30 Ideas for Fundraising Success in 2011 and Beyond, Part 1
Joe Boland[Editor's note: This is part 1 of a three-part series on the session "Getting Back to Growth: 30 Ideas for Success in 2011 & Beyond" held at the 2011 Washington Nonprofit Conference.]
During the past three years of economic struggles, many fundraisers have been operating with the hope that funds simply remained flat. In an era of recession, flat was the new growth. But every nonprofit organization would love to grow its fundraising initiatives and dollars raised, and now may be the perfect time to do so.
To wrap up day 1 of the DMA Nonprofit Federation's 2011 Washington Nonprofit Conference, five fundraising professionals offered ideas for success and growth for this year and beyond. Jennifer Bielat, VP of direct marketing at Easter Seals; Neoma Harris, marketing director at St. Joseph's Indian School; Lane McKinney, senior director of production and analysis at ALSAC/St. Jude Children's Research Hospital; Sherry Minton, director of direct response at the American Heart Association; and Kim Walker, director of direct mail at Memorial Sloan-Kettering Cancer Center, joined Larry May, SVP for strategic development at Infogroup Nonprofit, in the day 1 closing session, "Getting Back to Growth: 30 Ideas for Success in 2011 & Beyond."
Here are the first 10 ideas shared.
1. Mine your database
- Invest in lapsed donors — they're more valuable than new donors.
- Use models to identify best responders.
- Warm prospects.
2. Bond with your new donor
- Use thank-you packages.
- Mail second-gift packages.
- Go back with similar premium/themes that grabbed those lapsed donors in the first place.
3. Model to optimize acquisition
- Household-level models identify best and worst responders.
- Cuts out 10 percent of the least responsive names.
- Provides a 5 percent to 10 percent lift per campaign.
4. Manage your in-house prospecting
When the direct response team took control of selecting in-house prospects for acquisition at the American Heart Association, response increased 9 percent.
5. Invest in analytics
- Analyze and segment your pool of prospects.
- Develop predictive models for stewardship and strategies for donors at all levels.
- Provide tools to make decisions to make decisions about strategy and resource allocation.
- Evaluate program progress and model future performance.
- Forecast fundraising results.
6. Get to know your donor
- Find affinity to programs or issues.
- Recognize affinity through variable copy.
- Results in as much as 30 percent higher revenue per donor and 26 percent higher giving frequency.
7. Add an outsider's voice
St. Joseph's Indian School tested a mock newspaper article insert in its matching-gift house appeal. The control had a 3.97 percent response rate and $23.71 average gift. The mock newspaper insert resulted in a 5.63 percent response rate and $33.35 average gift — a 40 percent lift and $9.64 higher average gift.
8. Test state versioning
- Reference the number of children treated (or animals saved, or hunger fed, etc.) from donor state on the outer envelope and in the copy.
- Use state-specific artwork.
- Resulted in a higher response rate and average gift for ALSAC.
9. 13-month telemarketing
- Reach donors by phone 13 months after their last gifts.
- Subsequent revenue from those who received calls from the American Heart Association increased 35 percent.
10. Go beyond RFM
Examine:
- Giving velocity — last gift amount / average of previous three gift amounts.
- Time velocity — time elapsed between last two gifts / average time elapsed between gifts for the three previous gifts.
- Ratio of giving years to total years — number of years where a gift was made / number of years the donor has been on the file.
- Longest Ripken streak — maximum number of consecutive years where gifts were made.
- First gift amount — simple, but indicative of overall giving.
Check back next week for the next 10 ideas.
Lapsed or Dormant? Leveraging Statistical Analysis in Fundraising
David A. Schweidel and Peter S. Fader[Editor's note: This article is based on the session "Lapsed or Dormant? The Impact of Fundraising Efforts on Donation Activity" held Friday at the 2011 Washington Nonprofit Conference.]
Bob hasn’t made a donation to a particular nonprofit organization in three years, while Mary last contributed to the organization five years ago. On the surface, it might seem that Bob is a better prospect for future donations, since he has contributed more recently. On the other hand, perhaps the organization could spark Mary’s interest again and get her to re-engage after her five-year absence. So, which of the organization’s donors should be the focus of its development efforts?
Addressing this issue highlights a critical yet subtle difference between a dormant donor and a lapsed donor. While a nonprofit organization can re-engage a dormant donor through its development activities, such as direct marketing, a lapsed donor does not respond to these efforts. Given that these fundraising efforts incur a cost, resources are better allocated to those donors who are dormant rather than spent on donors who have truly lapsed. The key is to distinguish between these two types of donors based on the information available to the organization.
Consider the case of a university engaging in annual fundraising drives. After a student graduates, the development office maintains a record of all of his donation activity. In each year since graduation, the university knows whether or not he has made a donation to his alma mater. The result is a sequence of observations for each individual, as illustrated below with a “Y” indicating a donation in a given year since graduation and an “N” indicating that the individual did not make a donation in a given year:
Year: 1 2 3 4 5 6 7 8 9 10
Graduate 1: Y N N N N N Y N N N
Graduate 2: N N N Y Y N N N N N
Graduate 3: Y Y Y Y Y N N N N N
All three individuals are 10 years from their graduation dates but differ in the frequency and recency of their contributions. Whereas graduates 1 and 2 have both made two contributions to the annual fundraising drives and differ in regard to when their last donations occurred, graduates 2 and 3 both made their last contributions five years ago but differ in how frequently they had made donations.
Based on these donation histories, who is most (and least) likely to contribute in the future? This question can be reframed into a related question: Which of these donors is most likely to be dormant, and which has probably lapsed and will never donate again? Simple summaries (such as recency and frequency) provide some relevant inputs, but they fall far short of offering any specific recommendations. Upon closer inspection, graduate 3 is the most likely to have lapsed, since he donated consistently early on but has gone completely cold since. It is much more difficult to compare the seemingly sporadic pattern of graduate 1 with the “off and on” pattern of graduate 2.
Rather than trying to flag lapsed and dormant donors using casual heuristics, formal statistical analysis can be brought to bear on this question. A recently published paper by Peter S. Fader, Bruce G.S. Hardie and Jen Shang, “Customer-Base Analysis in a Discrete-Time Noncontractual Setting,” examined exactly these kinds of trade-offs using annual donation data from a major public radio station. It showed remarkable accuracy in predicting donation patterns over a five-year forecasting horizon. While the model has some complex math within it, the ultimate implementation is a relatively simple Excel spreadsheet, requiring nothing more than recency and frequency as inputs. Many of the results and implications within the paper run quite contrary to the usual intuition that many nonprofit organizations have about the behavioral propensities (and thus future contributions) of their past donors. For instance, the paper found that recency is far more important than frequency in determining estimates of future donation patterns.
But while the paper offers accurate forecasts and useful insights about how to understand the underlying “drivers” of donation propensities, it stops short of offering any specific advice about which donors to target and when/how to do so. This is where a new paper by David A. Schweidel and George Knox, "Incorporating Strategic Direct Marketing Activity into 'Buy 'Til You Die' Models," comes in. Building on the same basic modeling platform used by Fader et al, this paper goes further to explore the impact of fundraising efforts on short-term and long-term donation activity. It explicitly captures the “dual causality” that often exists between donations and solicitation efforts — in other words, solicitation efforts clearly drive donation behavior, but past donations also impact solicitation strategies.
Once again, informal heuristics are unable to sort out these intertwined patterns, but a carefully crafted statistical model is able to do so. Schweidel and Knox show how an organization can gain specific understanding of how soliciting donors can not only influence the decision to make a contribution in response to a particular piece of direct mail, but also how it impacts their tendency to lapse. On one hand, fundraising efforts may deepen a donor’s attachment to an organization, but such activities may also irritate donors and trigger a premature end to the relationship. Striking the right balance here is obviously critical to any nonprofit, but it has not been examined very carefully on a regular basis.
Taken together, these two papers offer a powerful “one-two punch” for data-driven nonprofits that are interested in moving beyond casual “rules of thumb” to address key questions about future donation patterns and the best ways to enhance them using standard solicitation strategies. These methods have proven useful in other industries that also focus on the collection and analysis of detailed customer-level records (e.g., pharmaceuticals, telecommunications, financial services), and the carryover to nonprofits is surprisingly smooth and robust.
David A. Schweidel, Ph.D., is assistant professor of marketing at the University of Wisconsin-Madison School of Business. Peter S. Fader is Frances and Pei-Yuan China professor and professor of marketing at the Wharton School of the University of Pennsylvania.
Online Giving: A Larger Piece of the Fundraising Pie
Steve MacLaughlinThe Internet continues to transform how nonprofits engage with constituents and help fulfill their important missions. 2010 saw continued growth in online fundraising for nonprofit organizations. A recovering global economy, online response for disaster relief, peer-to-peer fundraising and the role of social media in the nonprofit sector all shaped the year.
Blackbaud recently conducted the largest and most extensive analysis study of online giving trends. The 2010 Online Giving Report includes 24 months of online giving data from 1,812 nonprofit organizations. The study found that online giving grew 34.5 percent in 2010 compared to 2009. This was a positive sign, and there were different growth rates depending on the size of the nonprofit.
Large nonprofits, with annual total fundraising greater than $10 million, grew their online fundraising 55.6 percent on a year-over-year basis. Medium-sized nonprofits, with annual total fundraising between $1 million and $10 million, had a year-over-year increase of 15.9 percent in their online fundraising. Small nonprofits, with annual total fundraising less than $1 million, had online giving grow 22 percent on a year-over-year basis.
International affairs organizations had the biggest year-over-year online fundraising growth with a 130.8 percent increase. This was followed by human services, environment and animals, public and society benefit, and education organizations. Arts, culture and humanity nonprofits and health care organizations each had less than 10 percent growth in 2010 compared to 2009. This is a very positive sign as the economy and the overall health of the fundraising climate have improved.
The Haiti earthquake had a significant influence on online giving trends in 2010. For the first time, January had the largest percentage of online giving for the entire year, with 18.4 percent of online giving taking place in January 2010 compared to 18.3 percent in December 2010. For several years now, December had been the largest online fundraising month of the year. This change can be almost solely attributed to Haiti relief funds collected by international affairs organizations, which saw online giving grow 130.8 percent compared to 2009.
Online giving is also showing its ability to attract larger gift amounts. Donors continue to make significant gifts online. In 2010, 88 percent of organizations had at least one online gift of $1,000 or more. The largest gifts online in the analysis were several $100,000 donations. The median online gift of $1,000 or more was $1,250, which is slightly lower than in previous years; 41 percent of these significant gifts were exactly $1,000, and 6 percent were $5,000 gifts.
Another important trend is the overall growth of online giving as a percentage of a nonprofit's total fundraising. This data is especially valuable because it allows nonprofits to benchmark online giving against peer organizations within each sector. Analysis of 1,438 nonprofits with total funds raised of $5.1 billion shows that 7.6 percent of total fundraising comes from online giving. Large organizations now lead the way with 7.7 percent, followed by medium-sized nonprofits with 7.6 percent and smaller organizations with 7.5 percent. The international affairs and health care sectors now have more than 10 percent of their total fundraising from online giving.
Nonprofit organizations can now use research like this to help benchmark themselves against peers. These types of metrics can be invaluable tools to gauge performance. Online giving continues to lead the changing nature of fundraising with social and mobile channels now emerging as well. Thankfully there is useful information that is actionable for all nonprofits.
Steve MacLaughlin is the director of Internet solutions at Blackbaud. Find more of his nonprofit statistical work at nptrends.com.
Is Your Organization Using/Benefiting From Social Media?
A lot of the talk at last week's DMA Nonprofit Federation's Washington Nonprofit Conference was about how so many organizations are still hesitant to devote money and manpower to social media. They don't see the immediate returns, so they figure their resources are better spent on other things.
But nonprofits — probably more than you think — already are gathering donations on sites like Facebook — again, probably more than you think. And the consensus among consultants and other in-the-know folks is that those numbers are only going to grow. When the social-media giving cork pops, the organizations who have been preparing for it will be the first to reap the rewards. Those are the organizations who are busy — right now — building their online communities and engaging their friends and fans.
I'd love to know where you all stand on this issue. Let me know how your organization is using social media. Are you just now sticking your toes into the water? Or do you have already have a huge fan/friend base? What are you doing with those folks? Have you raised any money from them?
Drop me an e-mail and let me know!
All the best!
Margaret