volume or out of net fundraising.

Once again, Josh Marshall and TPM display a basic ignorance of the facts.

Ruffini ...

have you ever done direct mail? ..  It's so cheap .. postage? .. they pay bulk rate I am sure .. print and stamp letters? .. are you stuck in the 1970's?  That stuff is automated these days ..  as someone stated above .. TPM's point is not that it is unlawful .. it is the fact that Honeycutt and the other candidates BMW Direct are working for are fleecing their contriutors .. do you know how to read FEC disclosure reports?  Say you contributed $2,000 to McCain .. would you be happy if McCain paid $1,500 of every contribution to Charlie Black or Steve Schmidt? .. because that is what is going on here .. insane amounts are being raised for candidates who: 1) get only the die-hard vote , and 2). Don't do any actual campaign work(Meaning no phone banks .. no campaign signs .. nothing)

ROI proves nothing

I don't think some of the candidates involved will ever develop lasting donor bases, and I'd rather most of this fundraising moved online, so I don't, from a professional standpoint, endorse this type of program.

But the fact remains the vast majority of the cost of any direct mail campaign goes to postage and printing, whether they pay the bulk rate or not.

The ROI on any given direct mail campaign is not prima facie evidence that donors or candidates are being "fleeced" by a direct mail house. ROI reflects one thing alone: the responsiveness of the list being mailed. One can just as easily pad a high margin within a high ROI campaign with tons of housefile names than you can within a low ROI campaign.

But if ..

Honeycutt is going to run any kind of viable campaign .. how can she afford office space . or campaign workers .. if she is paying BMW that kind of money? .. The point is .. how is someone like Honeycutt going to get more votes than just those who'd vote "R" if it was a dead cat?

Honeycutt is never going to net big $$$

Honeycutt is going to run any kind of viable campaign .. how can she afford office space . or campaign workers .. if she is paying BMW that kind of money?

You obviously have no understanding of direct mail. BMW is raising the money and pays to mail and print the letters. The money BMW gets paid is the cost of fundraising. Aside from whatever commission they receive, the BMW line item represents what it costs to send out all those letters.

This is essentially low margin income generation. BMW is not being paid some arbitrary consulting fee.

The fallacy behind the notion that Honeycutt is being "bilked" out of hundreds of thousands of dollars assumes that Honeycutt would raise hundreds of thousands of dollars anyway. For a longshot candidate, that's unlikely. Tens of thousands (which is what she has) is more like it. And this is just an unconventional way of getting there.

 

Costs of bulk mail

How much bulk mail would have to have been sent out for it to have represented the majority of the money paid to BMW Direct?  Surely this is something that can be figured out. 

Trying to figure it out...

The per pound price for standard mail is apparently about 40 cents.  To spend $300K at that rate would be about 4000 tons of mail.  Obviously they have other expenses - hiring people to organize the mail, and such, or whatever.  But still, this seems like a couple of orders of magnitude more mail than they could have possibly sent out.

92.5% Overhead: Ada Fisher in '06

Well, TPM's at it again, rightys.  Here's their latest post, about an NC candidate named Dr. Ada Fisher.  BMW raised a whopping $400k for Fisher, but Fisher received a mere $30k.  That means BMW's "prospecting" fees added up to 92.5% of the total raised, and the total was not insubstantial.

But, as you've indicated, nothing's fishy about that. Bulk mailing sure is expensive.  What are they using, gold-embossed envelopes and lead paper?