Cover Story: Feeding the Need
It’s a development office’s dream: You’re a nice-sized nonprofit and you score some big corporate and foundation partners who start throwing money at you.
Sweet. Lots more cash in your coffers. Lots more people getting help.
But what about when those project grants time out? If you’ve put too many of your fundraising eggs into that big-ticket basket, you might find yourself a yolk or two short of an omelet somewhere down the line.
America’s Second Harvest, the country’s largest domestic hunger-relief charity, has teamed up with some heavy hitters over the past few years, including the ConAgra Feed Children Better Foundation; The Donald W. Reynolds Foundation, which helped fund a big technology project; and the Starr Foundation in New York City.
All of that extra cash on the corporate and foundation side was a blessing for A2H, of course, but the puffed-up numbers made the funds coming in from other legs of the development plan look, well, puny. Direct marketing, especially, left something to be desired.
In the late 1990s A2H’s direct marketing program was pulling in roughly half of the organization’s contributed revenue each year, according to A2H Vice President of Philanthropy Dan Delany. But then the focus turned to corporate and foundation giving, and the direct marketing side plummeted.
“Suddenly the individual side [of the program] had fallen far out of whack versus philanthropy overall,” Delany says. “A lot of organizations never reach the 75 percent mark for individual giving, but we didn’t want it to be this low; it was close to only 20 percent.
“We wanted to get things balanced again,” he adds. “Corporate and foundation gifts are great. But they’re more project specific and, if they’re time sensitive, once that goes away, you need more balance.
A shift in focus
By late 2003, Delany says, A2H’s direct marketing had pulled in $12.5 million, or 44 percent of contributed income. To get those results, A2H “elevated the quality of the entire program.”
The bulk of the energy — and money — went into acquiring new donors. Before enhancing its acquisition program, A2H was attracting 27,000 new donors each year. At last count, that number was up to about 70,000.
“We decided to implement this quickly, instead of stepping in over a number of years, because we wanted to get people into our bonding and cultivation programs as quickly as possible, knowing that would drive the long-term value of the file,” he says.
The cost of such an aggressive effort? A2H spent $3 million to acquire 70,000 new donors in FY2003.
“We were able to drive our cost per response down by $5 ($43 versus $48), which was great, “ he says.
Terri Shoemaker, manager of direct marketing at A2H, explains that the new approach began with breaking some old habits.
“We built our [direct marketing] program from the ground up starting in the mid-1980s and had the same direct marketing consultants for more than 10 years,” she says. “And while that relationship provided us with a great file and a very cost-effective program, we found ourselves bogged down with our own historical approaches to things.
“We decided to put out an RFP to see if there was a new way of thinking that would help us move the program forward instead of living with the status quo,” she adds.
With the help of the Seattle-based Domain Group, A2H revamped its mail schedule and widened its approach to include other direct marketing venues.
“For the first time, we formalized our Web and e-mail solicitation program [and] ventured into telemarketing,” Shoemaker explains.
Delany agrees that direct marketing fundraising at A2H shriveled due to a combination of complacency and shortsightedness.
“It fell off because there was a level of comfort there, and then when you really started to analyze what was going on, you saw some trends that were not things that you wanted to let go on for the health of the organization,” he says. “The biggest thing is that we were working with a small number of institutional donors who came in with large gifts.”
And even those donors weren’t really getting the message, Shoemaker adds. Contributions came in fits and starts from some; others were one-time deals. Donor-loyalty levels weren’t where they should have been.
“To put it bluntly, they would give once and get off the file,” Shoemaker says.
Everyone involved with the new program at A2H seems to agree that helping donors feel more connected to the cause was key to turning around the direct marketing income.
That includes Domain’s Tim Burgess, who attributes the “remarkable improvements in fundraising” to, among other things, helping donors and potential donors get a solid understanding of the work that A2H does.
Other factors in A2H’s success, he says, include its careful attention to the fundamentals of fundraising, its commitment to growth and its passion for its cause.
A look at numbers
Just how remarkable were the improvements? In the fiscal year ending June 2002, revenues from individual donors increased 65 percent to $5,593,256 from $3,379,926. The number of current donors who continued giving into the next year (an indicator of donor loyalty), jumped up to 58 percent from 42 percent. The number of active donors increased to 35,762, an increase of 29 percent over the previous year.
In the fiscal year that ended June 2003, individual donor revenue increased another 56.1 percent to $8,730,506. Donor loyalty increased to 63 percent from 58 percent; and the number of active donors was up to 50,679, an increase of 41.7 percent over the previous year.
Following are some of the steps A2H took to secure its fundraising transformation, many of which focus on creating better relationships with donors and potential donors by satisfying their desire to know precisely how their money is being spent.
1. Increase reporting of accomplishments so donors would better understand how their gifts were being used.
2. Change the new-donor acknowledgment program so donors would bond more closely with the mission of A2H. That meant moving away from the traditional letterhead letter and CRE stuffed into a standard-size envelope. In its place, A2H offers a hardcore thank-you letter that references donors’ year-to-date contributions and explains the amount of food and groceries that amount allows the organization to distribute. The lower part of the letter is a personalized response device.
“Of course, we still include that reply envelope,” Shoemaker explains emphatically.
3. Change the creative content of appeal packages to more clearly report the needs A2H attempts to solve, along with increased emphasis on the negative consequences of those needs not being met. The new mailings tone down information about specific programs that are part of the A2H effort. In its place is a greater emphasis on the general issue of hunger and A2H’s core program of soliciting and distributing food and groceries.
4. Introduce a new donor-focused newsletter to replace the previous organization-focused newsletter to (a) provide more affirmation to donors, (b) increase education related to the central issues addressed by A2H, and (c) provide donors with another giving opportunity.
While the old newsletter — The Grapevine — focused primarily on giving options, the thrust of the new Hunger Digest is on programs that donations make possible.
5. Revise the gift acknowledgment program to place more emphasis on how A2H fights hunger in America. Now, acknowledgement letters are personalized to match the piece to which the donor responded, and the back of each acknowledgement letter is dedicated to the “how” of what the organization does.
Where to go from here? According to Shoemaker, A2H would like to take a more personal approach to direct marketing.
“It’s hard to do as technology for this is expensive and will take time to leverage savings, but I want to make sure that we honor the donor’s wishes before they have to tell us about them,” she says. “Giving patterns and demographic information can tell us so much about what someone’s preference might be. More and more we’re learning that asking is as much about listening as anything else.
“Direct marketing is critical to the success of all individual giving programs at America’s Second Harvest,” she says, in explaining why there’s been such a determined push to get the program back on track. “It feeds our planned and major giving programs, provides a stable source of income that is less likely to fluctuate in times of economic uncertainty, and is the primary method through which we brand ourselves to the donating public. Direct mail is where we start the vast majority of our individual donor contact, and then go on to stabilize them into real giving relationships.”
Using your strengths
But fundraising at A2H isn’t all about direct marketing. The relationships with Starr and Reynolds, which came about over the course of 2000-2001, helped pump the foundation relations division income from a line item of less than $500,000 a year to about $8 million a year, 29 percent of the organization’s contributed annual revenue.
A2H’s latest coup in that area is a new (as of July 2003) partnership with The Starr Foundation in which the foundation writes an annual check for $4 million to A2H, which in turn helps feed needy New Yorkers by granting the money to A2H affiliates City Harvest and Food Bank For New York City and their member agencies — soup kitchens, pantries, shelters and other food providers across the five boroughs.
The symbiotic pairing came about when The Starr Foundation wanted to expand its hunger-relief, grant-making efforts to help feed more people in the five-borough area around NYC. It was a huge undertaking that would have required the addition of staff members who could interact with local agencies and who also had some knowledge of food-handling and safety rules. Rather than add to its own administrative costs, the foundation turned to A2H, which already had a network in place to best distribute the funds the foundation was offering.
To accommodate the arrangement, the only thing A2H really had to do was add a staffer to administer the program. Everything else was more or less an extension of existing programs.
“Obviously ... you have meetings and decide things, but that’s all just program management,” Delany says. “There was no huge layer of staff or administration or oversight that needed to be added. Oversight is constantly going on in our network.
“If another individual or foundation wanted to replicate this anywhere in the country, it’s something we can pretty much do anywhere,” he adds, with just a hint of that old “hint-hint” tone in his voice.
What it comes down to, basically, is a case of a nonprofit organization capitalizing on its strengths and using existing programs to generate another income stream in a relatively painless way.
“Every organization probably has some strengths that already are in place that if they can extend that into another program, [it] will help them expand their resources, which will help them do an even better job of reaching their missions,” Delany says.
Other parts of the equation
A2H also has staff to focus on individual philanthropy and corporate relations, which are, respectively, relatively new and recently restructured.
The two-year-old individual philanthropy staff, Delany says, focuses on major and planned giving and is striving to “meet as many donors as possible and start working with people of means a lot more carefully.” Individual philanthropy currently accounts for $1.5 million (5 percent) of A2H’s annual contributed income. Delany has his eye on increasing that to 15 percent to 20 percent.
The facet of A2H fundraising that used to deal solely with grants (corporate philanthropy and private foundations) was restructured in 2002, resulting in the separate foundation relations and corporate relations staffs. Corporate relations now accounts for $6.7 million (23 percent) of A2H’s contributed income.
In addition to all the specific strategies that Delany and his staff have gleaned from the past few years, the overriding feeling is this: lesson learned. No one is about to bask too long in the glow of recent successes, especially not when it comes to direct marketing.
“We did the major push to take it all to the next level,” he says, “and now that we’re there, that doesn’t allow you to be comfortable. All that activity is ongoing.”
And to that end, he says, one of the biggest factors will be maintaining his senior-level staff and fostering a sense of dedication among his employees.
The newest senior-level staff member in the A2H development office had been there for two years at the end of 2003. Others had been on board five to seven years. Hiring “high-quality people really committed to the mission” is key to keeping the department and its programs vital, Delany says.
“Everyone here is committed to nonprofit careers as careers, not as a stepping stone to another sector,” he says, adding that successful nonprofit employees have “strong feelings that the intangible benefits are extremely important to them.”
Once Delany finds the “right” people, A2H itself makes keeping them a little easier by ensuring salaries and benefit packages that are competitive within the nonprofit sector, though few nonprofits can compete compensation-wise with corporate America.
“In general, we try not, within reason, to let money be a reason for people to leave,” Delany says. “If we no longer are able to provide growth, that’s another thing. But in an environment like I’m describing, there’s plenty of opportunity for people to step up and move up.”
For her part, Shoemaker reiterates Delany’s warning against complacency and stresses the importance of keeping your eye on the prize, as they say. “Remember that you aren’t raising money for money’s sake. It’s easy to lose focus when you get into the rhythm of your job and program,” she explains. “My fundraising efforts are tied to a cause that enables millions of Americans at risk of hunger to access groceries, and I try to remind myself of that often.”