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.

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.

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!