The changing landscape

Turning your database into your most reliable source of fundraising using great technology

This article represents a summary of observations from more than 40 years in social marketing, technology and fundraising. More importantly, it represents observations from hundreds of non-profit organisations in New Zealand and around the world. Finally, it represents trends that we in Vega are observing as we support our diverse clients.

As active fundraisers’ we know there is an endlessly changing variety of “factors” that we need to consider. As we plan for both the success and the sustainability of our programmes many external variables play a part in determining that success. Not necessarily in order of importance, these include:

1. The shift of power from Baby Boomers to Generation X and the rise of the “Millennials”

2. The change in psychology and “participation preferences” that accompanies the generational shift

3. The rise of mobile technologies.

4. The maturing of cloud-based platforms.

5. The opportunities platforms like XERO and Vega present to lower costs.

6. The dominance of social media in all its forms as a publishing platform.

7. The subsequent decline in the importance of the web site as a publishing platform.

8. The emergence of other related trends like the “selfie” and “everyone is a journalist”.

9. The rise of the “pop-up” charity or the low cost of entry for new charities servicing niche markets.

How organisations respond to this changing market place will determine which continue and prosper and which decline.

Let’s start with the “cloud”. To me, it represents the single biggest opportunity to integrate, automate and make cost-efficient almost every area of a charitable organisation’s operation. There are cloud-based applications across the spectrum of need from XERO to Office 365 to fundraising platforms likeVega. You can automate and integrate your processes as never before. Furthermore, you can significantly reduce your costs and staff time while doing it. Innovative charities are already advanced in this journey.

The move to the cloud as a technology platform and to a mobile digital world for engagement is inexorable. It should be noted that even Microsoft with all its wealth and resources nearly missed the transition to a cloud-based mobile world. Microsoft which was totally invested in “the desktop” would have declined if they had not taken late but drastic action to go cloud-based. For charities without Microsoft’s substantial reserves, the need to address this fundamentally changing technological world is critical and urgent. 

The generational and psychological shift

 As baby boomers move to retirement they remain stalwart charity supporters but their giving patterns reflect their life priorities which are saving. The generation that replaces them dubbed GEN-X has a  different psychology and different needs. Millennials are a development again from GEN-X. All studies show that each generation regards itself as “values-driven” and each generation expresses those values in charitable activities or in their purchase choices.

However, where GEN-X and millennials differ starkly from Baby Boomers is in their need to see themselves reflected in the work of the charity or in the interactions they have with the charity. GEN-X are more sceptical, demanding and want more control and transparency. The rise of peer to peer and event-based fundraising reflects the charitable sector's response to that. But GEN-X are now in the income peak range where general charitable giving is also at its peak. They are avid users of social media and are almost universally using mobile technology. 

The fundraising strategy or programme mix

But while we as charities cope with fast-paced change, we face the task of managing our programmes and bringing in the funding our organisations need. Depending on their resources, most charities will have a variety of fundraising programmes in place at any one time. All of which must cope with the underlying social and systemic changes that are occurring. These may include;

• General Donor Programmes
• Regular Giving Programme
• Web Site Donation & Recruitment programmes
• Annual Appeals
• Trusts & Foundations grant seeking
• Corporate sponsorship
• Bequest Programme
• Major Donor Programme
• Events Programme
• Social media programme
• Possibly contracted income from government 

Doing any of this well is a significant undertaking. Doing all of it well requires a talented team or a great technology platform. Fortunately, great technology is now available and as I said the cost of cloud-based technology is causing infrastructure costs to plummet. We hope that we at Vega are leading that charge. The future promises to be even better with the maturing of “rules-based” intelligent systems that will support and underpin great fundraising. Modern technology can respond on your behalf and be available 24 x 7.

Today even the smallest charity can dream of implementing a diverse and resilient programme.  

With legacy technology, usually depending on the in-house expertise or resources available, one or more the channels or programmes I listed above will be the mainstay of the organisations fundraising efforts and will return the bulk of the organisation's funds.

In addition to these “standard” programmes, most organisations will need to have recruitment, retention and upgrade strategies in place where appropriate in each of the main programmes. It is probably true to say that for many charities the heroism of the team keeps the programme going.

To cope with the world as we find it today an important concept is Marketing Automation or Workflow Automation. Marketing Automation can constrain your costs while allowing your programmes to scale. While Marketing Automation does not require a cloud-based system, it can certainly benefit from it. In other words, your technology must not be a recording system it must be an active participant in delivering your engagement and responding to supporters needs on your behalf. Marketing Automation delivers your messages automatically in supporter induction, supporter retention and supporter upgrade. Marketing Automation can even target and deliver your appeals. It is rules-based and removes the need for you or your team to respond to donors. Forward-thinking fundraisers are embracing this concept with exciting results. 

So, Marketing Automation is key to increasing the impact of your engagement while reducing costs and ensuring a timely and professional response. To me, the automation of any or all common tasks in supporter servicing and engagement is a starting point. Again, a web-based or cloud-based platform gives you automation opportunities across your organisation.

But there is another way technology can help keep your programmes dynamic and relevant, if you update the delivery and take advantage of intelligent systems. I will use Direct Mail and eDMs as an example. What I am saying applies to any fundraising strategy. In today’s world, almost everyone is a publisher and we all want and expect choice and even control over the messages we receive. Again, charities that don’t adapt will be left behind. But charities that do adapt have new and exciting fundraising streams available.

In the 1980s and even up to the early 2000s direct mail and annual appeals were the primary sources of public funding for most charities. Everyone knew that personalisation was key in direct mail. Thus, every letter had a personal salutation and every successful letter had a structure that built or reinforced a personal connection with the donor recipients.

By the middle 2000s, many direct mail programmes started to decline and this channel moved to play a secondary or minor role in the organisations fundraising mix. This was often replaced by an event-based strategy which is great for engaging GEN-X and Millennials. I absolutely agree that event-based fundraising is important. But deprioritising appeals to a database is in my opinion, a mistake and our clients at Vega have shown this to be so. You are foregoing a good and beneficial channel for funds and engagement by allowing your Direct Mail programme to decline. And eDMs or direct appeals by email can be every bit as effective as traditional direct mail if you follow the steps I will outline soon.

If running a diverse multifaceted fundraising programme is not complicated enough we also have to deliver meaningful messages to each segment or channel. Today we must understand who we are talking to at a micro-level, not a macro level. It is almost like you must treat every donor like you would a high-donor. People demand individuality in a way no previous generations demanded. In the past, at the very least we tried to understand what gender we are talking to and what the age range the recipient of our communications was. Now we have to go further. Take the established fact that income Is the biggest predictor of donation size or activity. Then take the life cycle of people and you have a model that shows where the bulk of your donations are likely to come from.

A Recency Frequency model is still a useful predictor of who is likely to respond to appeals or upgrade requests, but we can do so much better and we need to. If you try to raise money by email and send a form email or worse a newsletter and include a donation link to a standard landing page, then I suggest your results will be poor time after time.

From this, the next key factor in technology-assisted fundraising I want to emphasise is personalisation, but not just as a greeting. I want to focus on the key to successful database driven public fundraising by direct mail, email or even SMS to any generation. The key is total personalisation. Total Personalisation is the concept of getting the grain of your communications with any individual as close as possible to that individual. This is not only possible, but it is also essential if you are trying to engage GEN-X by email or social media.

As fundraisers, we know that people move through phases in their lives that can be modelled and predicted. See figure 1. This says that for most people from birth to their late twenties, they may participate in or subscribe to charitable organisations, but they will not, in general, be reliable donors. But as people move into their thirties they will in many cases start to increase their incomes and stabilise their lives. They may also choose long-term partners and some will decide to start families. This time is when many begin to express their values by supporting charities tangibly through events or donations. This golden period for charities to recruit new donors has been shortened and delayed by the imposition of student loans. Student loans mean that young people enter their thirties often burdened by debt that delays house purchase and other “stabilising” factors.

As we move into our forties (this applies to every generation) we face the growing costs of raising children, if we have chosen that pathway. It is likely the number of charities we support will shrink, while our support for selected charities will continue.

In our fifties, we are starting to think about retirement and savings but we can be generous with windfalls or from an income that has now plateaued. In our sixties, we are actively saving and generally reduce our charitable giving and in retirement, if we are lucky we will have assets of value but a fixed income.

It is important to point out that all research shows that each generation has values and each generation expresses those values albeit in a different way. Generation X and Millennials are far more sceptical and far more demanding than Baby Boomers. Gen-X and Millennials want something back and they want transparency and accountability. They also want participation and “buzz”. But as their income rises they can be generous supporters.

So, if your recruitment processes contain a post gift survey are you asking people what their age range is? Are you making sure you establish the gender of the donor? Do you regularly survey your donors for useful basic information like this? How much use do you make of publicly shared information now available about almost everyone through our social media profiles? How much notice do you take of trending topics in social media forums?

To personalise communication for a millennial, a GEN-X or even a modern baby boomer, you need to have as much information as possible. You need to have text that is as close to personal as possible within a broader communication.

This article focusses, as the title infers, on key parts of the fundraising mix that are driven by public or database or donor-driven fundraising. But the concepts apply to all fundraising in any programme. All fundraising is relationship-driven and in my opinion, every donor who gives you money is open to giving you more money.

For the remainder of this article the fundraising strategies or programmes I will focus on are;

• General Donor Programmes by eDM or Direct Mail or SMS
• Regular Giving Programme and
• Web site Donation & Appeals Programme

With the confidence of experience and observation, I state that a well-managed public or general donor programme can give you a reliable source of funding. This income can be every bit as reliable and predictable as any of the others including Regular Giving. This income is arguably more reliable than many. A well-managed database will always say yes to your proposal. It will always give you support. But developing or resurrecting a “well-managed database” will take time.

Every time you ask your database for the support you are giving the recipients an opportunity to share in the mission and success of your organisation. Why wouldn’t you do that regularly and in a variety of ways?

I will further assert that using “appeals” to your database as a reliable source of funding applies equally to email-based appeals. Email appeals have a wonderfully low cost compared to direct mail and email appeals reach GEN-X. Also with email appeals, you can influence the whole journey from the time the person receives your email to the likelihood they will open it and the possibility that they will convert or respond to your call to action. For charities with a predominantly older age donor-base, old fashioned direct mail is still a great way of generating income and keeping people engaged. But such charities need to be urgently growing an email-based programme alongside their DM programme.

If you are looking at Direct Mail as part of a standard appeal programme with perhaps a minimum of four appeals a year, you will aim for perhaps a 15-20% response to each appeal and you will expect an average donation from most databases of about $50. An example would be to mail to 5,000 people most of whom have given you at least two gifts in the past three years and you should expect to gross between $40,000 and $50,000 per appeal. In your annual programme, you are looking to get an average of more than 1 gift per donor per year and if possible approach 2 gifts per general donor per year.

You will look to recruit some of your general donors to regular giving, but you will also see which amongst your regular donors are also appeal responsive. Many regular givers miss the information and passion that they were inspired by in the direct mail or email appeal programmes. Equally appeals income from regular donors is an easy upgrade to their annual gift.

Most organisations running direct mail programmes know these numbers. For organisations that have a database and don’t use it for appeal income, this may help you evaluate whether to embark on a donor-driven programme in the first place.

What many organisations will not know is that if you plan it correctly and if you build the infrastructure you can achieve similar results from email at a significantly lower per-unit cost. For email campaigns, you will need to give it time. Allow for at least a year of steady growth but low returns until you start to see a programme blossom and mature.

But don’t imagine you can send an email with a personal salutation and a donation link and expect a great response. In an email appeal, every stage of the process needs to be personal. It can be and should be. The content or text, the subject line, the donation link, the landing page, the donation prompts, the payment methods, the greeting and call to action on the landing page, the post gift survey, all can and should be personal to the recipient. Take time to do all this and your email appeal programme will blossom into a wonderful and reliable source of income.

Direct Mail case study

We had one client here at Vega, who is typical of dozens of organisations I have dealt with it. Their Direct Mail programme was “dying”. Each year their database aged and they lost more donors to inactivity then they gained through acquisition. Each year the number of donors available to the mail programme declined. Their total database size was over 100,000 but their active base (any gift given with the last three years) was around 11,000 and declining. Now 11,000 active supporters represent a great database and many organisations would envy it. It should return a reliable income of an average 1.n gifts per donor per year at an average of somewhere between $35 and $50 average. If this was 1.2 gifts at $50 then the steady recurring gross income from this database is $660,000 at a cost of perhaps $1.50 per item mailed. This would be achieved by 4-6 appeals a year.

In fact, the DM programme was grossing an average of just $26,000 from each of three appeals and this gross income was declining. This gross would leave a nett of only $15,000 at a cost per item of $1.00. The annual gross income was, therefore, $78,000 and the nett was at most $45,000. This programme was in decline.

For testing, the client was limited to standard A/B split testing where half the database was asked for a certain lower amount range and the rest for a higher amount range.

The client migrated to Vega. During the migration of the data, all salutations were standardised to ensure that people were addressed correctly. This simple basic step can have a 2% impact on your response if it is done badly. All addresses were address cleaned and confirmed. An NZ Post SOA was issued of course.

But we then started to apply modern data management techniques to the data. We calculated an optimal amount to ask each donor based on their giving history. We screened donors for responses to certain types of appeals and improved our targeting. We increased the target audience by selecting higher value lapsed donors who had responded to similar appeals. We identified key donors using an 80/20 analysis which showed which donors have been giving us 80% of our donations over the last five years.

In other words, we started to reduce the grain and we got an immediate response. Direct Mail income rose from $26,000 to nearly $60,000 per appeal within one year.

The first appeal from the new platform returned a 12% response at an average of $41 for a gross income of $54,120. By the third appeal, the gross income was just on $60,000 and the average donation had increased to $44. It continues to increase.

But wait there is more. What about email boosts or email appeals?

Email Appeals & Email Boosts

If done correctly an email boost will add a possible 3%+ response to your original appeal response rate, at a very low cost. But good email appeals as a standalone or as a boost require the planning and technical infrastructure I described above.

I said that the content or text, the subject line, the donation link, the landing page, the donation prompts, the payment methods, the greeting and call to action on the landing page, the post gift survey, all can and should be personal to the recipient. If they are then in our experience you will start to boost your responses remarkably.

There are so many factors in making email appeals or boost successful that I can’t even begin to canvass them all here. But if you take the time to understand and use this medium, it will return responses that are every bit as impressive as direct mail at its peak.

This is an email boost sent to just 2093 people for whom emails were available.

		Week	Week	Week	Week	Week	Week	Campaign
Metric Type		2	3	4	5	6	7+	Total
Total Outbound Communications	2093
Items Opened	586
No of Donations	63	28	22	10	6	3	5	137
Total Donations	$14,344	$2,135	$1,353	$795	$450	$443	$170	$19,690
Average Donation	$228	$76	$62	$80	$75	$148	$34	$144
Average Per Item Sent
								$9.40

• 2,093 people emailed
• $19,690.70 raised from a 6.5% response rate
• A staggering $9.40 per item mailed
• But a whopping $35 per item opened
• 25 new monthly givers recruited at $15 per month average

Outline

It always startles me when people say “we tried appeals but they didn’t work for us”. But I also hear people saying we tried Trust grants seeking and that didn’t work. We tried High Donor programmes and so on. When you look at what was tried, fundamental errors were often made or a valuable programme was dropped before it could possibly mature.

If we think that one or even a series of rejections from a Trust results in dropping that programme, then that is the worst of all outcomes. No learning was done, the programme and its managers did not get better and the programme was not allowed to mature.

It is the same with appeals from the database by mail or email. Like all fundraising, you need to do the groundwork or build a technology infrastructure if necessary. Include these strategies in your fundraising mix and over time they will return a reliable income that is untied and therefore flexible.

So, in conclusion, I would encourage all charities and community organisations to;

1. Embrace the cloud and cloud-based platforms like Office 365, Vega and XERO and significantly reduce your costs
2. Embrace Marketing Automation and reduce staff time and effort while increasing your responsiveness to your donors
3. Give your appeals programme a new lease of life and your organisation a great source of funds by building a technology-based personalised appeals programme by mail or email.

If you ask your database in the right way, at the right time, for the right amount then that database will time and again return a generous income for you. You can turn your database into the most valuable asset your organisation has. It will be utterly worthwhile.