Why you shouldn’t be using Face-to-face fundraising
There has been a great deal of ink spilled about whether or not face-to-face fundraising is a good recruitment channel or not and I can’t believe that people are still using it. Of course, it looks great on the front end and the advocates will tell any fundraiser who questions it that they are not cultivating donors correctly if they are getting high attrition rates. But don’t the figures speak for themselves?
Charity ‘X’ wanted to test Face-to-face [F2F] in FY09 and had a relatively robust 2nd gift welcome programme in place. The above chart shows that prior to the F2F recruitment, regular donors had been staying with the charity at a rate of 96% into their second year. These were mail and ‘phone recruited donors and they were losing 4% from new into Y2. Pretty impressive.
Then in FY10 to FY11 the attrition rate plummets to just over 70% pulled down by the F2F donors. Remember that the attrition rate for the F2F donors is down at 40% but they are pulling the overall % performance down from 96%!
On further examination it turned out that it would take 50 months to break-even — this is harsh cashflow for any organisation and it is difficult to justify this level of investment with donated money.
If anyone is making F2F work — and can support it with numbers that include attrition rates by year — please let me know. Why is this material never presented at fundraising conferences?
Acquiring the right donors
For years now I have been going on like a broken record about charities recruiting low value donors and how they should be focusing on acquiring higher value donors. Despite this we find agencies and charities sending address label packs, pen packs, as well as low value monthly giving at £2 and £3 / month offers. At last year’s IoF Conference there was a high profile session on Incentives in Direct Mail advocating that incentives are fine if it improves response rates. Wrong!
We often examine the data of charities who want to recruit donors that will repay their investment over the next 3+ years. This is in answer to the strategic question “Where should I spend my acquisition budget?” and “What type of donors should we be acquiring?”
If you look at the chart below you will see that when we reviewed the performance of donors by the value of their first gift to the charity, those whose first gift was £25 or more have a much higher value — as you would expect. But look at the difference in value as the years pass by. After 4 years the £100+ 1st gift donors are worth 10x that of donors whose first gift was less than £25. And in most cases this is much higher than this graph illustrates. But….
…as we dug a bit further, we applied all of the costs related to the cultivation of those lower value donors (less than £25 first gift) and what we found was that these donors had cost the charity more to cultivate than they had returned in income. Now imagine what this figure would be like with the 1st gift less than £15 donors; or 1st gift less than £10 donors. Imagine what this figure looks like with incentive-led recruited donors. We could show you and it is an ugly scenario. No charity should be using this method of acquiring new donors unless they look at the 3+ year performance AND they take into account the ongoing cost of cultivating those donors.
Now the argument I often hear from charities who recruit at low value is this: “we recruit at low value and then upgrade the donors from there”. Nice theory, but in actual practice it doesn’t work. Low value donors are more likely to be ‘one and dones’, are less likely to upgrade and, even if they do upgrade, a 50% upgrade of £10 is £15 is still low.
It’s true that higher value donors are more expensive to acquire. But they will stay longer, upgrade more easily and become stronger advocates for your cause.
If you would like to see the LTV analysis of Regular Donors by the value of their first gift then email us and we will send you the findings. Or, if you really want to find out we will undertake it on your own file.
In reality, you will need to recruit a mix of donors by value because of cashflow constraints. Just ensure that you have the correct mix, a solid welcome process and a very capable high value donor relations person or team in place to upgrade donors that do come in with higher gift levels.
Tweet
One and dones
I was surprised to hear some of the direct marketing “theory” going around at one of last year’s sessions at the Institute of Fundraising on the value of Incentives. Virtually all of the discussion was around the response rate and/or the numbers of new donors being recruited. There was little, if any, talk of ongoing value which, at the end of the day, is the most important aspect of any direct marketing programme – especially if those donors are costing the charity more than they bring in!
Who cares if a cold direct mail campaign gets a 3% response rate or if it recruits 3,000 new donors if 80% of them are not going to give a second gift? One and done. You can incentivise as much as you like but if you don’t recruit donors to the cause from the outset then they will give once and never again.
Further, this week at a Fundraising Workshop in Germany at which I was presenting, a so-called analyst was suggesting that we should be focusing more on “all of those thousands of 5 euro donors” and here I quote “because there are so many of them and together they all make up quite a bit of money” [ed. jaw drops in disbelief]
These are exactly the donors who are costing many charities more to cultivate than they are giving in cash. The problem is that many charities and “analysts” are not able to figure out which donors they should be leaving alone and which they should be developing.
For me, the important thing is to keep an eye on the underlying value within the donorbase to ensure that there is an ongoing – and growing – net income. This comes about by developing relationships with loyal and committed supporters, not just churning more and more gifts from one-off donors. I can guarantee that those heavy address label packs that contain gift cards will never – ever – work. The break-even point will take so long and might never arrive.
Public and Poverty – a response to Andrew Darnton and Martin Kirk
In their ‘Finding Frames’ paper which was published by BOND in January 2011, the authors question why the general public are not more engaged with the issues of poverty now than they were in 1974. This despite decades of initiatives such as Band Aid, Make Poverty History, Jubilee Debt campaign, Comic Relief and so on. What is of more concern is that DFID found through their research that the segment of the public that are most engaged has shrunk by a third since April 2008 – now at 14%.
I want to thank the authors for much of their thinking, but also to challenge some of the conclusions and to add to the debate. As a fundraiser involved in the development world, I am passionate about the issues of poverty and how those issues are communicated to the UK public.
The Implication of the NGO sector
The NGO sector is implicated in the state of public engagement. The paper states that “the sector’s engagement models have achieved big numbers and ever-increasing incomes, but with what impact on the quality of public engagement?”
It is interesting that back in 2002 I gave a paper at the Institute of Fundraising’s Annual Convention on the negative effects of low value, high volume fundraising as practised by charities such as Oxfam. My premise was that it would be better for these organisations to recruit fewer donors but of higher value. The premise was supported by data and analysis that showed that higher value donors are more expensive to recruit but all of their loyalty and giving metrics make it worthwhile investing in bringing them on board.
The presentation was met with a certain level of disdain from fundraisers who are focused on the acquisition of volume at all costs. There is a mentality that the larger our supporter base ergo we must be more successful. That is a worrying and incorrect conclusion. I include Oxfam as one of those who are more interested in building a large database of supporters (£2 per month will change the world) at the expense of other, longer-term objectives.
Now, Martin Kirk might be interested to know that in 2009 I undertook a major piece of analysis on the Oxfam database, the details of which I am not at liberty to disclose due to client confidentiality. However, there are some interesting principles that relate to this paper and the points that he raises.
- If a charity is focused on building volume at the expense of value in it’s donorbase, then it is likely to recruit those donors at the lowest possible entry point. I find it incredible that this is still the case with so many charity acquisition strategies. Take the Red Cross ‘address label’ pack which is costly to produce, gets a very good response and has a sharp drop-off rate. Why? Because low value donors recruited in this way, and the £2 per month donor proposition used so extensively, is a transactional type of fundraising as opposed to cause-driven fundraising.
- One of the problems faced by larger charities is the tendency to work in silos. So the fundraising team are working on one side of the building and the programmes team on the other and the left hand either doesn’t know what the right is doing, doesn’t care, or in extreme cases works against it. Let me put a question to Martin Kirk. How involved are the overseas programmes team at Oxfam in the development of the fundraising strategy? Is there collaboration and co-operation in the planning and writing of the appeals and in the overall direction of the supporter journeys? Are members of the overseas programmes team present at briefing meetings, planning meetings and debrief and review meetings?
I would be interested to know how supportive the overseas programmes team at Oxfam were about the ‘100% Campaign’ that was run in February 2011? To me this was a cheap marketing trick that would have done little to educate the public in the issues that Oxfam are engaged in. Why give to Oxfam just because 100% of your money is going to Oxfam? Transactional fundraising that is not going to ever [likely] get a second gift.
- There is another worrying trend in the sector which is to bring in non-sector Fundraising Directors who think that selling ‘poverty’ is the same as selling books, or coffee. It isn’t. And, what is more, this leads to the transactional model of fundraising made in the first point above. Fundraising is a different transaction to any commercial transaction and unless that subtle relationship between charity and donor is understood, there will be a breakdown in the engagement with the public which is being discussed.
Andrew and Martin, I would encourage you to get on to the direct mail lists of some of the leading overseas development charities who are raising funds in the UK from the general public and ask yourself how they are communicating with you. Are they engaging you in the issues that you raise in your paper? Are you being viewed as a cash provider, or as a valued partner?
I am not saying that these NGOs are wholly to blame for the slide in public engagement that you talk about, but certainly they are responsible for much of the low-level transactional fundraising that sets aside donor education and engagement. Maybe, in the same way that some believe that charity begins at home, some honest strategic thinking and evaluation should also begin at home.
Tweet
Direct mail is alive and kicking
Before you throw the direct mail baby out of the fundraising bath and invest all your budget in social media or face to face, remember that mail is still the bedrock of most charities’ individual income streams.
Two years ago I started working with one charity client to increase the income from their direct mail programme. It was just about the time when the sector was jumping up and down about social media and you couldn’t move for seminars and workshops on ‘the next big thing’. There is a real temptation to lose focus here. The massive increase in the number of so-called social media consultants and digital marketing consultants is not a guide as to how to spend your fundraising budget. It is an additional channel not a replacement one.
In the meantime, direct mail is alive and well. We have seen our clients achieve annualised increases of 15% income growth and more on their direct mail – with careful planning and by focusing on loyalty this is all possible. And you don’t need to be a large brand to achieve this either. There are some charities that are blaming a downturn in mail income on the recession and on the economic climate. But it is possible to find new donors, cultivate them and do so at a profit, even in these hard times. Direct mail is alive and doing well.
Too clever by half
I was recently reviewing the results of a direct marketing fundraising campaign together with the creative and to be blunt it wasn’t pretty. When we stripped it all away, not only was the creative not pulling in the response, but it was working against the success of the fundraising campaign.
Why? Because too many ego-centric creative solutions are conceptual and distort the proposition. Time and again I have worked with prima dona planners and creatives who add ‘clever ideas’ and gimmicks into the pack only for it to bomb. I used to work with a planner (in title only) who just couldn’t get it — it’s about the results remember.
So, with a plain letter, a clear and compelling offer, a simple reply device and reply envelope we beat the so-called creative solution. It was cheaper which also added to a better ROI, gained more money, more repsonse and more of the charity’s mandate was fulfilled.
Sometimes being too creative is being too clever by half. Be clear and direct about what you want the donor to do and how you want them to respond.
What does ‘major’ mean?
I am often asked ‘what is your definition of ‘major’?’ in reference to developing a major donor programme.
The way that charities usually define it is by a specific amount; “any donor who gives over £1,000″ for example. There are a number of problems with this approach. Firstly, it excludes any donor who gives regular amounts cumulatively below that level. So, a donor who gives £300 per month is a more likely candidate but would be missed on the ‘largest gift’ cut. There is another problem with this approach.
What if there are 500 donors who have given £1,000+ and there is only 1 major donor fundraiser? It is not possible to adequately devote the time and attention to developing a personal relationship with all 500 donors. They require further qualification.
I have always found the best approach to start with the largest donors cut by largest AND cume giving and work down. Incidentally most direct marketing reports start from lowest to highest so you need to request an upside down report. Then it is important to run at least 3 or 4 years’ data to look for patterns. In most reports that I view there are large annual gaps — the result of a lack of ongoing donor relationship building. This is especially the case where charities build their major donor programmes on events, dinners, and Balls. It is very rare to find many donors from these events who turn out to be consistent, worthwhile, engaged and committed donors.
When you have identified your caseload, you will find that there will be approximately 100 donors on there that are capable of being managed by each full-time fundraiser. That is how I define ‘major’, by the available internal resource. So, 2 full-time MD fundraisers will give us 200 donors by definition.
In addition to those donors who are qualified, I would also have a further 20% of unqualified that will come onto the caseload once they have been qualified. But remember, the donors on your caseload are actual donors who have given – by cume value. They are not prospective donors that have been screeened by a wealth overlay. Those donors will remain on a prospect list.
So start to look at your definition in more of a multi-dimensional way than simply by single largest gift and always focus on those donors who can be cultivated to give on more than a one-off gift basis.
New money or old?
Charities need to start waking up to the necessity of investing in long-term major donor relationships with existing donors instead of running after new ones. At the risk of using that hackneyed expression involving fruit, why would you get a ladder and climb to the most difficult, dangerous and out of reach part of the tree when you could pick the ripe fruit from the lower branches? It just doesn’t make any sense.
So, in the same way, why do so many charities put their efforts into finding new major donors and not spend their money and energy in cultivating existing donors? Rather than do major donor events or hold dinners or create major donor ‘clubs’ most of which are either directed at uncovering new donors or speaking to a group all at once, why not concentrate on developing one-to-one individual relationships with each donor? By figuring out what their interests are and how they want to interract with your charity, the returns will be greater and donors will most likely give on an annual basis for a number of years.
In my experience approximately 80% or more of a major donor caseload originates from the direct marketing pool and those donors when cultivated give increasingly large amounts. Very many of these donors start giving at relatively low amounts, even as low as £50, but over time they will become investors in your cause. These donors are much more likely to give and to continue to give than wealthy donors from a prospect list who may have the ability to give but have little or no propensity for doing so.
One charity file I recently analysed had 500,000 donors on the direct marketing file and fewer than 200 major donors. Their answer: go to the City to try and find new donors! What about developing all of the potential donors that are hiding in that large dm file first? When that has been exhausted then go and look for new ones.
How much should I be spending per new donor?
So, there we were in the meeting today talking about which was the best channel for recruiting new donors. Mail is the solid tested route, but should we go for a single gift or a regular bank transfer? And everyone tells me that on-the-page advertising only recruits emergency donors. And what about inserts, and DRTV, and F2F or telephone?
Where do you start and how do you know which channel is the most effective for recruitng new donors?
The answer will be based on a number of factors but primarily the cost of acquisition at the front end, and the value of the donor over their life with the charity. So, although the cost of recruiting a donor on £15 per month direct debit might be £200, the return from that donor might be greater than a single cash donor who only costs £40 to acquire.
Don’t only focus on the cost — look also at the longer term return before making your decision.
Development
What is the definition of ‘development’? I have been working with a ‘development’ NGO client this week and the CEO asked me and I must admit that I struggled.
He told me that the best definition he had come across was ‘security’. There are villages in the middle of DR Congo that are not touched by the war, that are not involved in tribal conflict, who are living sustainable and secure lives. They are as ‘developed’ as any developed economy.
