Growing Donor Files: It's Time for a New Approach
If a diner targeting septuagenarians was the only type of restaurant, how many people would dine out? What would revenues look like for the restaurant industry? Consider the explosion of dining options we have today — different cuisines, levels of service, atmospheres and channels (dine out, take out, order in) as restaurants take a constituent-centric approach to cater to different types of clientele at different times. No wonder the restaurant industry grew from $444 billion in 2007 to $632 billion in 2012 in spite of the Great Recession!
You may be asking, “OK, that all sounds great, but how do we actually do this for fundraising?” Admittedly, talking about donor centricity is a lot easier than practicing it. But the opportunity is too big and the stakes too high not to take action.
A large national health charity worked with Merkle to build demographic clusters last year based on its donor file so every donor fell into one of four clusters. (In full disclosure, Jeff Regen heads up the nonprofit group at Merkle.) The clusters were built entirely using third-party data so prospects could be placed into clusters, too. The two largest and most important clusters we’ll call Traditional Retirees (retired, high-school grads/some college, not very Internet-active, low average gift but high retention) and Affluent Professionals (professionals in their 40s and 50s, higher incomes and house values, college grads, Internet-savvy, high average gifts, lower retention).
The analysis concluded the Affluent Professionals were a lot more valuable, generating approximately 70 percent more revenue per donor each year than the Traditional Retirees. The next piece was more interesting (and more actionable): Affluent Professionals and Traditional Retirees preferred different types of solicitations. In fact, the mail pieces that the Traditional Retirees liked most compared to the other clusters, the Affluent Professionals liked least — and vice versa. The chart at right shows the gross income per name (GIPN) for Affluent Professionals and for Traditional Retirees relative to the mean for all donors. For example, for the first solicitation, Fall MD#3, Affluent Professionals were 37 percent above the mean and Traditional Retirees were 23 percent below the mean (although they still produced net revenue). As shown above, GIPN was always higher for the Affluent Professionals vs. the Traditional Retirees as they are a much more valuable cluster of donors. However, for some solicitations such as Apr Appeal and July AF#5, the Traditional Retirees performed almost as well as the Affluent Professionals — specifically, these were the two best-performing solicitations for Traditional Retirees and the two worst for Affluent Professionals compared to other clusters. For Jan AF2, by contrast, the Affluent Professionals performed far better than the Traditional Retirees. These two clusters of donors respond best to very different types of appeals!