August 2009

The world’s best fundraising conference

Since 1981, the London-based Resource Alliance has been presenting the International Fundraising Congress every year at a comfortable conference center near Amsterdam in The Netherlands. The event, now attracting close to 1,000 people, seems to get better with every passing year. If you’re jaded by the usual run of fundraising conferences where you don’t seem to learn anything new, this is the event for you. You’ll find senior fundraisers from more than 50 countries at the IFC—an unparalleled opportunity to network and to pick up ideas and insights you’ll never hear about anywhere else. Check it out.

1. Is direct mail fundraising really headed for the exit?

By Chuck Pruitt

Under the headline, “Is Direct Mail Really Headed for the Exit?” Frogloop—a blog about nonprofit online marketing—breathlessly reports on a startling new study just published by the “research” firm, Borrell Associates. The folks at Borrell allege that money spent annually on direct mail will decline by 40% in the next five years. In grave tones, Borrell concludes: “Direct mail has begun spiraling into what we believe is a precipitous decline from which it will never fully recover.”

For as long as I have been involved in the direct response fundraising world—now over two decades—the prediction of the impending demise of direct mail has been a recurring theme. With the advent of the Internet, this has taken on a new dimension. For now, according to the “direct mail is dying” chorus, online fundraising will step in and provide the mechanism to raise all the dollars direct mail used to produce and capture a growing share of a younger demographic waiting to give.

What has always mystified me about some (but far from all) of the online marketing community is their insistence that for online fundraising to rise, direct mail fundraising must fall. And what angers me about “studies” such as those offered by Borrell Associates and given legitimacy by blogs like Frogloop is they camouflage their underlying biases. Borrell Associates is, according to their Web site, “a media research, consulting and project firm specializing in Internet advertising.” It should come as no surprise that such a firm would be predicting that the demise of direct mail is occurring while, according to Borrell, “email advertising continues to surge and is now the number one online ad category.” Quite frankly, the Borrell study has about as much credibility to me as the tobacco industry’s studies on the health effects of smoking in the 1960s and 70s.

This gets me to my second point. The late Senator Daniel Patrick Moynihan was fond of saying, “You are entitled to your opinion. You are not entitled to your facts.” So let’s try to elevate the “direct mail is dying and will be replaced by email marketing” debate by looking at a few salient facts.

Fact: The direct mail donor universe is alive and well and actually shows little signs of rapidly diminishing—at least in the next decade.

Evidence: In 1995, my firm, A.B. Data Group , joined with The Mellman Group to conduct a national survey of 800 progressive direct mail donors to analyze whether direct mail was endangered. We found that progressive donors were aging rapidly—so rapidly they would soon disappear. Their average age was 65 years and actuarial analysis revealed that 40% would expire within ten years.

In 2007, we conducted a new survey—this time sampling 600 direct mail donors and 600 online donors. Our 2007 survey—12 years after the first one—discovered that a new generation of contributors has been found via traditional direct mail fundraising. Direct mail responsiveness, we learned, is a life cycle, not a generational, phenomenon. Donors’ responsiveness to direct mail solicitations appears to be a function of their stage in life, rather than characteristics of a particular generation that has largely passed. Sixty-eight percent of today’s direct mail donors are over 60 and their average age is 68 years old—nearly mirroring the donor population we found in 1995. In addition, in recent years, a whole new cadre of online donors has emerged, adding a new pool of potential contributors to candidates and causes.

Our 2007 survey also found that direct mail and online donors live in very distinct fundraising worlds. Thirty-three percent of online donors also give through the mail, but 67% do not. Similarly, 22% of direct mail donors give online, but 78% will not contribute through this channel. The conclusion is obvious to anyone except those who myopically seek to wish away one or the other type of fundraising communication: You will not get both kinds of donors and you will, therefore, not maximize your fundraising potential unless you do both online and direct mail marketing.

Fact: The growth of online fundraising is happening but it’s happening much more slowly than many predicted.

Evidence: According to The Chronicle of Philanthropy’s survey, online fundraising accounts for about 2% of the $306 billion raised by nonprofit organizations. While there are not equivalent numbers available for funds raised via direct mail, all agree that the direct mail channel accounts for at least 15 times and perhaps as much as 25 times as much as the online channel.

According to The Chronicle, online gifts grew by a median of 28% from 2007 to 2008—a slower growth rate than the previous two years. Not all organizations are growing at the same pace. For 101 groups in the survey, online giving accounted for less than 1% of donations.

In short, the evidence shows that we are still a long way from online fundraising supplanting other forms of fundraising for nonprofit organizations. Progress is being made and growth will continue—but remember that a 20% or 30% increase on a base total of 2% still means that there is much work to be done. Fortunately, there are significant opportunities out there for smart fundraisers to exploit in the years ahead.

Fact: There are enormous multi-channel marketing opportunities out there for smart people with open minds.

Evidence: There has been much discussion in recent years on the promise of multi-channel marketing. In A.B. Data’s work with the Obama for America campaign, we saw firsthand that promise become reality. Beyond the slow but steady growth in online fundraising, there are two reasons why it’s critical for nonprofit organizations to develop a new emphasis on multi-channel marketing.

First, multi-channel contributors have dramatically higher long-term value than single-channel donors. Our analysis has shown that:

• Multi-channel donors contribute over 2.5 times as much as their single-channel counterparts;

• Multi-channel donors give almost 2.75 times more gifts than single-channel contributors; and

• Multi-channel donors, who first give through direct mail, end up giving almost 3.15 times more than single-channel, direct mail-only donors.

Second, recent studies have underscored the value of using multiple channels—and especially direct mail—to increase donor retention. The 2008 donorCentrics Internet Giving Benchmark Analysis (PDF, 121 KB) found that online-generated donors have lower retention rates and value over time. However, more and more organizations were finding success moving segments of the online donors offline and making them multi-channel donors. A median of 33% of the donors acquired online in 2009 renewed their support offline in 2008. In addition, 37% of donors acquired online in 2006 gave again in both 2007 and 2008, but never gave online again. Jennifer Tierney, from Doctors Without Borders, was asked to comment on the donorCentrics study and said,

“People are asking us all the time why we don’t reduce mailing costs and save paper with online fundraising but the simple fact is that people come online to give once and don’t repeat.”

We’ve found that building successful multi-channel marketing programs to move online donors offline and expand direct mail-generated donors to online contributors requires a different creative and strategic approach. The Internet is changing the direct mail experience. And marketing success in the future will recognize the changing sources of news and information and, if the goal is to convert an online donor to a multi-channel direct mail donor, you cannot rely on tired or traditional direct mail techniques.

However, the effort to discourage the use of direct mail fundraising could lead to a refusal to take advantage of the extraordinary multi-channel marketing opportunities that can occur if online and direct mail fundraisers work together to craft integrated, synergistic multi-channel programs.

In our 21-month long work with now President Barack Obama’s campaign, we saw and participated in an unparalleled success story of the appeal of multi-channel marketing. There are more success stories out there to create, but it will require a clear-headed, honest appreciation of the strengths and limitations of both online and direct mail fundraising.

Let me conclude by returning to Frogloop and the Borrell Associates’ study with which I began this article. My industry colleague, Mal Warwick, was asked by The Chronicle of Philanthropy to comment on the “direct mail is headed for the exit” conclusion. Mal’s response: “Hogwash.” Now there is an opinion supported by the facts. I couldn’t agree more.

Chuck Pruitt is Co-Managing Director of the A.B. Data Group, 600 A B Data Drive, Milwaukee WI 53217, phone (414) 961-6400, fax (414) 961-6410, Web www.abdata.com, email chuck.pruitt@abdata.com.

2. Where's Mal?

September 2, 2009 – Phoenix AZ
AFP Greater Arizona Chapter
Luncheon Address: Fundraising When Money Is Tight
Workshop: Fundraising in a Global Context
Workshop: Technology and the Future of Direct Response
Site: Sheraton Hotel

September 7-9, 2009 – San Francisco CA
Momentum Leadership Conference 2009
Site: W Hotel San Francisco

September 22, 2009 – San Diego CA
Fundraising Outside the Box Conference
Luncheon Address: Fundraising When Money Is Tight
Workshop: Fundraising When Money Is Tight
Site: Town & Country Hotel

October 2, 2009 – Los Angeles CA
ArtsReach National Arts Marketing & Fundraising Conference
Keynote: The New Frontier in Fundraising and Marketing
Workshop: The copywriter's clinic: Crafting brilliant appeals for breakthrough fundraising results
Site: Biltmore Hotel

October 16, 2009 – Concord NH
CONFR: Council on Fundraising
Keynote

October 22-25, 2009 – La Jolla CA
Social Venture Network Fall Conference
Site: Estancia La Jolla

November 11-12, 2009 – Parsippany NJ
New Jersey AFP Conference on Philanthropy
Featured speaker
Site: Hilton Parsippany

February 26-27, 2010 – Albuquerque NM
Association of Lutheran Development Executives National Conference
Master Class: The Copy Clinic for Advanced Practitioners: Producing Brilliant Direct Mail Fundraising Appeals for Breakthrough Fundraising Results
Workshop: Crafting a Message to Win More Support for Your Cause
Workshop
Site: Hyatt Regency

May 11-13, 2010 – Online
Second International Fundraising Congress Online

3. When not asking makes sense

By Deborah Block and Paul Karps

In last month’s issue of this newsletter, we found Jeff Brooks’ article “When not to ask for funds” particularly interesting. Basically, he said, “For the most part, not asking is the quick route to not receiving.” That is, except for three situations: “When a donor specifically requests that you do not ask” . . . “When it’s not worth your money to ask” . . . and “When you don’t need any revenue.”

However, our experience indicates otherwise—most specifically when it comes to marketing a planned gift or, to be more precise, a bequest.

Of late, we’ve found ourselves writing a number of packages—for various clients—that are, by design, strictly cultivational. The overall strategy is to build a solid foundation for future planned giving mailings that will then directly ask the recipient to include the organization in her will.

But for the time being, at least, the Marketing Concept directs us not to ask for a gift. Though, with apologies to Jeff Brooks, the clear presumption is that by initially not asking for a gift, the likelihood of a future bequest undoubtedly increases.

With all this in mind, you might consider using someone who herself has become a legacy donor as the signer of your bequest cultivation letter.

Having a donor who has already made a bequest to your nonprofit sign a letter on your behalf is a great cultivation tool. After all, while this person has a definite relationship with your organization, she wouldn’t necessarily be in a position to make a direct Ask for a bequest.

If you decide to go this route, here are some tips to guide you:

1. Make a connection with the reader

This letter should be used to tell the signer’s personal story about why your group is so important to her and why she decided to include it in her will.

The goal is to create the impression that, in many important ways, this signer is just like the reader of the letter. So her experience with making a legacy gift can translate directly to the recipient’s perspective. (By the way, this is a key way you can implicitly challenge the misconception that bequests are only for the super-wealthy.)

In one situation, for example, we knew the target audience of the mailing consisted of a number of monthly sustainers. So we made a point of discussing how the signer was a monthly donor. And while those donations gave her the chance to contribute on a regular, ongoing basis, she wanted to do even more to make a longer-term impact.

2. Be authentic

Since this cultivation letter is coming from someone outside the nonprofit, it’s fine to use language you might not normally use in a regular direct mail solicitation. The objective, as always, is to make the copy sound authentic to the letter’s signer. That means if it’s coming from a 92-year-old widow, you probably want to go out of your way to use more “old-fashioned” constructions and phraseology.

What’s more, this may be one of the few times when a P.S. should not be used.

3. Use the lingo

Because the purpose of this cultivation piece is to lay the groundwork for future mailings, you want to use this as an opportunity to introduce the relevant concepts and some of the lingo.

So liberally sprinkle in references to “legacy”—both in terms of making a “legacy gift” and upholding the legacy of the organization’s mission. Also include language about having an impact “long past my own lifetime” or making a “long-term difference to so many.”

4. Ask people to raise their hands

In some cases, you might want to be just a hair more aggressive . . . by enclosing a reply device. But this is still a soft sell, so all you’re really asking people to do is raise their hands if this is something they might be interested in. Including a simple check-off box to receive more information might suffice.

Given this scenario, you may decide to add a cover letter from a planned giving officer that refers to the third-party testimonial letter. This letter should be short and sweet, since its purpose is primarily to introduce the other signer.

Copywriters Deborah Block and Paul Karps are partners in BK Kreative, 1010 Varsity Court, Mountain View CA 94040, phone (650) 962-9562, email bkkreative@aol.com.

4. Ask Mal

Since 1994, when the Mal Warwick Associates Web site went online, Editor Mal Warwick has answered fundraising questions posed by visitors to the site. Hundreds of those Q&As are available here. Here’s one Mal answered not long ago.

Question: How can we start our fundraising through the Internet? What are the required steps for hitting an unknown person to associate with our organization?

Mal answers: There are two fundamental elements of an online fundraising program: a Web site that reflects the ongoing work of your organization and is updated at least once every two weeks and a list of email addresses of supporters. It’s possible to obtain outside lists of email addresses, but I don't recommend it. Most people resent receiving unsolicited communications, even from worthy organizations, and they tend to delete them before reading.

If you’re really starting from scratch, I suggest that you begin with a basic Web site and then begin offering a free email newsletter to anyone who will supply you with an email address. You can use events, direct mail, telemarketing, leaflets, print advertisements, and other means to make the offer. But then you have to deliver.

As part of delivering an email newsletter—on at least a monthly basis—you could occasionally insert an appeal for funds. But the emphasis needs to be on providing information that your subscribers want to receive.

That's the best I can do in a short email answer.

5. Bucking the trend: opportunities for success in tough times

By Peter Schoewe

Two forces are dominating fundraising in today’s climate—reality and fear. For many organizations, reality is dictating that fundraising efforts must be cut or scaled back. Long-cherished best practices for long-term revenue growth and donor cultivation are being sidelined by the need for as much net revenue as possible—often to make up for shortfalls elsewhere.

And, fear, too, is sometimes playing a part. Fear that what used to work won’t work anymore. And fear that the long-term investment in donors might be as reliable as the balance of our 401(k)s.

However, if your reality is not perilous and your fear is not overwhelming, opportunities exist in the current climate, in many cases opportunities created by reality or the fear of those around you.

Acquiring new donors—now

The first and most prominent opportunity is in new-donor acquisition. If you’re like most folks, you’ve probably cut back on acquisition in order to preserve net revenue. You may also have had the feeling, backed up by weaker returns, that potential donors aren’t able to expand the list of causes they support right now.

But, if you have money to invest that could be used to acquire new donors, now may be the time to take the leap. Here’s why:

• There’s much less competition right now. In some cases, I’ve seen response rates near or above levels they reached prior to the economic crisis.

• You won’t have any trouble finding lists for direct mail acquisition. Most list owners are desperate to increase their revenue, too.

• With a simple projection of future net revenue two or three years down the road, you should be able to justify most acquisition investments. Unless reality absolutely dictates it, don’t kill the future of your program for net revenue today.

There are a couple caveats, though. If you were experiencing weak returns before you stopped acquisition—or if you haven’t done any acquisition in a while—you should go slowly and be sure you can predict results before you roll out with a large effort. You should know exactly how much you can afford to invest in a new donor and be able to predict with as much certainty as possible that you won’t exceed that amount. And, second, make sure to throw away any roadblocks that used to get in the way of creating your best fundraising offer. (In other words, now is the time to tell your boss to stop mangling your copy—and to throw your brand guidelines out the window.)

Reactivating former donors

The second opportunity is reactivation of former donors. If you cannot afford to invest in acquiring new donors, you can probably reactivate your lapsed donors at or above break-even. Again, many of the donors you haven’t heard from in a while are also experiencing quieter mailboxes . . . and phones that don’t ring as often. You can partially make up for a lack of new donors on your file by a lower cost reactivation program. Also, if you use the phone to get in touch with your former donors, you can manage the costs very tightly—and stop the program if returns are not going to cover your expenses.

Cultivating your donors

And, finally, don’t give up on cultivating your donors. Even if they’ve stopped giving to you or are not able to give as much, they haven’t lessened in their passion for your cause. If you show them in some way that you appreciate their dedication, even in these tough times, you’ll probably be making friends for life.

If you can’t afford expensive cultivation efforts, it’s a good idea to take the time to get in touch with as many of your donors as possible. Even a quick voice message or an email—something that lets them know you appreciate their friendship and hope they’re doing well—will make them more likely to remember you and eventually return to their former level of support.

Of course, I recognize the reality right now for many organizations makes some of the suggestions above impractical. The important thing is to evaluate each decision you make during these difficult times—and to be sure that fear isn’t preventing you from inspiring as many donors as possible to help you with their financial support.

Peter Schoewe is Senior Account Executive, Mal Warwick Associates, 2550 Ninth Street, Suite 103, Berkeley CA 94710-2516, phone (510) 843-8888, fax (510) 843-0142, Web www.malwarwick.com, email peter@malwarwick.com

6. Online fundraising on the rise

By Jeff Brooks

The online revolution is coming to fundraising. But it’s not here. That's what you can learn from a new study from Target Analytics: donorCentrics Internet Giving Benchmarking Analysis (PDF, 121 KB).

Some of the findings:

• Online giving continues to grow, even in the absence of major disasters.

• Even with this growth, online giving is still dwarfed by direct mail giving.

• Online donors have slightly lower retention rates overall than traditional donors.

• Higher acquisition giving levels and higher revenue per donor in subsequent years may mask issues with cultivation and retention of online donors.

• Online giving is not a strong renewal channel. Large numbers of online donors migrate away from online giving and to other channels, primarily direct mail.

• Donors to direct mail rarely give online.

• When mail donors do give online, they tend to give higher average gifts. By contrast, online donors downgrade when they switch to offline, primarily direct mail giving.

• Having an email address on file makes a positive difference in the giving behavior of offline donors.

There's also a similar study from Convio that’s well worth reading.

Courtesy of Jeff Brooks at Donor Power Blog.

7. 14 trends in foundation giving (Part 1)

By Rob Blizard

“It is often said that if you have seen one foundation, you have seen one foundation. In our work that has certainly been the case,” states Penny Friedman, Vice President and Chief Operating Officer for Cincinnati-based InterAct for Change, which provides staff support for family and independent foundations. Such a comment, unfortunately, suggests the difficulty of drawing general conclusions about foundation giving. Yet a number of clear trends in the foundation world emerge from a series of interviews with leading practitioners in the field.

The question I posed to them was this: “How will foundation fundraising evolve whether times are good or bad?”

1. Drive for simplicity

A number of nonprofits, especially smaller ones with less money to hire high-priced fundraisers, have for years decried the hoops through which foundations have made them jump to apply for grants and provide update reports. In response, there seems to be an effort to make this process less of a headache.

Help may be coming just in time for charities, according to Pablo Eisenberg, Senior Fellow at the Georgetown University Public Policy Institute, and a 40-year veteran of nonprofit management.

“Foundations are beginning to simplify their proposal requirements, thereby making it easier for small groups to compete,” he says.

2. Continuing reliance on personal relationships

Relationships between nonprofits’ board and staff with their counterparts at foundations is, without question, the sine qua non for receiving large donations. And this constant appears to be one trend that will likely continue—and possibly intensify.

Despite less complicated requirements for the submission of written materials, such advancements may only take a charity so far. As longtime fundraiser Eisenberg illustrates, “Proposals are only a small part of the grant-making process. It’s who you know and what clout you have that is key.”

At The College of New Jersey—with 40% of its private funds coming from foundations—according to Keith Dewey, Ph.D., Director of Corporate, Foundation, and Government Support, relationship-building efforts include “keeping our foundation leaders informed about programs or research of interest to them, by keeping them on appropriate mailing lists and reaching out to them via email when appropriate; inviting foundation program officers to specific on-campus events; arranging on-campus site visits of particular programs or projects they’re currently supporting; getting entry into new foundations through friends and networks of active community members (maybe even . . . alumni) who help us reach out to other foundation program officers; and visiting foundation offices whenever possible to develop and discuss, wherever possible, mutual, substantive areas of interest.”

3. Little support for operating funds

“Foundations generally excel in partnering with nonprofits to create new programs and to provide support for capital. Although most nonprofits are looking for unrestricted operating support, unfortunately most foundations do not provide such support,” says InterAct for Change’s Friedman. And this state of affairs is expected to continue with little change.

“Today, less than 20% of foundation money goes to general operating support and a substantial number of foundations still do not give general operating support,” says Eisenberg, who discerns a tiny blip of hope on the radar screen, however.

“An increasing number of foundations are now willing to give general operating support,” he proclaims.

Friedman concurs. “A small number of foundations are shifting focus to provide ongoing operating support for initiatives and organizations that work in the areas they support,” she says, “yet most foundations still view their grant dollars as providing organizations with ‘venture’ funds, funds for special projects, or capital support.”

4. Focus on outcomes and results

In the world of philanthropy, we often hear that gone are the days when donors wrote checks and assumed the charity would do good with the funds. Now, more than ever before, the donor ethos encompasses following up on charities, researching their effectiveness, and making sure they’re doing what they say they’re doing with the money they receive.

The trend among foundation leaders is to enhance their mechanisms for tracking what happens as consequences of their gifts. They want to make an impact, they want to see it, and they want to be able to share it with others.

Bill Warren, Vice President of Foundation Relations and Grants for the Washington DC-based National Geographic Society, asserts: “Foundations remain in the role of fiscal sponsor, but nevertheless have begun to take a more hands-on approach with their grantees, preferring to be well integrated into the work of their grantees rather than sitting on the sidelines awaiting an annual report of activities.”

As we travel through the next decade, Dewey theorizes, “specific, concrete, [and] measurable . . . outcomes will become the focus both for applicants and funders.” Which seems perfectly appropriate, he believes, since foundations are tasked with being mission- and program-centric.

5. Process changes due to technology

Just as high-tech, especially Internet access, has re-fashioned our lives in so many ways, it also has permanently altered the dance between grant-seekers and grant-makers.

Such changes include required e-applications, online databases and research tools, proposals enhanced by user-friendly desktop publishing software, and electronic cultivation and stewardship of foundation leaders.

“Technology is enabling us to reach more foundations more quickly—whether through tech-supported letters of inquiry or letters of intent that, with enhanced software applications, can be produced more quickly,” says The College of New Jersey’s Dewey.

Friedman sees a different sort of trend sparked by technological growth: “Because of the rise of technology, online giving platforms, and increased travel globally, giving is increasing internationally at a quick pace and our point of view is that will continue.”

6. Reduced giving from corporate sources

One more trend sure to affect foundation giving in the next several years, and already evident now, is the increasing pressure on foundations to give more as other giving sources in the fundraising mix are less able to give.

Cynthia Bailie, Director of The Foundation Center’s Cleveland office and its special online initiatives, notes the smaller corporate donations received in her region—reduced partly due to difficult times for companies still in the area, but also because of previously generous companies that have had to fold their tents forever. The vacuum created by declining corporate donations, she explains, means an increased necessity to ask for even more assistance from foundations in the community.

Meanwhile, adding to the pressure on foundation grants as a portion of the fundraising mix is another trend observed by some Ohio fundraisers, according to Bailie. Her informal poll of AFP chapter members in Cleveland revealed that “individual donors who also have foundations seem to be shifting away from making direct charitable contributions to making their contributions solely through their foundations.”

Eisenberg sees a parallel scenario on a national level: “Nonprofits will increase their demands on foundation funding, especially if government resources continue to dry up. As the number of nonprofits increases, competition for foundation resources will grow much more heated.”

Stay tuned for Part 2 in next month’s issue.

Rob Blizard is Director, Gift Planning at George Washington’s Mount Vernon, P.O. Box 110, Mount Vernon VA 22121, phone (703) 799-8652, email roberteblizard@yahoo.com.

8. Don’t hold your breath!

According to the latest edition of Giving USA, as reported in The Chronicle of Philanthropy, the current recession is strikingly similar to the downturn of the mid-1970s. Key economic indicators were used to compare today’s climate with five previous recessions, as well as the Great Depression. The bottom line in terms of charitable giving? “If the comparisons hold up,” The Chronicle says, “giving won’t recover to 2007 levels until 2012 at best, assuming the recession ends this year.”

Something to look forward to, no doubt!