When you work with as many charities or non-profits as I am privileged to do, you see a broad disparity between the organisations that “get it” and those that still struggle. By “get it” I mean grasp the science of fundraising, the disciplines of this profession. Understanding and implementing the science is vital, to which you add your passion and message. You will then deliver a great outcome for your organisation and your community.
When I see some organisations achieve 80% + engagement and some as little as 3% it is worth pausing to consider why this happening. In this case, “Engagement” is measured by either the number of outbound “calls to action” compared to the number of actions taken, or the number of people on your database compared to the number who have ever given you a donation. Other proxies for these metrics might be consistent open rates for emails or click-through rates once opened.
"SENDING OUT MILLIONS OF EMAILS IS NOT ENGAGEMENT, GENERATING THOUSANDS OF ACTIONS OR RESPONSES IS"
By the way, the 3% engagement organisation generates far more outbound calls to action than the average 80%+ organisations. Outbound volumes indicate nothing. It is worth noting that international research shows that supporters who give you money early in the relationship, turn into better activists across all areas of the organisation. A donation is a reliable indicator of engagement, in the way a “like” can never be. However, people who take some action like sharing your posts on social media are significantly more like to become donors than those who simply supplied their email address. The engagement journey starts with a way of contacting someone, getting them to commit to an action and then deepening that action by monetising it.
If I look at the lifetime value of a name or if I seek to do a valuation of your database, I get another way of looking at metrics that guide my investment or planning decisions.
A general donor should give you an average of between $50 and $100 a year over a perhaps 10-year + lifetime of support. Regular givers that stay for 5 or more years give you on average perhaps $250 a year. Then if you factor in bequests and other special gifts, one-off large gifts and event-based gifts and you can work out the lifetime value of your donors.
If you look at your database, you have an asset that returns income and if untouched will return a declining income for about 10 years. Thus, your database degrades by a measurable amount every year as people stop supporting. The rule of thumb is 10%. The database will be depleted in 10 years if no new names are added to it. If I have 5,000 active and current names in my database in a mix of programmes, including events, regular giving, appeal-based giving, bequests and large gifts, then I would look to have an income from that database asset of between $500,000 and $1 Million per annum. If I valued my database as you would a building returning rent, then 8 x Annual Income is my value and my database is valued at between $4 Million and $8 Million. A charity database returning $10 Million in annual income is worth at least $80 Million. This should be a guide to how much you are willing to invest in maintaining it and servicing it.
I want now to cover several key challenges that charities and for-purpose organisations are facing today. These challenges reflect a response to a rapidly changing environment that organisations must operate and succeed in. They also reflect new opportunities to be better, to reduce costs and to get technology to help us. Most importantly failure to face these transitions can make us into the 3% organisation and not the 80%+.
Some key transitions we all face are;
- The migration from technologies bound to servers and desktops, to what we will call the API ecosystem (I’ll explain this), that is cloud-based, low cost and intelligent.
- The engagement challenge facing organisations as our supporter’s psychology changes. The way the so-called “responsible generation” who grew up during WWII, the Baby Boomers who grew up in the sixties, Gen-X, Millennials and Gen-Z respond to charity messages is very different.
- The communications challenge created by the explosion of mobile communications and social media.
- The gains to be harvested from centralizing and rationalising the way we do things.
Let’s talk about technology first
The emergence of the API ecosystem means that the web has allowed technology companies to create an intercommunicating range of functional systems that can share data with each other. These provide a charity with low cost and highly functional cloud-based systems usually available for small subscription prices.
At Vega, we have simplified this by putting an easy to use user-interface over a variety of functions that normally need multiple suppliers.
Functions like Marketing automation (rules and artificial intelligence-based communications), Regular giving, Email or other communications, Events and CRM are presented in Vega with a consistent user interface. Alternatively, you can also assemble these functions for yourself from the API ecosystem and link them to your core CRM.
This API ecosystem and cloud-based approach promise wonderful cost reductions. Typical reduction in costs for users of large fundraising platforms can be in the region of $100,000 or more each year. At average sector earnings, this represents two FTE equivalents. But cost savings also come from marketing automation, from automating donor retention and upgrade programmes and so much more. This means we can scale our programmes while reducing costs. Rod Drury at XERO showed the way. He built a global company by completely disrupting the traditional server and desktop model of delivering accounting systems. We at Vega are doing the same in Fundraising, Engagement and Communications for charities. This is exciting and challenging. But whether with Vega or some other platform, the opportunity is real.
Every organisation that embraces the move from desktop-based software, to modern, intelligent and cloud-based systems stands to benefit. It is time to embrace the cloud for all your core systems and to seek to integrate all your systems so that they share your data seamlessly.
Now let’s look at the people who support charities and how they have changed. The Centre for Disease Control (CDC) is based in Atlanta, Georgia. One of CDCs remits is communications. Looking at their guidelines for communicating to different age cohorts reveal that the CDC divide age groups as;
- the responsible generation value discipline, self-denial, and hard work. They demonstrate obedience to authority, commitment, responsibility, and financial/social conformity. They generally prefer face-to-face or written communication.
- The Baby Boomers are “rule-breakers. Individuality over conformity is a consistent boomer pattern. Baby boomers’ first impressions are usually emotionally based, more durable, and more difficult to reverse than those of younger generations. Baby boomers like to tell their stories, and the Internet has facilitated their "get it all out there and share it with the world" tendencies”
Gen X are defined by a desire for personal power & personal fulfilment. They see themselves as conscious actors in their own life. They are sceptical and value transparency. They want a feeling of involvement an answer to “what’s in it for me?”. They are active users of mobile technologies and social media is their world. They are the first generation that will not achieve the same financial security as their parents.
Millennial’s and Gen-Z are developments again on the pathway from a close and homogenous society to a society of self-realising individuals.
How we communicate to and how we respond to these different donor groups is vital in how we transition to the future and keep our messages relevant.
We have ceased to read in-depth and in fact “skim reading is the new normal"
Maryanne Wolf is the Director of the Center for Dyslexia, Diverse Learners, and Social Justice in the Graduate School of Education and Information Studies at UCLA. She says that we have ceased to read in-depth and in fact “skim reading is the new normal”. This reduces comprehension and more importantly empathy. What does this mean for charity communications? We as charities are seeking to elicit a visceral reaction and establish a feeling of empathy in our readers. If our readers engage with perhaps one sentence in our communications, how can we build a case for a donation?
This “skim reading” is most pronounced in the young, in millennials and gen-z, but is apparent across all active users of technology-based media. Our technology is changing us, and we need to take account of that.
If income is the leading indicator of willingness to give, then we know that Gen-x, baby boomers and the responsible generation make up most of our financial supporters. Millennials are emerging as important and gen-z will also. We need to understand the motivations and psychology of all cohorts. The emerging cohorts indicate they are as value-driven as their parents and grandparents. Engaging people that read the first sentence and then reject or accept your message based on that, presents a whole new challenge. Intelligent technology that gets you close to your supporter's world-view and automates some of your supporter care, becomes essential.
Our third area of transition is the stampede to mobile communications and the use of social media in all its forms. Supporter recruitment through social media and using phones is now becoming commonplace. The role of the website is changing. It still plays an important role in gathering names and prospects. If your web site does not present well on a phone or if you have no social media presence, you are likely to face an ageing community of support and all that will mean for your organisation’s future.
If our donors are engaging with us on their phones; if our donors are skim reading our messages; if our donors are getting their news and insights from Facebook; if our donors see themselves as powerful actors and publishers; then how do we engage with them and empower them to achieve their ambitions
by supporting us? We know the opportunity presented by our supporters promoting us to their networks. How do we engage them further to give? We do it through engaging surveys, real dialogues driven by artificial intelligence and by crafting our communications to respond directly to individual donor’s ambitions. We become donor-centric. We recognise that the responsible generation gave because they saw themselves as part of a community, that baby boomers and all who follow them want more for them; more feedback, transparency and proof of impact. Following cohorts to the responsible generation see themselves as individuals.
Finally, many regionally represented organisations are finding that it is both desirable and beneficial to centralise key services. You can have both the benefits of centralised fundraising, ICT, financial and management structure while retaining regional fundraising and service delivery. This significantly reduces costs and with good technology can increase engagement and local donor participation. Another example of this trend is represented by small organisations that pool their resources to have a true “shared services” model for finances and fundraising while retaining their operational independence.
All these moves represent opportunities to reduce overhead costs, sometimes significantly. You don’t have to sacrifice effectiveness for efficiency. You can achieve both, better effectiveness, greater efficiency, reduced costs and increased income. You achieve this if you harness cloud-based intelligent systems, undertake the necessary internal changes to harness the opportunity and truly migrate your organisation to the 21st century. We all can do it. The return on investment is measurable, significant and worthwhile.
Tony is the co-author of "Paradise Saved" the story of the New Zealand Conservation Sector. Published by Random House NZ in August 2014, and the founder of vega works limited.
He has spent his life working in the non-profit sector in New Zealand and overseas. In a long career, Tony has worked as technologist, consultant and fundraise in a diverse range of New Zealand and overseas based organisations.
Tony's first successful fundraising and political campaign was opposing the construction of a Nuclear Power Plant in southern Ireland in 1971. Today, Tony is still a practising fundraiser on behalf of vega clients.