June 2008
1. Extra!: Use your heart and head when giving
By Perla Ni
2. Which is it?
3. Answerman: Measuring the health of your donorfile (Part 1)
By Peter Schoewe
4. Worthwhile!
5. Best Practices: Destination marketing!
By Tom Gaffny
6. Ask Mal
7. HandsOn: Make your Web site a big hit
By Lance Trebesch and Taylor Robinson
8. Where's Mal
9. Wealthy donors online?
By Jeff Brooks
10. Bridge Conference
11. What's Working: Following up the match
12. Waning?
1. Use your heart and head when giving
By Perla Ni
There’s a trend in philanthropy to treat the act of giving as an “investment decision.” This is partly because nonprofit management is taught increasingly in business schools, and partly because more wealthy donors with a business background are becoming involved.
Donors are younger, more active, and may have made their money in finance. They believe, as I did until a couple of years ago, that there is a holy grail of metrics, and if we just worked harder to find it, we could measure all nonprofits, lay them side by side, and figure out which ones were more effective in doing good in the world.
What gets lost in all of this focus on evaluation and numbers is the grace and joy of philanthropy. Philanthropy inspires. It tells stories. It reconnects us with others and reminds us of our shared humanity.
Two years ago, I visited a local homeless shelter located between the train tracks and the bus depot. It provided homeless people with free breakfast, a place to hang out, and referrals.
I asked the Director, a Unitarian minister, how he measured effectiveness. I had expected him to say something about the number of people he had helped find jobs, or the number of breakfast sandwiches it handed out, etc. Instead, he replied simply: “Last year one of our [homeless] regulars died. We paid for his coffin and his burial. And 10 people, who he’d gotten to know here, showed up for his funeral.” He paused. “Does that answer your question?”
That sobering encounter made me think hard. The fact that the nonprofit provided a place where a homeless person made friends who cared enough to go to his funeral—something that would not fit into anyone’s investment metrics—speaks volumes about how this nonprofit made an impact on this person’s quality of life. The organization did something incredibly decent for this homeless person at his death. It pulled at my conscience and my heart.
I shouldn’t be so surprised by this story’s effect on me. After all, recent research on philanthropy points to the fact that it is a highly emotional and social behavior. The work of Deborah Small, a professor of marketing at Wharton business school, shows that presenting potential donors with metrics suppresses donations because it lowers empathy. It is empathy, her research says, that triggers giving.
This rings true intuitively—we’ve all pulled out our checkbooks at some point at the sight of the picture of the child in India with a cleft palate.
That’s not to say that effectiveness does not matter and we should look only to our hearts. It matters a great deal, but the human dimension is just as important. Many nonprofits are trying to make a difference in people’s lives. And that’s hard to do. People are not products. We are complicated—changing our attitudes, ideas, and behaviors can take years, and it’s difficult to isolate which single factor contributed to any specific result.
And so, when people ask, “how do I know whether this is a good nonprofit?”, I respond as follows: “Go and visit. See for yourself. Volunteer for a soup kitchen and sit down next to an ex-felon. Ask them about their lives. What got them into trouble? How are they coping out of jail? How is this soup kitchen helping?” You will be amazed by the stories. It’s eye-opening, vivid, and inspirational.
The other advantage of this firsthand approach is that you’ll see that the work of the nonprofits extends beyond tangible, immediate, or predictable results. Many such organizations—even those that provide direct services—also work to educate, change attitudes, and affect policy. These efforts towards systemic change—think about the various efforts by environmental nonprofits in the past 30 years—have a long pay-off timeline and only years later do we see the results of their efforts.
Philanthropy is all the more powerful because of these poignant stories. Let’s not rob such giving of its human pulse by regarding it only as an investment decision.
Bono, of the rock group U2, was inspired to become a philanthropist after traveling to Africa. “I saw it. I heard it. I felt it,” he said.
This is the gift of philanthropy. It will awaken you to the joys, sorrows, and, above all, the hopes of life and our world.
Perla Ni is founder and Chief Executive of GreatNonprofits.org, an organization that provides donors and volunteers with reviews and stories of nonprofits posted by nonprofit clients, volunteers, and donors. She’s also founder and former publisher of Stanford Social Innovation Review and a co-founder of Grassroots.com. Copyright © 2008 by The Financial Times Limited.
2. Which is it?
First, the good news. A survey by the Association of Fundraising Professionals (AFP) and reported by The NonProfit Times finds that over 65% of charities raised more funds in 2007 than in the previous year—while 24% raised less. Now for the bad: In 2006, 23% of respondents said their fundraising revenue rose by over half. But in 2007, a mere 9% of nonprofits had the same kind of increase. In fact, 41% of the organizations had increases between 1-19%.
According to Paulette V. Maehara, President and CEO of AFP, “The million-dollar question is, do these decreases represent a return to normalcy from the very strong year we saw in 2006, or the beginning of a much bigger slide in fundraising and giving?”
Come to think of it, this question is worth a lot more than a million dollars!
3. Measuring the health of your donorfile (Part 1)
By Peter Schoewe
The donors who support your cause have made thousands—or perhaps millions—of individual decisions to send a gift of a certain value at a certain time. The sheer quantity of these decisions and their diverse motivations make it impossible to base fundraising strategy on their full scope. In fact, to create a successful fundraising strategy, you need to be able to see beyond individual donors’ motivations—and be able to quantify the wider trends that are affecting your file’s health.
That may sound contrary to much of the advice you read about fundraising—in which you’re admonished to understand your donors and their motivations inside and out. But consider the following two examples, each of which, on the individual level, will result in the same outcome for your program’s performance:
1. Donor A decides to stop giving to your organization because her husband died.
2. Donor B decides to stop giving to your organization because she received a more compelling appeal from a similar organization.
In the first example, the donor’s decision will not affect your program’s results other than the loss of that individual’s support. In the second example, the donor’s decision may reflect a wider trend that could lead to a big decline in your revenue. By aggregating your data and making decisions based on total donorfile trends, rather than granular-level data, you can cut out a lot of the noise of individual decisions that have nothing to do with your organization or your fundraising strategy.
With that in mind, what are the standard measures of file health that you should monitor, and how do you calculate them? Here are five measures of Donorfile Health that you can use:
1. Active donors
I’ve seen active donors defined in many different ways. Some people feel that a donor who has given a gift within the past three years is an active donor, some say 24 months. But the most useful way to measure the number of active donors on your file is to count the number of individuals who have given gifts to you in the most recent 12-month period. Active donors can be counted on a calendar year or a rolling 12-month basis, but it’s most instructive to measure active donors by fiscal year. This allows you to gauge how your fiscal year fundraising plan has increased or decreased the number of donors offering you their support. You should also count active donors by their type of giving. The standard categories you can use are:
New donors: donors who gave their first gift ever in the current fiscal year.
Multi-year donors: donors who gave at least one gift in both the current fiscal year and the prior fiscal year. (You may also want to look at this category by years of consecutive giving, splitting out two-year, three-year, and four-plus-year consecutive donors.)
Reactivated donors: donors who are not new to your file and who did not give in the prior fiscal year, but who did give gifts in the current fiscal year.
2. Retention
Retention measures the percentage of donors who gave in a prior period who gave again in the current period. Again, this is most instructively measured using the 12 months of a fiscal year. It can be calculated by taking the pool of active donors in the prior fiscal year and counting how many of them gave at least another gift in the current fiscal year. For example, if you had 20,000 active donors in the previous fiscal year, and 12,345 gave gifts again in the current fiscal year, your retention percentage would equal: (12,345/20,000) x 100, or 61.7%.
Attrition is the opposite of retention and measures how many donors have stopped giving. Based on the above example, you could calculate attrition by subtracting the retention percentage from 100, which comes to 38.3%. You should measure retention and attrition for your overall pool of donors and along several more refined segments, such as new donors, multi-year donors, and sustainers.
3. Conversion and return on initial acquisition investment
Conversion measures how many first-time donors give a second gift to your organization. Because new donors are often acquired with an investment, it’s important to measure how many convert to long-term giving to your organization. Conversion can be tracked by the source the donor came from (e.g., a mailing list, an acquisition project, an event), but can also be tracked on a fiscal year basis, similar to retention. To calculate a fiscal year conversion percentage, you should count the number of new donors acquired in the prior fiscal year and then count how many of them have given at least two gifts by the close of the current year. So, for example, if you acquired 75,000 new donors in the prior fiscal year, and at the close of the current fiscal year 28,000 of them had given two or more gifts to your organization, the new donor conversion percentage for the fiscal year would equal: (28,000/75,000) x 100, or 37.3%.
You should also calculate the amount of the initial investment you’ve recouped from your new donors on a fiscal year basis. Similar to conversion percentage, this can be tracked by counting the total value of the gifts over two fiscal years from new donors acquired in the first of those two fiscal year—and then dividing by the initial acquisition expense needed to acquire those donors. For example, if the 75,000 new donors acquired above required an expense of $2,400,000—and, at the close of the current fiscal year, those donors have given a total of $2,550,000—the return on initial acquisition investment can be calculated as: ($2,550,000/$2,400,000) x 100, or 106%.
Of course, it would be best to measure the total return on investment for any given donor, but this requires a very strong database and quite a bit of work to track all of the costs involved in cultivating a donor. As long as your overall program is netting revenue, return on initial acquisition investment can be a good proxy for assessing the value of donors acquired in different fiscal years or through different acquisition programs.
Stay tuned: Next issue I’ll discuss gifts per donor, revenue per donor, and upgrading, and downgrading.
Peter Schoewe is Senior Consultant, Mal Warwick Associates, 2550 Ninth Street, Suite 103, Berkeley CA 94710-2516, phone (510) 843-8888, fax (510) 843-0142, Web www.malwarwick.com, e-mail peter@malwarwick.com.
4. Worthwhile!
Getting prospects to donate online is challenging, to be sure. Yet according to a survey by Target Analytics and reported in The Chronicle of Philanthropy, those who make their first gift to a charity online donate one-and-a-half times more than first-timers who contribute by mail. In addition, the same study finds that repeat contributions by online givers are also generally larger.
5. Destination marketing
By Tom Gaffny
At the 2008 DMA Nonprofit Conference in Washington DC, late in January, Epsilon Executive Vice President Tom Gaffny delivered an extraordinary workshop, relating the findings of his year-long study of online best practices. The presentation included a staggering 192 slides and revealed so much about the state of fundraising online today that it was virtually indigestible at one sitting. Tom graciously agreed to allow us to publish his findings piecemeal as a new column in this newsletter. What follows is the fourth installment.
In my year-long study of the online practices of 144 nonprofit organizations, I learned about 12 ways that charities are using the online medium to bring donors closer to the cause . . . again and again. They’re thus making their organizations more relevant, more provocative, more stimulating, and more engaging.
Here, once again, are those 12 techniques:
Be relevant—be local
Highlight the video
Engage constituents
Leverage techniques that work in the mail
Send information in bite-size chunks
Work at channel integration
Personalize your organization
Be visual—be provocative
Say “thank you” in different ways
Ask friends to “get the word out”
Be timely—be there
Highlight your partners
In my last column, I addressed the first of these 12 approaches. This month I’ll cover the second.
Highlight the video
As Americans grow accustomed to accepting the Web as a source of information, the use of video is increasing at a meteoric rate. Video is, for many, the preferred way to receive information. And many of the country’s top nonprofit online communicators are taking notice.
Below are outstanding examples how five well-known nonprofits are using video to deepen their connections with their supporters: the American Society for the Prevention of Cruelty to Animals (ASPCA), the American Civil Liberties Union (ACLU), Defenders of Wildlife, the Humane Society of the United States (HSUS), and Common Cause. Study these examples. They represent today’s state of the art in highlighting video.
For starters, here’s how the ASPCA uses video to engage a new supporter:
Now take a look at how the ACLU uses the high-visibility sidebar on the right to call special attention to the video that’s the subject of its e-mail to supporters.
Like the ACLU, Defenders of Wildlife uses the prime real estate of the sidebar to highlight its video. However, in this case the graphic makes unmistakably clear that the link will take the reader to a video.
Similarly, this e-mail from the Humane Society of the US uses a graphic device to underline the character of the link:
As in many other cases, the subject line of the following e-mail from Common Cause urges the reader to watch the video. (A recent study found that this practice can significantly increase an e-mail’s open rate.)
Stay tuned for future columns, as I explore the remaining 10 online best practices of the American nonprofit sector.
Tom Gaffny is Executive Vice President, Epsilon, 601 Edgewater Drive, Wakefield MA 01880-6235, phone (781) 685-6825, fax (781) 685-0817, Web www.episilon.com, e-mail tomgaffny@epsilon.com.
6. 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. In this feature, we'll spotlight one Q&A from the most recent month.
Question from Europe: I have a question about cultural differences influencing fundraising in different countries. Our organisation has managed to get funding for many new projects. But now we are facing the problem that there is no money for running costs because all the cash is restricted to these new projects. We were thinking about letting the accounting department have some rows in our e-newsletter showing their gratitude for the gifts for the new projects, but at the same time raise this issue of the need for funds for running costs. This idea was refused by some local fundraisers, saying that this might have the opposite effect, especially in the U.S. Is this correct, and how would you raise money for the less sexy parts of the organisation?
Mal answers: I certainly agree that cultural factors bear on fundraising—but the problem you're facing is universal. There are at least three ways you can deal with this:
(1) Set up, as a standard practice, a certain percentage of every gift or grant to be set aside to cover overhead costs. Major funders often accept this practice as necessary, since they know full well you can't operate without infrastructure. That percentage might be 10% or 20%, depending on your cost structure.
(2) Educate your donors whenever you raise money that you need to cover operating costs or you won't have the staff available to carry out the projects they want to fund. Inform them that a certain percentage of the funds they give will go to cover these costs.
(3) Advertise how efficient you are by publicizing—through your newsletter and in every appeal—how low is the percentage of your operating (“running”) costs. Certainly, anything less than 25% would be impressive to most donors.
These steps won't eliminate the problem, but they should help over time.
7. Make your Web site a big hit
A 30-Day Step-by-Step Guide to Dramatically Improved Search Engine Optimization (Part 4 of 4)
By Lance Trebesch and Taylor Robinson
Your objectives in the fourth and final week include e-mailing potential link partners, negotiating link agreements, and continuing your education of SEO and nonprofit resources online.
1. Link recruitment
Unless you have a personal friend within the site you’re trying to contact, the first step is to e-mail requests for links. To do this you’ll want to make sure your e-mail contains the following:
Include the request for the link early in the e-mail so the reader knows the purpose.
Explain what your Web site has to offer and why it will be beneficial for them to link to you. Be sure to demonstrate how this will benefit the users of the partner site.
Tailor your request for the site you’re contacting. Do some research and learn what services they provide to better understand their needs.
Give your site’s URL that you would like them to use for the link. To make your link structure look more natural to search engines, don’t always give the URL of your homepage. Where appropriate, link to pages within your site that are more beneficial to the link partner.
Tell where you would like your link to be placed within their site.
Give your contact information and ask them to contact you if they're interested.
After you’ve made contact with the organization, you'll negotiate the terms of the link. Use the information you collected in week three with your primary and secondary link objectives to discuss the link placement. Again, your goal should be to get a link on their homepage, or within a part of their site that’s topically relevant. Other points of negotiation will likely be how long the link will be posted and the appearance of the link. Use varied anchor text with your links. For example, don’t ask for a “click here” link, but rather one that’s topically relevant—such as the organization’s name or main purpose.
2. The future
Below are three technology changes that will have a direct impact on your organization. By understanding what these key changes are and how you can use them, your organization will be better positioned for the future.
1. Vertical search engines
Have you ever wanted to search for information that’s specific to nonprofits but been unable to find what you’re looking for in general search engines such as Google or Yahoo? The growing number of vertical search engines may be the solution you’re looking for, because they’re specifically focused on one topic or user group. Today, Guidestar and the Nonprofit Technology Network (NTEN) are great tools that help network nonprofit organizations and related information. GoodSearch is also an excellent choice for broader information searches because it donates 50% of its total revenue back to the nonprofits registered on their site.
2. Rich media and content
Rich media is becoming more and more popular due to its aesthetic appeal, but should be implemented with caution. It’s often difficult for search engines to crawl frames and Java content and therefore may be detrimental to your SEO efforts. Also, users with low bandwidth Internet connections may become frustrated while waiting for pages to load. For more information on optimizing rich media content, visit www.seonews.com.
3. Social networking
Sites such as MySpace, Facebook, Squidoo, and Friendster have caught the attention of many commercial companies and nonprofits alike for their unique ability to connect individuals. Many nonprofits are using social networking sites to raise awareness for their organization and accomplish very real fundraising objectives. For more information about how to leverage social networking, read TechSoup’s article “What Can Social Networking Do for Your Organization?”
Review
Let’s now review your progress over the last four weeks.
1. You’ve identified several keywords and integrated these into your Web site’s content. This has helped your site become more visible to searchers and improved its natural search position.
2. You’ve created a blog on your Web site, which facilitates communication between affiliates and the organization while simultaneously encouraging other blogs and sites to link to you.
3. You’ve established a well thought out link campaign strategy that targets topically relevant partner sites.
4. You’ve begun to execute your link recruitment campaign by sending e-mails and negotiating link agreements.
Congratulations! You’re on your way to vastly improved search engine optimization. Remember that great SEO is a continuous process and should be pursued with diligence for as long as your organization is on the Internet.
Week 4 checklist:
E-mail Web sites
Negotiate link agreements
Establish technology goals for future
Continue SEO campaign and remain current with research
Lance Trebesch and Taylor Robinson can be reached at www.ticketprinting.com or by e-mail at Lance@TicketPrinting.com.
8. Where's Mal
June 3-5, 2008 – Palm Beach FL
DMA Nonprofit Leadership Summit
Discussion Facilitator
Site: Ritz Carlton Hotel
June 5-8, 2008 – Boston MA
Business Alliance for Local Living Economies
2008 BALLE Conference
Panel Discussion: Fundraising for BALLE Networks
Site: Boston University
July 7-9, 2008 - London, United Kingdom
UK Institute of Fundraising National Convention
July 23-25, 2008 – Washington DC
Bridge to Integrated Direct Marketing Conference
Pre-Conference Workshop: Crafting a Message to Win More Supporters for Your Cause
Workshop: The Copy Clinic: How to Write Successful Fundraising Letters
Site: Washington Hilton Hotel
August 4-7, 2008 – Minneapolis MN
Planned Parenthood Federation of America Development Officers Conference
Workshop: The Copywriter's Workshop: Crafting Brilliant Letters, E-mails, and Telemarketing Scripts for Breakthrough Fundraising Results
Workshop: Creating the Perfect Year-End Campaign
Workshop: The Do’s and Don’ts of Response Devices
October 14-17, 2008 – Noordwijk, The Netherlands
28th International Fundraising Congress
Master Class: The Copywriter’s Workshop: Crafting Brilliant Letters, E-mails, and Telemarketing Scripts for Breakthrough Fundraising Results
Site: NH Leeuwenhorst Hotel
9. Wealthy donors online?
By Jeff Brooks
A much-remarked study called “The Wired Wealthy” (from Sea Change Strategies and Convio) shows a high level of Internet usage by high-end donors:
About 80% said they had made a charitable gift online.
51% said they prefer to use the Internet for their donations.
46% said that they expect to make a greater percentage of their charitable gifts online within the next five years.
56% said that charities send too many e-mail messages.
81% of donors dislike messages that take an urgent tone in seeking a repeat donation.
Before you rush out and change everything, remember: It’s just a survey. When you ask people what they think, you find out what they think, not necessarily what they do. Actually, you really only find out what they say they think. If you really want to know something you can act on, watch actual donor behavior. When you see changes in behavior, that’s the time to change everything.
Most organizations that pay attention to what their donors do will probably find these survey results to be a bit hysterical and slightly out of step with reality.
That said, this survey should get your attention. It signals a change in response medium that’s likely to become significant quickly. Not only wealthy donors, but donors across the spectrum are turning more and more online to give and otherwise interact with charities. Donation revenue is migrating from the mail to the Web, and that means we need to become effective at communicating online.
Reprinted with permission from Donor Power Blog.
10. Bridge Conference
Mal and other top-notch experts will be in Washington DC July 23-25, 2008 at the Bridge Conference. Join them to learn the latest fundraising tips and techniques. Click here to obtain more information or to register.
11. Following up the match
Asking donors to support a matching grant is one of the best direct mail fundraising tools around. So really promoting this sort of grant is paramount whenever such an opportunity presents itself.
Habitat for Humanity (Americus GA) took this smart approach one step further. After sending an initial renewal appeal, the group mailed a simple follow-up package, reminding supporters that Habitat’s “’Building Bucks’ Matching Gift Campaign is in its final days.”
The urgency began on the Monarch-sized outer, with a teaser that announced “There’s still time!” Additional copy on the envelope made it clear that “your renewal gift can go twice as far!”
The personalized letter was all about the matching gift, as it should be. Copy declared, “For every dollar right now—Up to $3 million! —we’ll receive another $1 that we can put quickly to use serving more families in urgent need of a decent place to live.” Long-winded? A bit. Motivating? Definitely.
Copy even translated what a matched gift would total for three personalized gift amounts tied to the donor’s Highest Previous Contribution—a helpful tactic that was repeated on the reply.
The donor is also reminded that “there are only a few days left to take advantage of this extraordinary 100% Matching Gift Campaign.”
The P.S. then reinforced the message that the campaign “ends on April 3rd, so act today!”
Yet, it’s never too late to give in the fundraising world, right? So parenthetical copy assured the recipient: “(Any gifts received after the deadline, or after the $3 million Matching Gift is raised, will still be a huge help in our ongoing efforts to build homes for families in need.)”
One minor quibble. The reply envelope would have been more effective with a teaser like, “PLEASE RUSH TO MEET MATCHING GRANT DEADLINE.”
To see the entire package, click here.
12. Waning?Just a quarter of Americans believe not-for-profits do a “very good” job of helping people. So says a recent poll by New York University’s Organizational Performance Initiative and reported in
The Chronicle of Philanthropy. The number reflects a drop of over 25% from the 34% recorded in 2003—and continues a downward trend noted in 2006 when 30% felt this way. Paul Light, a professor in the university’s Robert F. Wagner School of Public Service, writing in a summary of the survey findings, calls this decline “deeply troubling and suggests that charitable organizations may be losing their most prized possession, their reputation for caring.”
Mal Warwick, Editor
Deborah Block, Managing Editor
Kieu Tran, Production Manager
Contributing Editors:
Nick Allen, Donordigital
Ken Burnett, Cascaid Consulting
Harvey McKinnon, Harvey McKinnon Associates
Jerold Panas, Jerold Panas, Linzy & Partners
Steve Thomas, Stephen Thomas
Joe White, Share Group, Inc.
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Mal Warwick's Newsletter: Successful Direct Mail, Telephone & Online FundraisingTM
(ISSN 1067-9316) is published 12 times per year by Strathmoor Press, Inc.,
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