Spinning Date Into Donor Gold
With a languishing donor-acquisition program and shrinking applicable-list universes, Catholic Relief Services prudently mined its own data in search of answers.
And for good reason.
The 61-year-old international-relief and development agency of the U.S. Catholic community relies heavily on the private sector for donations; in 2003, CRS netted $484 million, 20 percent of which came from private-cash contributions. What’s more, the organization’s direct-response fundraising program accounts for roughly 50 percent of all donations from private contributors.
“We have spent a lot of time working in a mature-donor market, recognizing that some of our efforts have not performed nearly as well over time, as we have seen response rates steadily decline, particularly in acquisition,” says Kevin Whorton, director of direct response fund-raising for CRS.
“We’ve still been able to eke out some reasonable increases, year by year, but it’s really made us focus on issues like data management to be able to maintain a good fundraising performance,” he explains.
Despite drawing 80,000 to 90,000 new donors a year with an average gift of $32, CRS placed considerable emphasis on its data and partnered with Newburyport, Mass.-based analytics-software provider Genalytics to streamline its prospecting appeals. Using sophisticated modeling, the organization focused on top segments of the file rather than the entire universe, suppressed mailing to the bottom segments, and discovered significant numbers of new prospects similar to existing donors.
“Our direct mail acquisition program is very mission focused. We don’t do premiums at all,” Whorton notes. “So we knew we had to focus more on higher segments [of the file], in terms of likelihood of giving.”
But the biggest benefit for CRS, Whorton says, was to purge hardcore non-responders dwelling at the bottom of the file who clearly were annoyed, rather than engaged, by solicitations. The organization’s acquisition and retention efforts simply were based on outdated information.
Cautions Whorton: “When you mail re-acquisition appeals to 300,000 households, over and over again, without eliciting a single response, the 101st effort isn’t going to be your silver bullet.”
Less mail, more involvement
After conducting extensive analysis of current donor data, CRS found that the average contributor is 62 years old, female, married and decidedly religious with a fundamental understanding of international issues. Only 29 percent are retired. An unexpected finding, that.
Not surprisingly, though, many donors on the housefile demonstrate a strong predisposition to give seasonally, or just once a year. The objective of data analytics was to pinpoint and track the donors who prefer to receive less mail, as the average contributor who gives a $100-plus gift once or twice a year is targeted 22 times annually.
“Our housefile program is fairly aggressive. We find that when we reduce the number of mailings, we reduce our gross and net revenues,” Whorton shares. “But we also found that two-thirds or even three-fourths of our file are very sensitive to the volume of mail they receive.”
For the most part, these individuals are higher-value donors who don’t require much goosing to get their gifts. Going forward, Whorton plans to leverage supplemental mailings to upgrade and solicit emergency gifts, and when donors hit a plateau in their giving.
New lists, new donors
While the current pool of contributors is invaluable to CRS and its mission, when it came time to find new names, the organization, at first, simply put more pressure on its list broker to cast a wider net.
According to Whorton, speciality Catholic lists have performed satisfactorily for donor-acquisition campaigns, especially when the organization employs enhanced ZIP code models. In addition, CRS uses Church School Finder, a proprietary tool of its current list broker that searches ZIP codes for the presence of Catholic schools and parishes. When a prospective donor’s ZIP code hosts more than one Catholic “center,” CRS is likely to earmark that name as a hot prospect.
“The technique means that we can go out to a wider range of lists with a greater likelihood of better results on our prospecting,” Whorton asserts.
Starting in 2003, instead of mailing prospecting appeals to Catholics represented on advocacy and magazine-subscription lists, CRS began targeting like-minded individuals on massive compiled files. Many of these prospects simply don’t show up on the Catholic-oriented lists that faith-based mailers have long exhausted. Perhaps they’re not as active as other Catholics; they might go to Mass but might not subscribe to religious publications or show behaviors that are readily accessed with traditional list-brokerage methods.
While trusting its models to filter out the best prospects and using net-name arrangements with list brokers, CRS can now safely mail to a pool of 2.5 million to 3 million potential donors for any given prospecting campaign — instead of previous drops that rounded out at 1.5 million.
“We simply accept that we’ll have a somewhat lower response rate, with the same average gift,” Whorton says, commenting on the nature of compiled lists. “We’re pleased with that because it will allow us to mix up our acquisition program over the year and mail to more new names.”
Working in the “compiled world” requires a strong commitment from the mailer, for mailers are dealing with a variety of files that are virtually indistinguishable from one another, says Douglas J. Newell, founder and president of Genalytics. Many compiled files on the faith-based market have similar universes, giving levels and frequency of updating.
“[CRS] tested a variety of lists in combination with each of our control packages in our first major compiled-list-oriented test and found one winner in conjunction with our more expensive control package,” Newell says. “Fortunately the list has a large universe, but we also have to be concerned with the possibility of list fatigue or ‘cherry picking’ it for the best prospects.”
Currently, CRS is pulling a .65 percent response rate from Catholic-oriented and international-relief lists. With its myriad compiled files, the organization is drawing close to a 0.4 percent response rate.
But Whorton is quick to underscore the economics and long-term benefits of employing compiled files to a prospecting program.
“We operate a ‘many are called, few are chosen program,’” Whorton avows. “We have found that the first gift an acquired donor gives is the best predictor of their lifetime value to our organization.”
Many faith-based charities fetch an average gift of $10 to $12 from a first-time donor, and while CRS is pulling down close to three times that, Whorton admits that response rates would be much higher if it offered a front-end or back-end premium to prospects represented on compiled lists.
“We know that churn is much higher with a premium-centric campaign,” Whorton says. “As long as we are performing at a fairly healthy rate, in our case about a 35 percent renewal rate from year one to year two, we know that those people who do upgrade aggressively have a lifetime value that is more than worth it for us.”
Throughout the modeling process, CRS probed for new, largely untapped demographic slices that are uniquely attuned to international-relief issues. One segment discussed was the older Generation Xers.
But even with a clear desire to bring in younger donors — who have less disposable income and philanthropic indoctrination — Whorton says that any cultivation efforts through the mail can be risky.
“These prospects have a lower lifetime value and tend to be much more engaged and involved, which is a good thing and a bad thing for an organization,” he says, commenting on Generation X’s tendency to volunteer and to require more persuasion and motivation to give repeat gifts. “The bad thing is that the cost of servicing the donor is going to be much more expensive.”
For Whorton, the ideal “younger” target is just slightly younger than the average CRS donor: 45 to 54 on exchanged lists and 55 to 64 on compiled lists.
“We try to balance a desire to prepare for the future against short-term results,” he says. “If we simply focused on the people who are most likely to give, we could obviously face a shrinking universe over time.”
For the time being at CRS, short-term results must win out.