When I was in college, I worked for the Boston chapter of a nonprofit organization called AIESEC. Our mission was to foster international and cultural understanding by finding short-term jobs in our local area for members from other countries.
One of my responsibilities was running a fundraiser. We sold gift baskets to parents of undergraduate students at Boston University. The parents gave these baskets full of fruit and snacks to their kids as an encouraging care package right before Spring finals.
I was only 18 and very inexperienced the first time I ran it. Through a combination of hustle and luck, the fundraiser was a huge success.
I was much smarter the second year. We made much less money, but the program was far more successful. We scrapped the program entirely by my third year, and we were happy to do it.
Why step away from a successful program? It's all about trade-offs.
Year 1: Financial Success and Operational Pain
The gift basket program was pretty simple on the surface.
We sent a direct mail letter to the parents of all undergraduate students at Boston University. The parents were offered a chance to buy a gift basket for their student right before Spring finals. We fulfilled the orders and kept the profit.
Operationally, it was a lot for a college freshman to manage. Keep in mind this happened prior to the internet's rise in popularity. Most people didn't even have email yet.
The direct mail piece had to be written, copied, and sent to the post office so it could be mailed out to more than 10,000 recipients. We had to buy address labels from the University, which required a mountain of red tape.
We saved a ton of money by making the gift baskets ourselves. I bought all the supplies in bulk at Sam's Club and then gathered volunteers to assemble the baskets.
When an order came in, we sent the student a post card letting them know their parents had purchased a gift basket for them. We had an on-campus office, so we set-up pick up dates and times when students could pick up their gift. This was a lot cheaper than mailing gift baskets to each recipient.
Financially, it was a huge success. The fundraiser paid for our entire annual operating budget.
Operationally, there were a few drawbacks. First, it took a ton of time. I spent untold hours on the project, but I also had to get other people to volunteer their time to help me out. This time commitment took us all away from our core mission of getting local companies to hire our members from other countries for short-term job assignments (up to 18 months).
Second, I had to deal with a lot of customer service headaches. Some students didn't bother to come pick up their gift baskets. We instituted a calling campaign to remind students to pick up their gift baskets, but that took up a lot of extra time.
There were still plenty of students who didn't pick theirs up. This led to a lot of calls from upset parents. They didn't understand (or care) that it was their kid's responsibility to pick up the gift basket. They didn't understand (or care) that we couldn't deliver it and we also couldn't hold pick-up hours indefinitely because we all had finals too.
These parents were really angry to hear we didn't offer refunds because it was a nonprofit fundraiser. Our direct mail piece stated this explicitly, but it didn't matter. This was my first lesson in the old axiom, "Customers don't read the fine print."
Year 2: Smart Trade-Offs
The fundraiser was an important source of revenue, but I wanted a solution to our biggest challenges for year 2:
Too much time spent on the fundraiser
Students were inconvenienced
Parents weren't happy if their student didn't pick up the gift basket
I realized I could solve all of these problems by outsourcing the entire program. There were companies that specialized in this sort of thing, and they handled everything from sending the direct mail piece to order fulfillment.
Best of all, they shipped the orders directly to each student so there would be no issues with delivery.
The trade-off was there was no way that we'd make as much money. The margin we got running it ourselves was significantly better than we got from the outsourcer.
Here's why those trade-offs still made sense:
The time spent on running the fundraiser could be re-directed towards fulfilling our mission. In fact, we used our time wisely and wound up among the Top 10% of US Chapters in terms of jobs raised that year.
We also avoided a significant risk. You see, if enough parents complained to the University about poor customer service from our in-house gift basket program, the University would shut the program down. So, by improving service through a professionally-run program, we mitigated the risk of losing the program entirely.
The outsourcing plan worked beautifully. Parents and students were happy and complaints fell to almost zero. (The outsourcer handled the handful of tiny issues that did happen.) And, we still made some money, though not as much as the year before.
Year 3: No More Gift baskets
Redirecting saved time towards our core mission worked really well in Year 2. So well, in fact, that we no longer needed the fundraiser by Year 3.
We had raised more than enough money to cover our operating budget through a combination of raising jobs (companies paid us a fee) and corporate sponsorships. These activities were all a core part of our mission while the gift baskets never were.
Learning
Frances Frei and Anne Morriss wrote an outstanding book called Uncommon Service in 2012. The book details how businesses must choose to do poorly in some areas so they can excel in areas their customers really care about.
I could immediately relate to the trade-offs discussed in the book. It reminded me that revenue isn't everything, especially if that revenue comes with an opportunity cost.