Monday, March 23, 2009
I wanted to share the story of The Lost Dogs’ Home, which has grown their regular giving programme through cold acquisition during the last quarter of 2008; on budget and beating targets. For me it illustrates that with effective planning to minimise risk, acquisition is still possible in tough economic times.
I would recommend the following steps to help with your acquisition.
1) data analysis
2) strategic plan
3) implementation and monitoring
4) results and evaluation.
Data analysis of past campaigns
Analysis of past acquisition activity allowed us to see subsequent donor behaviour - attrition, upgrade, conversion, additional cash gifts, bequest conversion – by recruitment source (face-to-face/direct dialogue, direct mail, phone, online etc.). Armed with this information we were able to see which recruitment channel was delivering value beyond the original results, and determine where to invest.
Developing the strategy
The data analysis showed the differing behaviour of donors recruited through each channel. For example, DM recruits went on to make cash gifts through cash appeals where F2F didn’t, and online recruits upgraded at a higher rather rate than DM.
Using the information about additional value from regular givers, we opted to focus acquisition on straight to regular giving. We knew that at a campaign results level we would get a lower year 1 ROI with regular givers vs cash, however, the additional value identified in the analysis (especially cash gifts from regular givers in year 1), would lift the year 1 ROI for regular givers closer to that for cash. Also, additional gifts aside, we also knew regular givers offer a higher year 5 ROI than cash.
To keep costs low and maximise learning from prior campaigns, we focused on tactics, creative and media that we knew worked for each channel.
Implementation and monitoring
We opted for a 3 month trial phase using F2F, mail, phone and online to see if the economy was affecting particular channels. With the learning from this we would then roll-out across the best performing channels.
With campaigns running at different times, it was essential that we had real-time monitoring to keep spend and acquisition rates on target.
Results and evaluation
At the end of three months of activity we had recruited 1600 monthly giving donors, increasing the active supporter base by 19%. Other key metrics were also positive with the ROI and average gift meeting target.
We also reached a milestone for the Home recruiting the 10,000th active Friend of PAWs regular giving donor, having only 97 regular givers just four years ago.
Building on this success, we are now in the roll-out phase to the end of June and hope to have recruited another 2000 Friend of PAWs donors by the end of the year. Watch this space.
Friday, March 20, 2009
Being a data, I prefer analysis of actual data not just what people say is happening but I think it is still useful - especially in looking how the financial mess is impacting charities beyond fundraising.
Bottom line in UK Charity Commission report is that charities are being hit on several fronts:
* Reserves / investment income
The most common source of income, the most important source of income and most damaged by the recession.
Only 20% reported an increase in demand for services, and three quarters of them most reckon they can meet the demand.
* Currency exchange
Those raising pounds and spending other currencies are smarting with the pound exchange rate being so bad. (Us Australians are finding this even harder - I was in USA last year where 1AUD=0.97USD, now it is 0.69USD! So everything being bought in Australian dollars now costs a massive 40% more - an increase that makes any potential fundraising woes pretty insignificant).
Not flagged as being down by many, and one in nine said they were spending more on fundraising. None seemed to have flagged spending less on fundraising as being a mitigating measure they intend to follow.
In summary I reckon that those fundraisers that managed to persuade their boards / finance managers that fundraising is a good alternative investment -especially regular giving - deserve a medal.
View the full report here.
Sunday, March 15, 2009
Mal Warwicks new book 'Fundraising When Money is Tight' hits the shelves in about a week. I shared with you in an earlier blog that there is loads of good advice for fundraising during these times which also translate into when times are good.
Mal has given me permission to publish the whole of the first chapter which is below.
“Onward and upward” appears to be the byword of the human race in the modern era. That’s why a massive interruption in the notion of progress, such as the near-collapse of the world’s financial systems late in 2008, has been so traumatic.
But history’s role is to put things in perspective. An historical view of these matters can help. And the single biggest lesson to be learned from economic historians and economists is that the U.S. economy—and the world’s— continues to grow over the long term.
In the USA, the increase in the Gross Domestic Product above the rate of inflation averaged 3.25% annually over the 107 years of the 20th Century and the first seven of the 21st. Such seemingly dramatic financial shocks as the OPEC oil embargo in 1973, the collapse of the U.S. stock market in 1987, or the dot-com bust in 2000—even, ultimately, the crash of 1929—sooner or later come to look like minor setbacks. And, yes, the meltdown of 2008 will eventually be viewed as a hiccup from the vantage point of history. You can see the pattern in Exhibit 1-1.
Exhibit 1-1. U.S. Real GDP in Millions of 2000 Dollars
Unfortunately, so long as the current recession continues, that statement begs the question. What can we expect from our donors—now, when money is truly tight?
Philanthropy in recessionary times
In recent years a growing body of research on fundraising has come pouring out of the Center on Philanthropy at Indiana University as well as other academic centers devoted to the study and advancement of philanthropy. We practitioners might have long memories and anecdotes to spare from decades of experience, but it’s the scholars who tap into the raw data increasingly available about fundraising and philanthropy and put our work and our memories into a solid historical framework.
- An economic downtown may—or may not—adversely affect your fundraising results to any great degree. It depends on the severity, length, and character of the recession.
- Even if nonprofits generally are feeling the pinch of a gloomy economic outlook, your organization might not be similarly impacted. The effects you’ll feel will depend on how you raise your money, what services you provide, and, ultimately, what you do in response to deteriorating economic conditions.
Giving during the Depression
During the early years of the Great Depression, according to the limited data we have available, giving did indeed decline significantly three years after the Crash, though not nearly as precipitously as the economy as a whole. But philanthropy recovered as the 1930s proceeded, even in the absence of significant improvement in economic conditions.
The best information I’ve been able to locate about philanthropy during the Depression years comes from Robert F. Sharpe, Jr., a fundraising consultant widely known for his encyclopedic knowledge of planned giving. A 1991 paper published by The Sharpe Group, re-released in 2008, draws upon both the contemporaneous studies of the legendary fundraising consultant John Price Jones beginning in 1931 and a 1950 study by F. Emerson Andrews characterized by the New York Times as “ . . . the most comprehensive survey of philanthropy ever undertaken in this country” up to that time.
The Andrews report showed a somewhat significant dip in total giving from 1931-33 at the beginning of the lengthy period of economic stagnation that characterized the 1930s. The report shows a slow annual rise in giving throughout the remainder of the 1930s, a time period when inflation was non-existent—and which might even be characterized as a period of increased giving were deflation of the period factored in.
Not all nonprofit organizations were equally affected by the Depression, however. The Sharpe paper reported on a study of giving to higher education which indicated that many colleges and universities—especially the largest and best-known—fared relatively well during the 1930s. “Those organizations related to human services, religion, and health care also appeared from contemporary reports to have fared well,” the Sharpe Group noted.
During this period there was another, highly significant trend: “a much higher percentage of individual gift income [was] derived from bequests and deferred gifts during the 1930s, with a with a return to more normal levels occurring as current giving mushroomed in support of war-related charity.”
In other words, during the worst financial crisis in the memory of any living person, there were a couple of significant decline for the nonprofit sector, or at least for most nonprofits. But philanthropy bounced back to pre-Depression levels far more quickly than the world economy in general.
* * * *
It’s important to weigh this perspective in the balance against the many changes in American philanthropy since the 1930s. A far smaller proportion of the U.S. population then could be counted as donors, so major gifts—and, as Robert Sharpe notes, substantial bequests—constituted a far larger share of overall giving than they do today. Only after World War II did a substantial middle class capable of sharing its prosperity begin to dominate the American economy. Direct mail fundraising—mass fundraising of all sorts—didn’t begin coming into its own until the late 1940s. The number of charitable foundations was a tiny fraction of the more than 100,000 in the USA today. There were no computers, no Internet, no email. Still, the fact that giving was less sharply impacted than the economy as a whole seems relevant. The same pattern has prevailed through every subsequent economic downturn. It appears as though the philanthropic impulse is stimulated, not discouraged, by the widespread evidence of growing need during difficult times.
Monday, March 9, 2009
Scott Gray, managing director of Rapidata says:
“Cancellations rates skyrocketed last summer so that, for example, in July, 54 per cent more people cancelled their direct debits than in the average July for the pre-recession period, while in December, there were 67 per cent more cancellations than for the average pre-recession December.
“We’ve looked very closely at these figures and what they suggest is that the monthly cancellations rates during 2008 were so high that they were not likely to have been subject to the same factors influencing cancellations before the credit crunch hit. There have been a lot of surveys suggesting how donors intend to revise their giving during the recession but this tells us what they actually are doing.”
The monthly cancellations rate is the percentage of live direct debits that are cancelled each month. Average monthly cancellations rates for each year are:
For the first time, the financial year 2008/09 saw monthly cancellations rates exceed five per cent, on four separate occasions – July, September, October and January.
The report released by Rapidata, the Charity Direct Debit Tracking Report 2009 sets out several recommendations to win back cancelled donors, including:
• Acknowledge the cancellation quickly, in writing, and thank the donor for their support
• Offer alternatives to cancellation, such as giving at a lower level or taking a payment holiday
• Make sure donors can reactivate easily and securely through the charity’s website
• Attempt reactivation sooner rather than later: try it within six months and don’t leave it 12 months or more
• Regularly test sample reactivations: for instance, try telephoning a sample of 100 donors who cancelled within six months to test for reactivations.
Gray goes on to say there is a need for a “culture shift” away from an emphasis on acquiring new donors to looking after and stewarding the donors you already have.
“The findings in this report point to trend for more donors to cancel their direct debits, which will mean increased costs in acquiring new donors to replace those you have lost.
“Wouldn’t it be better to spend some of that money in trying to keep your existing donors? Commercial companies invest heavily on customer retention; charities need to follow suit."
I agree that we need to spend more time on donor care, although I am not convinced it's at the expense of acquisition. Refer my earlier post about smarter and no less acquisition.
But Scott's point about stewarding donors is spot on. Over the past seven years having mystery shopped hundreds of British, Canadian, Australian and Asian charities, I have witnessed the same fundamental flaws appear in the way we service donors, which are contributing to their ongoing loyalty and subsequently the figures that are now surfacing in the UK.
Lack of thanking, not responding at all, or in a tardy fashion, not acknowledging the donors type of support. Fortunately, all really easy things to fix.
So as well as the reactionary measures Scott refers to, I'd suggest the following steps:
- Mystery shop yourselves and others and see what you find. Rip off what works well, but as importantly, do something about the things that aren't working in your organization.
- Review your acknowledgement and thanking strategy. It shouldn't and can't take 4 weeks to thank someone who ahs made a gift. My experience is this is always down to systems rather than a conscious decision to do so. Don't allow donors to question why they have supported you: thank and reaffirm within a week after they come on board.
- Review your outgoing communications (particularly your thank you and welcome materials) and ensure that each piece uses personal and engaging copy, talks to the donor as an individual, focuses on the donor and the beneficiaries (not your organization) and talks about real impact.
- Ensure your communication cycle continues to ask appropriately (and for monthly donors attempts to upgrade at least once a year - for this is an attrition buster as well as being revenue generating).
The outlook could be grim if you don't get back to basics and do the things we know we should be doing. The evidence from Rapidata is actually in contrast to what we are seeing with our clients at Pareto Fundraising particularly in Australia and Canada, where we see monthly (regular) giving continuing to grow. But that's not to say things won't take a turn for the worse if charities don't practice proper supporter relationship management.
We'd love to hear your experiences with your monthly/regular giving program. Please post here or email me at email@example.com
If you would like a full copy of the report mentioned above, please email Rapidata's Managing Director, Scott Gray at firstname.lastname@example.org .
Sunday, March 1, 2009
I have compared results of nearly 30 charities in Australia raising funds for a diverse range of causes. The smallest has about 3,000 donors, the largest well over 100,000.
I wanted to know if the there was a pattern – any decline in income that could indicate economic downturn impact. I ignored targets, and just compared year on year, as close to like for like as I could get, looking at the most recent appeal cycle, Oct-Nov 2008 (Christmas appeals).
My main measure was ‘income per thousand letters mailed to known donors’. I didn’t have costs available, but income per thousand ‘smooths’ costs, giving me a more realistic reflection of the performance of the donor file. These results are just warm donors – ie donors who have given before.
Through the Pareto Benchmarking Insights group, we had compared mid-year (May-June) appeals between 2007 and 2008. There was no difference that could be attributed to the economy then, but things have got worse in the past six months.
Would Christmas 08 appeals be worse than Christmas 07?
I had available gross income, average donation and response rate across each and all of charities who supplied that data, comparing Christmas 07 with Christmas 08. I then calculated income per thousand. All the data was just 'warm' donors - ie donors who have given before.
If the economy was harming donation levels more in December 2008 than December 2007 we would expect Christmas 2008 income per thousand mailings to perform much worse than the previous year.
The bottom line
- In total, Christmas 08 raised 9% more per thousand mailed than Christmas 07.
- Half of the charities had a higher income per thousand, the other half a lower income per thousand.
- Christmas 08 total gross income was 2% less than Christmas 07 - This is despite the fact that the charities mailed 10% fewer people
- Lower response rate was biggest variable contributing to those that raised less
InterpretationThis is pretty benign data. It is nowhere near strong enough to tell us that the economic downturn is having any impact on charities.
On the face of it, there’s not enough evidence to conclude that the economy has been a significant factor to date on warm appeal mailing results – we just don’t know.
Like many, I feel as though the economic mess should be harming fundraising but the fact that it is so marginal provides us with no proof.
The slight decline in gross can be attributed to the fact that most of those who had bigger declines have not been recruiting many new donors and so therefore mailed fewer. Later, we need to investigate to see if the reason they are not recruiting so many donors is due to the economy.
From this sample, I cannot conclude that the worsening economy has, by December 2008, directly harmed or reduced the amount given by a selection of charities own donors in Australia.
There is no need for panic. But despite all the non-evidence, I am still feeling fearful of what is to come.
Whatever country we are in, we don’t know how things are going to pan out, and must be prepared for the potential scenarios.
Also, it is important to note that the very nature of comparing warm results mailings is actually looking at how your best donors are responding to the economy. We know that they can be pretty resilient – but we also know that no matter how dedicated they are, a small percentage still attrite (stop donating).
Some more useful measures, which we are investigating in our Benchmarking Insights* program, include:
1. Acquisition volumes
2. Acquisition ROI
3. Regular Giving attrition
4. Attrition among high value donors
5. Attrition among low value donors
6. Unsolicited gift volumes
What to do - strategically
1) All the stuff you should be doing anyway – it is written in tons of fundraising books and papers, just make sure you are doing it.
2) Carry on with your acquisition, but budget for things to be tougher.
3) Do some scenario planning; look at your strategy and work out how it would turn out depending on two or three ‘what if’ scenarios (see Mal Warwick’s new ‘Fundraising When Money is Tight’ for more details – when it is published next month).
* Australian, Hong Kong and Canadian charities may still join the Benchmarking Insights co-operative, which is a member led group of charities sharing results just email email@example.com for more information. Other countries - let us know if you are interested.