Don't Waste Money on Wealth Coding for Donors
The myth is this – if we target our regular appeals at a wealthier audience, we will raise more money. Just one problem… it doesn’t work that way.
Recently I delivered the results of a Donor Engagement Profile to a large national charity. We examined almost 200 million interactions of more than 3 million donors and almost 8 million gifts. The client charity was shocked to learn that the wealth of the donor and the wealth of a particular geography had absolutely no relationship to gift size or lifetime donor value. We see this repeatedly in our Donor Engagement Profiles.
A few years ago, when I was with the American Cancer Society, an interesting thing happened. We had an annual direct mail donor in the Chicago area. He stroked a check for $100 every time he received the year-end appeal letter. This pattern had been well established for half a dozen years. Then, for no apparent reason, he sent a check for $1,000. Fortunately, a staff member in Chicago noticed the change and called the donor.
Turns out this gentleman is a billionaire… and an established philanthropist who has given more than $100 million to a variety of causes. He gave those $100 checks because he had friends who had been affected by cancer and because $100 was the amount requested by the letter. But, when his wife was diagnosed with breast cancer, this issue became intimately personal for him. Since being personally cultivated and involved, he has given millions to the Society.
The donor lives in one of the wealthiest zip code areas of Chicago and had the ability to write checks for millions but was consistently sending $100. His wealth had no relationship to his level of contribution – until the issue became personal for him.
I, like many of you, have spent lots of money and time during my years as a practioner to assign wealth codes to donors on file assuming (wrongly) that people with more money will give more money. Interestingly, I don’t ever remember testing later to validate the results. Now I know that I would have been embarrassed to have spent all that money only to find out that the hypothesis is incorrect.
To get a certain payback on your donor data, examine how donors engage with the organization and how they behave after they give their first gift.
The best investment you can make is in a well worded, well understood, concise mission message. This is the foundation on which all successful fundraising appeals are based. The next best investment is in a highly personalized gift acknowledgement that is sent within 48 hours of receiving the gift and followed with a thank you call or personal note from a staff member or volunteer. Make the donor feel valued and recognized and your retention rates will increase immediately.
Other data provides the information needed to raise more money. Focusing attention on donors who have a history of making multiple gifts within a short period of time is extremely productive. Increasing the amount of the ask for repeat donors pays solid dividends. Making an investment in getting donors to give through multiple channels increases gift size, gift frequency and lifetime value. Converting a donor into a volunteer is also a winning tactic. Trying to convert a volunteer into a donor doesn’t usually work well.
Wealth codes do have an appropriate function. If you are using wealth codes as the basis for face to face appeals for mid-level gifts, major and campaign gifts, and planned gifts… the coding is vital in prioritizing targets for staff and volunteers. Otherwise, spend the money you would have spent on wealth coding on retaining and upgrading your current donors through better mission messaging, better gift acknowledgement, and multi-channel donor involvement strategies.
It's August; do you know where your donors are?
For more than 20 years I had my auto and homeowners insurance with the same agent – Greg. I don’t remember how I started with Greg except that we went to school together and at one time attended the same church.
In all those years, I never shopped. I was loyal… and probably lazy. It just seemed easier to renew.
Two years ago, while doing the household budget I realized that I was insuring a nice house, 5 cars, and 5 drivers including 3 teenagers. The annual total for this coverage was close to the Gross Domestic Product of Belize I think.
Then it hit me – in more than 20 years, the only times I ever heard from Greg was when he wanted to ‘up sell’ me on something. He never took me to lunch, sent tickets for an event or show, sent a handwritten thank you note, or just called to catch up. Greg did not care about me. My loyalty was ridiculously misplaced. For years I had been paying more than I should and giving my business to someone who really didn’t appreciate it.
Of course I shopped and got a much better deal and called Greg’s office to cancel. I was stunned when he didn’t call me back to try to talk me out of it or find out why – proof positive that I made the right decision.
It is 5 to 12 times less expensive to retain a donor you have than to acquire a new one.
Many people in fundraising have never even considered measuring their donor retention rate. Oh sure they may know about retention in the direct mail file but they are clueless about event donors, major gifts donors, and online contributors.
How much of your annual budget is devoted to donor retention and renewal activities as opposed to acquisition activity? What does your donor appreciation program look like? How many of your loyal donors do you and your staff really know? What is the lifetime value of your median donor? What strategy have you developed to keep and upgrade the donors you’ve acquired? Do you care?
Do yourself a favor… Don’t be Greg.
Fire the do-gooders and shut down the pretenders
People who work for and volunteer for nonprofits are nice people… many of them should be fired.
I spent 28 years of my life working alongside these well-meaning folks in a variety of charitable organizations as both an employee and a board member. But, I have a bone to pick. Solid business practice and accountability is almost universally resisted in charities and churches. It’s a lot like government in that way. These people and organizations would rather defend themselves than really solving anything.
Hard work and zealous devotion to the mission do not excuse anyone or any organization or church from effectiveness or efficiency. Results matter.
Oh sure, I’ve heard the arguments that charities are not businesses and deserve to be dealt with differently. And, I agree – on a few points, but not many.
Every charity and church owes it to its supporters and the taxpayers prove that it produces measurable results that benefit our society. Similarly, every nonprofit employee should be expected to be held accountable for the job that they are paid to accomplish and every board member should demand that this occurs. Can your charity or church prove a significant return on its investment? Can you justify your salary and benefits based on your measurable impact on the mission?
I am in favor of a donor and taxpayer revolution. Somebody, please start an effective movement that demands that charities, churches, and the people that work for them and volunteer for them produce real, measurable results. I’ve devised a suggested plan to start this process… it’s not perfect but it’s a start - see what you think http://www.philanthromax.com/blogs/rob-mitchell?page=3
We can learn a lot from business and we should. Measurement and accountability is good and appropriate – embrace it and you and your organization will thrive. Yes, ineffective programs and people will be eliminated… they should...sorry. Nice people should sometimes be fired and replaced with people who are committed to accomplishment not tradition and hard work. And, ineffective old organizations should fail. Results matter!
Blinding Revelation of the Obvious?
Nonprofits are very different… in how they raise money and where they get it. And yet, there is a persistent effort to compare to national or sector averages. For example, the American Cancer Society and Mayo Clinic are both considered health charities. But they are very different in how they raise money and where their gifts come from.
One is funded primarily from millions of small gifts that come from millions of individual donors who give through special events, direct mail, and online giving. That organization also gets a significant percentage of its revenue from bequests. It gets a larger than average share of its gifts from corporations but almost nothing from foundation grants and major gifts from individuals.
The other has a nice base of annual support but really benefits from major gifts, foundation grants, and bequests. Its average individual donor has a very different profile from the average contributor in the other organization.
This difference is vitally important in understanding why some nonprofits are thriving in 2011 and others are struggling.
Unemployment is, and has been high. High unemployment dramatically constricts the flow of small gifts from working class and middle class individuals. People who are unemployed, underemployed, or fear becoming unemployed generally curtail or suspend their giving, while some cease giving entirely. This has a profoundly negative impact on an organization that relies on small transactional gifts.
Consumer Confidence is also important to individuals who make small gifts through events, direct mail, and electronic giving. These individuals make contributions out of their discretionary income. High prices on necessities like gas and food take a bite out of their budgets and damper their confidence making spending decisions on things they want but don’t necessarily need – this includes their desire to make charitable gifts.
The stock market is having a good run. Corporate earnings are soaring. The effect on net worth for wealthy individuals, grant making foundations, estates, donor advised funds and corporations is very significant. These donors and funds feel flush with value and are making game-changing contributions to charities, churches, donor advised funds, and private foundations. They are not affected much by high unemployment and consumer confidence.
A growing economy is also good for bigger gifts. And, believe it or not, the US economy is growing. It is a very slow growth but the recession is over and has been over for months. Fragile? Yes of course, but it is growing.
So, the lesson here is that nonprofit fundraising is a function of the donor mix and fundraising portfolio of a charity and the components of the economy that affect the donor types and fundraising techniques employed by the nonprofit.
If you are fortunate enough to be in an organization that is weighted heavily toward major gifts, grants, corporate support and bequests you are enjoying wonderful growth in giving in 2011. Make hay while the sun shines. Take advantage of the current environment. Step up your solicitation efforts. Ask, ask, ask!
If however, your nonprofit is focused on grassroots support from lots of small individual contributions, you are not feeling too flush. Now might be a good time for you to invest in diversification of your fundraising portfolio so that you can begin to share in the largesse of major gifts, corporate support, foundation grants, and bequests.
But, don’t forget to keep your finger on the pulse of American philanthropy at www.atlasofgiving.com. Conditions can and do change – sometimes quickly.
Are You Motivated by Seeking Pleasure or Avoiding Pain?
Here's a puzzler for you... Is year-end giving traditionally good because donors are in the giving mood... or is it because charitable organizations have made a tradition of aggressively asking during that period? In other words, has Q4 giving become a self-fulfilling prophecy?
When I was Chief Development Officer at the American Cancer Society, our worst calendar quarter overall was Q4. Our best was Q2 because that is when our largest special event (Relay For Life) was held each year.
This has me thinking a lot about timing of fundraising promotions – mail drops, events, and campaigns.
Tradition drives too much in fundraising management.
We have the fall gala the third Saturday in October not because the giving environment is best then but because that is when we always have it. We plan our mail drops on a predetermined schedule never based on forecasted charitable economic conditions… and, we are afraid to change the dates because it might screw up our comparisons to previous years.
I love the story of the husband who asks his wife why she always cuts the Thanksgiving ham in half before baking. Her response is that that is the way her Mother did it. When she calls Mom to ask, Mom says that’s how her Mom did it. When inquiry leads to Grandma she replies “Oh honey, I cut the ham in half because my oven was so small I couldn’t fit a whole one!” Our promotion scheduling is like that.
Now that we have new technology (Atlas of Giving) that provides a reliable forecast for the giving environment, we have an obligation to start to use the information to schedule promotions for periods when they have the best chance of return… Don’t you think?
The Fidelity Gift Fund had its best first quarter in history in Q1 of 2011... How do you explain that? I’m pretty sure that I know the answer. The environment for giving was strong in Q1 and people with assets were feeling the euphoria of market gains, corporate earnings, and what seemed to be signs of an improving economy. I won't be surprised if Fidelity reports a really good Q2 result because the environment for giving was better than Q1.
Based on what we see now, it makes sense to time promotions sooner rather than later in 2011 to take advantage of a better charitable giving environment. A September mail drop or event should perform better than one in December - all other variables being equal. Based on the current forecast, September results should be 3-5% better than December results.
Will you be the practitioner that seeks the pleasure of better returns or avoids pain by sticking with the established schedule?
Keep your finger on the pulse of American Philanthropy
www.atlasofgiving.com
Can't wait to find out what happened 18 months ago? ...GET A LIFE!
And so it begins… the annual summer discussion about what giving did last year – 2010 in this case. Whose number is more accurate? Is any number accurate? Is it too high or too low? How did we do in comparison?
Honestly, why waste your time? If you have to wait six months to find out what the giving environment was for last year - you really don’t have enough to do. And, you are looking in the wrong direction.
Until now, charitable giving has been the only $300 billion dollar a year industry trying to drive forward while using only the rearview mirror.
At the Atlas of Giving we are all about looking ahead. Yes we measure, but we measure monthly so that we can note how giving is trending. More importantly, we are providing a reliable predictive forecast for the months ahead and are analyzing the impact of current events on giving. The name of this game is ‘utility’. How can you use data and information to raise more money and create better budgets? I’m pretty sure that Mattel isn’t focused on how accurate the retail sales numbers were for December of 2010 – their profitability depends on what the forecast is for this coming December.
So, as you watch the annual spectacle of the June release of Giving USA numbers and the frenzy of speculation related to accuracy, you’d be smart to ask yourself – Why is this important?
Until September 8, 1900, the National Weather Bureau mostly measured weather. Everything changed on that fateful day when as many as 12,000 were killed in Galveston, Texas in a strong hurricane (the biggest loss of life in a natural disaster in US history). As a result, the National Weather Bureau changed its focus from measuring to forecasting for the obvious reason that reliable forecasting would save lives... and it certainly has. It’s time for our sector to stop its infatuation with the past and focus on a brighter future.
Greater accuracy has little utility - especially if it is more than 6 months old. A reliable forecast and an ongoing monitoring of events and conditions that are currently affecting giving are the tools of that will bring real advancement and better results.
The Atlas of Giving is focused on the future but will continue to accurately measure the past and learn from it.
“The future belongs to those who prepare for it.” – Ralph Waldo Emerson
Keep your finger on the pulse of American Philanthropy
www.AtlasofGiving.com
Maximize Fundraising by Timing Events and Promotions
If you knew that your gala would net 6% more if you moved it from November to July, would you do it?
If you had reliable data that suggested that your traditional December direct mail drop could bring $150,000 more if you moved it up to September, what would you do?
Would your budget plans change if you knew that charitable giving will not grow in the next 12 months but will decline 1.6%?
Have you ever considered questions like this? Probably not… Because, until recently, there were no answers to these questions based in analysis and data. The best you could do was wait until June to look at how giving performed in the last calendar year, stick a wet finger in the air and speculate on what lies ahead. That has all changed with the introduction of the Atlas of Giving.
The Atlas of Giving is an innovation that forever changes how fundraising and nonprofit budgets can be managed. The Atlas is provides 3 things that have never before been available…
- Measurement of charitable giving results MONTHLY.
- A reliable forecast for charitable giving
- Analysis of the factors and current events that affect charitable giving.
This means that you no longer have to wait until June to find out how charitable giving performed last calendar year. - In case you are wondering, 2010 giving totaled $323.86 billion, up 6.6% over 2009. This rebound follows the biggest single year decline in giving in 2009 (down 5.7%). The Atlas of Giving released this result on January 19, 2011. Oh, and by the way, giving through the end of April, 2011 is up 8.3%. Results through the end of May will be available with the new monthly report which will be posted June 20.
As a nonprofit professional, you now have access to information that gives you options for scheduling appeals and events during times that are forecast to be more favorable than others. It’s a lot like scheduling your camping trip when no rain is in the forecast.
If you are wondering what the impact of an event like the BP Oil Spill will have on giving – now you can know.
Here is the best news… The Atlas of Giving is free! All you need to do is go to www.atlasofgiving.com , get a free subscription to view the Atlas of Giving each month.
If you really want an edge, you can get a customized version of the Atlas for your organization.
What will take US charitable giving to a new level?
What is the one thing that moves the charitable giving needle the most? That was a question that I was recently asked by a columnist. The answer is really easy… It’s the economy.
When people are working and have disposable incomes, when companies are making profits, when foundation assets are growing… charitable giving is good. There is a proven direct relationship between the health of the US economy and charitable giving.
Ok then, what is it going to take to change the charitable giving equation? That my friends is the biggest challenge.
Today, our giving culture is settled and consistent. In order to change the equation, the culture of giving in the US needs to change. So, the question is what will make individuals, foundations, and corporations give a greater portion of their income and assets to support charitable causes?
Effectiveness?
Intuitively you would think that the most effective charities would get the most support but I’m sure that isn’t true. As I look at the largest charitable organizations in the country I see an eerie similarity to government. Many of the largest charities are bloated, inefficient, and unfocused on measurable results – but they are successful brand based fund raising machines. When Americans begin to vote for effectiveness with their charitable dollars, the focus will shift away from big and toward smaller, focused and solution based organizations. I am a proponent of measuring charitable effectiveness http://www.philanthromax.com/blogs/rob-mitchell/it%E2%80%99s-time-measure-nonprofit-effectiveness. But, will giving grow or contract with greater effectiveness? I think it will decline at first as the waste is purged from the charitable economy but will then begin to grow dramatically as donors recognize a direct relationship between their giving and measurable results.
Increasing Needs?
Bigger government means decreased charitable giving. When health care needs are all provided by government, why give to support hospitals and health care? When education becomes a government provided benefit for all, there is not a big need for scholarships. When government support funds symphonies and museums, charitable gifts become less critical. Theoretically, the greater the needs of society, the greater charitable giving support will be. Perhaps the current contraction of government programs will create more giving… we’ll see.
Generational Change?
How will charitable giving of our children and grandchildren compare with ours? If the answer is either more or less, the charitable giving equation will change. If they end up being the same… the equation doesn’t change much. The challenge then is how to inspire a new generational shift toward charitable giving enthusiasm. My view is that this is not only the greatest challenge but the greatest opportunity to change the equation in a positive direction. Let’s talk about how we can inspire a new platinum age of giving – this can change America for all of us in a positive way.
An important destination is at your fingertips
Do you have something important to say and want to find an interested audience?
Do you have questions about your work, your career, your board, your results, or your plans?
Would you benefit from exchanging information with experienced colleagues?
Do you want to learn, grow, and be more successful?
Would you like to help others be more effective and successful?
Would you like to network with other nonprofit professionals?
Stop reading this right now and go to www.charitychannel.com.
This place is cool. Don’t be off put by the lack of visual sizzle. There is real power under the hood… kinda like my Dad’s 1980 Plymouth Gran Fury with the 440 V8.
You can create or recreate yourself with your own profile. You can set up your own discussion groups or join many already in place. You can quickly and easily post your own blogs. You can request to be a charity channel article contributor. You can pick up new learning from the charity channel University. You can add your own videos. You can learn from others. You can find your next job.
There is so much here. But its true capability won’t be uncovered until you become a part of it.
It’s a huge virtual meeting place for the exchange of information, ideas, relationships, products, and services. I will be a regular part of this community.
CharityChannel.com is not new but it has recently been reinvented. It is the brainchild of Stephen Nill, a nonprofit internet pioneer. Steve created the first online discussion forum back in the 80s for planned giving practitioners. He created Charity Channel in 1992. Here’s his bio http://charitychannel.com/cc/stephen-nill#showtab=info.
There are dozens of places online for us to connect but this one is different. Here you can link with all those other places and bring whatever information and relationships you’d like to this single meeting place. Hopefully, I’ll meet you there. www.charitychannel.com
My Dad could whip your Dad… last year!
It’s no secret that our sector is slow or even resistant to practices that are common to the business world. Examples include accountability measurements for staff, outcome based compensation, focusing on net revenue rather than gross revenue, market share monitoring, public monthly reporting and measuring of results, and intensive use of data for planning and decision making.
Lately, I have marveled at the traditional attachment of the nonprofit world to information that has little or no utility. Many anticipate a June release of annual giving estimates… for the calendar year that ended more than six months earlier. The attraction is voyeuristic, not utilitarian. Did we do better than our sector average? Is our mix of contribution sources different from the norm? It’s kinda like a grade school playground discussion of whose something was bigger than someone else’s… last year. It really doesn’t matter.
The Atlas of Giving brings three utilitarian elements that have never existed before.
- The ability to accurately measure giving as it occurs in real time.
- The ability to reliably forecast giving for up to a year (updated monthly).
- The ability to create custom forecast models for individual organizations or groups of organizations.
This timely data and forecasting has been standard practice in business and finance for decades. Retail sales, housing starts, consumer confidence, unemployment, and inflation are examples of current and forecastable data that is essential to business planning and evaluation. All are estimated using methods that are similar to those used in the Atlas of Giving. None are perfect but all serve a utilitarian function because of the consistency used in their calculations. All are established benchmarks.
The Atlas provides for the first time a way to establish budgets that are based on data rather than a wet finger in the air. Never before has data been available that allows a fundraising practitioner to schedule campaigns and promotions for times when they have the best chance for success. And, now a monthly benchmark is available to be used in evaluating the performance of fundraising events and fundraising staff.
Soon the Atlas of Giving will have monthly data and forecasts by sector (religion, arts, education, health, etc) and source (individual, corporate, foundation, and bequest). Think of the possibilities for increasing effectiveness and efficiency.