3 Things You Can Do Now in Response to Current Fundraising Trends
Each quarter I look forward to reading the Target Analytics Index of National Fundraising Performance to stay current with trends in the industry.
The latest study reports, "Declines in overall donor numbers have been driven primarily by declines in new donor acquisition. In 2013, new donor acquisition continues to decline. New donor acquisition declined a median 3.2% from 2012 to 2013. Only 37% of the organizations in the index had new donor population increases over the period."
But, if you are among the 37 percent of organizations bucking the trend, does this mean anything to you? The answer is absolutely yes. I would say that most of the large, traditional, direct-mail-driven charities rent their lists. If 63 percent of all organizations are seeing declines in new donor acquisition, then our list sources are shrinking.
I pulled six large, commonly used lists and compared the available names they have for rent and then compared that to the same lists from six years ago. I was shocked at the decrease in universes. Here is the data:
- International relief charity, -60 percent
- Seniors database, -41 percent
- Cancer coalition, -48 percent
- Child abuse charity, -20 percent
- Cancer charity, -34 percent
- National health charity, off the market
With fewer lists coming onto the rental market, list universes shrinking so significantly and retention rates dropping, maintaining the status quo and hoping things improve is a death spiral. There are three things you must do now to be successful in the long run. There is nothing breakthrough here, and every charity claims it is doing these well, but my research indicates otherwise.
The three strategies that follow will set you on a growth path to double-digit increases.
We know that with acquisition challenges and declining active donor bases, it is critical to plug the leaky bucket and retain more donors than we are today. According to the 2013 Fundraising Effectiveness Project, every 100 donors gained in 2012 was offset by 105 in lost donors through attrition. Taking positive steps to reduce gift and donor losses is the least expensive strategy for increasing net fundraising gains.
But how do we do that? The first step is to recognize how important an issue this is. According to the 2014 Nonprofit Communications Trends report, only 16 percent of nonprofit communications directors named donor retention as a top communication goal for 2014.
OK — so now that you've made it a priority, what's next?
First, acquire better quality donors who will make second gifts. The secret here is in new metrics, list selection and gift-array strategies. Acquisition is no longer about a transaction, but about starting a new relationship. That means our metrics need to change from response rate and cost to second-gift conversion percent and lifetime value.
Recently, we reviewed a case study in which a client was proud that it saved $50,000 in lower costs for one year's acquisition campaign. But in reality, it cost the organization $500,000 over five years because the quality of donors it acquired had a lower second-gift conversion and lower average gift.
Second, make stewardship a priority. I'm not talking about a thank-you letter, though that is a good start — and amazingly 25 percent of organizations don't do this basic step. Your donor felt good when she donated; this is the time to affirm, report and inspire.
Use pictures, send links to videos, place phone calls and make a pledge to get rid of that boring letter that you use month after month. And while there is much debate on whether your acknowledgment should include an ask, always include a reply envelope. Acknowledgments can be a very large source of revenue even if you never ask for a gift.
As leading fundraising academic Adrian Sargeant's research shows, an increase in retention of 10 basis points can improve a donor's lifetime value by as much as 200 percent. That is real money!
The second strategy to work on is digital integration. According to Grizzard's 2014 DonorGraphicsTM Study, online is now donors' preferred method of giving, surpassing mail for the first time. However, direct mail is increasingly being used to prompt the donor to give online. It's common to see as much as 70 percent of your online and white-mail giving coming from donors who received a direct-mail piece within the previous 30 days.
In an analysis for a large national nonprofit client, we found the five-year value of a direct-mail-only donor was $191; an online-only donor was $421, but a donor giving via both channels had a five-year value of $965.
With boomers now preferring to give online and a donor giving through multiple channels worth five times more than a direct-mail-only donor, digital integration is a must. Make it a seamless experience, thank quickly and, to realize the higher value, get those online donors included in the mailstream fast.
How does nonprofit activity stack up?
The last three years I have conducted an annual-giving study to track major charities and their acknowledgment processes. I've commented on the timeliness, accuracy and content of the thank-you process. Each year I found the process took far too long, and most nonprofits did not fulfill my requests, whether it was to be added to the email list or to be sent information regarding a sustainer or planned giving.
After seeing little change with the direct-mail thank-you process, I decided to take a different approach this past holiday season. During the Thanksgiving holiday, I sat down at my computer and made online donations to 25 large charities.
Here's an overview, and you can see more in my recent blog:
- More than 65 percent failed to make an ask within the next 90 days.
- Just one out of 25 sent a direct-mail welcome series.
- Only 50 percent sent a direct-mail thank-you.
Online retention rates are below that of direct mail, and it's because the follow-up and stewardship are taking too long. Make a gift to your organization, and see what your donors experience. There will be at least one or two enhancements you can make to improve their giving experience.
My final strategy to leverage the current fundraising trends is to commit to legacy giving. Over the next 15 years, there will be a 70 percent increase in the number of people 65 or older. In a recent survey, 90 percent of respondents said they would consider including a charity in their wills. The follow-up question asked if they already had included a charity in their wills. Only 10 percent responded favorably to the second question, which seems to indicate that we are not asking enough.
The market is expanding, people are receptive to including charities in their wills and the generational transfer of wealth is underway.
Many charities with mature planned-giving programs are generating 20 percent of their annual operating budgets from matured planned gifts. Imagine what you could do if 20 percent of your budget was already accounted for. Now is the time to create your legacy and secure the future of your organization.