At the 2013 DMAW Bridge Conference, I was joined my two of my industry colleagues—Cathy Finney, Deputy Vice President, Strategic Services at The Wilderness Society and Kevin Moran, Principal at Integral –to lead a panel on an important topic: Trying Times: Making the Case for New Donor Acquisition. (Scroll down for full presentation.)
The last 4 years have been difficult and challenging. In the face of economic turbulence, new financial pressures and increased scrutiny from the media and charitable rating agencies, more and more of us—on both the organizational and the agency side—have had to confront the questions from our bosses: “Why don’t you just save the money you propose investing in new donor acquisition and focus on the donors we have already?”
Even as the economy improves and fundraising programs turnaround, the questions persist –especially since so many organizations pulled back or even stopped their acquisition efforts thereby digging themselves a hole they are trying to climb out of with fewer donors to help them do it.
So that is the challenge before us. As my friend, Roger Craver from The Agitator puts it: “At a time when the media and watchdogs are focused on the high costs of fundraising, particularly acquisition, we all need to get much better at explaining the increasingly expensive but essential acquisition process. The alternative is to leave donors turned off, anxious and angry.”
Cathy and Kevin did a great job in our session of addressing the first two objectives of our panel: 1) Learn how to put together a strong case to leadership for growth and 2) Understand how to monitor your acquisition process with a smart, data driven strategy focusing on ROI. In helping meet my session objective—understanding how different creative approaches—in messaging and production –can affect your return on investment, I highlighted what I think are at least a few key benchmarks non-profit organizations need to be looking for and offered two short case studies of how at least two groups have gone about ensuring that they could meet the goals they set for both short and long term growth.
The 2012 Fundraising Effectiveness Survey Report—done by the Association of Fundraising Professionals and the Urban Institute—showed just how far we still have to go. That study found that the “net gain in giving” for charities in 2011 was $0. That is, for every $100 a nonprofit gained in 2011 from new donors, higher giving from current donors and the return of former donors, it lost $100 through lower gifts from current donors and the loss of donors who gave in 2010 but not in 2011. If you dig a little deeper in this study, you quickly find the real reason for this treading water status: For every 100 new and returning donors added to an organization in 2011, an even greater number –107 departed for a negative “net gain in donors” of -7.
All of us know that the reasons for this are complicated: We need to get better at retention strategies and make our efforts more integrated and donor-centric. But we are kidding ourselves if we don’t also realize that we have to get better at both making the case for new donor acquisition and then implementing those acquisition efforts smartly to both acquire the numbers of new donors we need and acquire the right kind of donors—those who are committed to your mission and will stay with you for the long haul.
It’s also important to see new donor acquisition as something more that merely a simple “body count” at the end of every fiscal year. It all comes down not just to the number of new donors acquired but what you invested in their acquisition and how quickly you can expect to receive a return on that investment ( ROI). Measuring ROI and impacting ROI is complicated and multi-dimensional. For those statisticians in our midst, think of ROI as the dependent variable in a multivariate regression equation. ROI –the number of dollars each individual donor will bring in over the next 6, 12 or 24 months– is the dependent variable that is influenced by lots of independent variables including: What kind of donor is this? How and why did they first give? Was it online or thru the mail? Was it in response to an emergency or crisis? Were they induced through a front-end premium? And just as importantly, how are they going to be treated now that they are a donor? What is the new donor bonding strategy look like? What is the overall retention strategy? How are you going to integrate online and offline to maximize multi-channel success?
All these independent variables and more will make a substantial difference on your ability to keep your promise to your bosses that the investment in acquisition was “worth it”. And as you watch your program evolve, you need a smart, data-driven strategy that is completely transparent –everyone knows and agrees on the measurements, there is no spinning or shell games, the strategy is carefully and continually monitored so that it can always be changed and adjusted if problems emerge and mid-course corrections are needed.
Given that, what are some strategies to shorten the ROI? How can you get your investment back more quickly and make yourself a hero. And what are some strategies to reduce the initial investment in new donor acquisition so that either you can use a fixed dollar investment to acquire more donors or you can invest less and still meet your new donor targets?
Two quick case studies that might help illustrate some creative considerations to answer these two questions.
In the midst of the recession, The US Holocaust Memorial Museum went to 100% premium-driven acquisition program—built around note cards and calendars. It was a reasonable decision and enabled them to continue to bring in new donors with lower overall investment. But it did have major consequences on donor retention and ROI. We begin 2 years ago to change the mix with explicit goal of improving ROI, turning around their program and building for long term, sustainable growth.
In Fiscal Year 2010, USHMM’s acquisition program consisted of 91% premium packages and 9% mission-based packages. Over two years, we shifted that balance to basically half and half–49% premium and 51% mission-based, non-premium packages. The impact of that change for ROI was significant and ongoing: a 25% increase in long-term donor value for new joins.
USHMM is now in a strong and what we hope and expect to be a long term growth mode with a foundation of committed donor support that should enable them to beat the benchmarks of the AFP study.
A second case study is also worth mentioning. We were fortunate to be a part of the 2012 Obama for America campaign. On many dimensions, this was “Big Data and Big ROI on Steroids”. The Big Data lessons learned from the 2012 OFA campaign are many including:
And finally, for the direct mail side of the record-breaking OFA campaign, we put in place creative strategies designed to both reduce initial investment—win the battle for attention at the mailbox or in your email in-box and reduce or eliminate any initial investment in acquisition—and put your ROI for those who came aboard on steroids to generate the highest possible donor value over the very short time of a presidential campaign.
Here are three elements of the OFA direct mail campaign that made that all possible and successful and within each, I think there are lessons that can and should apply to non-profit fundraising:
Authentic Voices – we used a lot of them—the President, the First Lady, David Axelrod, Jim Messina and others —and we endeavored at every turn to make sure they were different from one another. Authenticity in “voice” is important for lots of reasons. Most importantly, it makes your letter personal. But authenticity also is essential for brand differentiation—differentiating yourself from your competitors in the sector, differentiating yourself to improve your ROI so your new donors know what they are committing to and why you are different.
On that front, I urge our clients to fight the tendency to be like everyone else. Fight the tendency to chase the last ambulance down the street even if that ambulance has little or nothing to do with you.
Taken together—smart, data-driven strategies and new and different creative approaches designed to reduce initial investment per donor and acquire the right kind of donor for your organization can help you “make the case” for new donor acquisition and position your organization for long term and sustained growth.