The NonProfit Times - The Leading Business Publication For Nonprofit Management

COLOR OR BLACK & WHITE?

As fundraising techniques become more sophisticated, many more organizations have turned to color and eye-catching graphics as part of their direct mail packages.

No matter how much its use has increased, however, the presence of color has failed to ask the age-old question: What works best?

Certainly color has become easier, and far cheaper, to use than it was even 10 years ago. New advances in technology have allowed for hands-on creative work right at the worker's desk as opposed to having everything sent out for every phase of a project.

When making decisions about fundraising graphics, nonprofits may want to keep a few considerations in mind, both pro and con about using splashy color images for mailing.

The cost of color has dropped dramatically, from approximately $200 for 1,000 color pages in the early 1990s to about $10 today.
Digital printing allows people to create color pieces that have varying levels of personalization to them.
More and more people respond to color and come to expect it in everything they read, from newspapers to advertising pitches.
Many donors are still suspicious of a request that seems to offer splash instead of substance. They think that if the cause is serious then the request should be also.
Even donors who like flashy colors will accept an organization's logo in color.
Many organizations have found that when they stick to the basics, they get better results.

Donor giving patterns go beyond RFM

Audience selection and segmentation are critical to an organization in its marketing and fundraising.

At a recent national nonprofit conference, attendees learned that although a majority of nonprofits rely heavily on Recency/Frequency/Monetary (RFM) variables in segmenting their audiences, they might do better by looking beyond traditional RFM thinking.

One of the critical components of going past RFM is acquisition strategy. For example, having a ZIP Code Model identifies and predicts those geographic areas where a marketer’s best responders reside. It is applied to pull the best geographic or ZIP Code areas from each list universe. It may be ZIP penetration based or be used applying census information or other third-party information, or it may be a combination of both.

Another part of looking beyond RFM for acquisition is in awareness of the market. This means knowing that:

The acquisition market has become much more volatile as organizations are aggressively testing and rolling out new packages and offers
Many traditional non-premium mailers have added a premium track and vice versa
It is vital to be aware of the tactic or tactics used by the lists being rented or exchanged
Package/offer selection and placement can be a key strategy to improving list performance.

Imagination lacking in new direct response

It’s not the technology, the audience or the resources holding back nonprofit organizations from incorporating new media and direct response, it’s imagination, wrote Jason Potts in “Direct Response Fund Raising: Monitoring New Trends for Results.”

Potts suggested several areas where nonprofits could help both individual initiatives and supporter lifetime values through new media:

Digital interactive television: The proliferation of channels allows nonprofits to provide programming or “documercials,” giving viewers the ability to jump from this programming to a Web site to make an instant donation.
Communications: The ability to share digital information internally and externally can draw information in digitally from the field and turn it into material for supports and the general public by wired editors.
Revolutionizing volunteering: New media can empower retired supporters to communicate with an organization’s partners to offer help and advice, improving both the services the organization offers and the bond between organization and supporter.
Creating online advocates: Supports will be able to communicate with each other, perhaps sharing information on an event they have recently taken part in. The best fundraising stories are usually found at the grassroots level.
Selling third-party advertising: If the Internet makes the transition to a television broadcast medium, online broadcasters with large or well-targeted audiences will be able to sell conventional TV commercials between their programming.
Education: Curriculum-based online educational materials to familiarize a younger audience with a cause can be combined with school fundraising initiatives or volunteering.
The daily me: Supporters can download key updates from a site where information can be read at their convenience. Syndicating information through other content providers would give reach beyond existing online supporters.

Wisdom, tradition helps message

The nonprofit universe is huge, involving a multitude of aspects. Although there is necessarily a focus on the day-to-day realities of running an organization, part of the universe also involves a certain atmosphere aimed at crating an ever-improving quality of life.

Claire Lynn Gaudiani, president of Connecticut College, advocates a “wisdom tradition” that that helps nourish the dynamic between individual community.

The tradition includes the following precepts.

Cynicism is the great enemy of future communities. Make every sacrifice necessary to sustain community faith in the core values found in the wisdom tradition and how they are lived in good times and bad.
Having benefits policies is not enough if they cannot be used equitably by all the community. For example a company child-care plan that no one uses out of fear of disapproval serves little use except to create cynicism that, once sown, is difficult to uproot.
Expose new arrivals to the highest aspirations of the new community, its heroes, values, history and sayings.
Tell the stories of community members in meetings planned so that everyone can attend. Members will find unexpected bonds of aspiration and ideals.
Make progress a partnership.
Make learning and teaching a continuing part of the community’s life.
Make humane skills like negotiation and mediation, listening and team building available to all members of the community.
Encourage everyone to act as spokespeople.
Build esprit by believing the best of everyone.

5 Ways United Way Refocused - And You Can, Too

Fundraising is so important to nonprofits that many times they fall into the trap of losing sight of their mission. Raising money is necessary, but doing good is what philanthropies are about.

Several years ago, the United Way of America undertook a self-assessment to make sure that its money-landing focus did not eliminate its doing-good focus. UWA set five keys that it would use to perform its evaluation.

Although they might not provide a broad-brush model for all organizations, there are areas that merit further consideration:

Community engagement and vision. By working with formal and informal leaders to develop a shared vision and goals for a community.
Impact strategies, resources and results. By creating impact strategies that address the root causes and barriers of a community's priority issues, mobilizing essential assets, effectively implementing impact strategies and evaluating their effectiveness.
Relationship building and brand management. By developing, maintaining and growing relationships with individuals and organizations in order to attract and sustain essential assets.
Organizational leadership and governance. By garnering trust, legitimacy and support of the organization in local communities through leadership and overall management.
Operations. By providing efficient and cost-effective systems, policies and processes that enable the fufillment of the mission, while ensuring the highest levels of transparency and accountability.

CONVERTING YOUR NON-DONORS

     Donor list evaluation should entail more than simply considering the cost per dollar raised (CPDR) on a mail piece. Incorporating lifetime value (LTV) in the list selection process will enable an organization to segment its donors into high- and low value lists and determine how to most effectively appeal to each list.
     The concept was discussed during a session at the Direct Marketing Association Nonprofit Federation Washington conference, entitled Bending the Financial Mindset of Premium Mailers. Colleen Norton, director of direct mail and donor management, Children’s Cancer Research Fund (CCRF), in Minneapolis walked the audience through a strategy CCRF recently incorporated into its direct mail list selection process: the lifetime value of a donor.
     CCRF has more than 200,000 12-month direct mail donors and mails nine acquisition appeals annually. In fiscal year 2005, the organization raised approximately $13 million, with close to $7 million coming in via direct mail. Its direct mail donor pool is mainly premium-based and premium-renewed.
     By going beyond the traditional metrics of response rates and CPDR, said Norton, CCRF is now better able to balance its donor acquisition success with improved donor retention, and ensure that it is acquiring donors that meet the profit and loss (P/L) benchmarks in its renewal program.
     Cautioned Norton, “acquisition metrics are sometimes at odds with renewal goals. Decisions made to ‘improve’ acquisition metrics are sometimes made to the detriment of renewals.” Thus, she advised integrating an organization’s acquisition success with its renewal goals.
     Traditionally events-based, CCRF began its direct mail program in April, 1999. Due to the limited direct mail experience, the organization didn’t have an extensive background to tap into, so new donors were combined into six-month list groupings based upon the date of their initial gifts. The groups were then standardized to reflect giving over the 12-month period following the acquisition of the new donors, and two indices, the LTV index and the Acquisition CPDR index, were derived.
     Norton defined the LTV metric as the subsequent value per donor per year. The LTV index, she said, is calculated by dividing the average LTV metric of a list within a specific time period by the average LTV metric of the entire file (which was calculated over a similar period of time).
     The CPDR metric, or the up-front acquisition cost to raise a dollar, said Norton, was indexed against CPDR metrics for all the other lists within the group, resulting in the CPDR index.
     The two indices were then combined to form a new index, the combined metric index, by which acquisition lists were then judged. This index, said Norton, enabled CCRF to evaluate both the up-front and the back-end performance of a donor list, “so we see how it does on cost to raise a dollar on acquisition and then it allows us to look at the same time at the donor’s (LTV).”
     According to Norton, the findings of the study opened up a new universe for CCRF. For example, files with high acquisition costs, such as public broadcasting files (files rented from public broadcasting stations) and high-end women’s apparel catalogs, showed a much stronger LTV, or revenue per donor acquired.
     “They were expensive to acquire, but then after we watched them over time, the economics played out,” said Norton.
     The study also found that new mover files that had a Zip select combined with a higher household value select ($250,000 or more), and compiled donor files (with Zip select) experienced better than expected back-end, or LTV, performance. Norton ultimately moved some lists with a high CPDR to the top of the file list because of high response rates.
     Moreover, CCRF is now better informed to mail non-donors more effectively, placing emphasis on the more profitable segments, said Norton. Whereas in 2004 non-donors accounted for 38.8 percent of the organization’s direct mail, in 2005 that number deflated to 26.6 percent. More attention was given to those non-donors on compiled lists, mailings to which increased from 12.7 percent in 2004 to 17.5 percent in 2005. Mailings to non-donor subscribers decreased from 11.8 percent in 2004 to just 2.7 percent in 2005. Buyers accounted for just 5.6 percent in 2005, down from 13 percent the previous year.
     Norton described this as letting the lower dollar donors sift out. “We acquire a lot of donors not knowing who will stick,” she said. “So after a year of mailing renewals with no response, we made the decision to let them sift out, to drop them.” But, added Norton, “This was a new strategy and a young program, so we were trying to see how donors responded to our direct marketing program, our fundraising program and our organization.”
     Norton estimated that CCRF has seen a 17 percent increase in initial gift, a new donor revenue increase of more than 14 percent, first-year renewal revenue increase of 31 percent, and steady multi-year retention rates. Overall, said Norton, CCRF has seen a healthier, more productive direct mail program.“Using both of these indices (LTV and CPDR), you can get the whole picture,” said Norton. “It allows an organization to expand its universe.”

DUMPING, HOLDING LAPSED DONORS

Have you ever been in a friendly poker game with a large pot on the table, watching the stakes rise on every turn of a card? At that moment, Kenny Rogers begins to whisper in your ear those famous lyrics: “Know when to hold ‘em, know when to fold ‘em.”

According to Todd Baker, senior account executive at Materworks in Poulsbo, Wash., surprisingly, many charities are playing a similar game of chance with their donors. And, the stakes are high. One can even say the charity is riding on it.

Specifically, according to Baker, organizations play this game by using an arbitrary date to determine the definition of a lapsed donor. They’ve indoctrinated the notion that somehow donors become less important and therefore should have less contact if they haven’t given in the last 12, 18 or 24 months -- take your pick.

Baker said he believes there’s a better way of defining a lapsed donor for your charity. A donor becomes lapsed and requires an alternative fundraising strategy when the person is no longer an even-money proposition, meaning that your nonprofit is no longer at least breaking even on fundraising to that donor.

Therefore, a $5 donor can become lapsed as quickly as three months but for a $500 donor it can be as late as 48 months or even longer.

You can see how using an arbitrary date (say 18 months) wastes money, because you’re going to mail that $5 donor the full 18 months with very little or no return on investment at all, according to Baker.

Now in regards to the $500 donor, you’ll be leaving serious money on the table by no longer mailing that donor after 18 months, when they could be profitable for another 30 months. You just been dealt a pair of aces worth of strategy -- now what are you going to do about it?

DO YOU HAVE LIST EXCHANGE BALANCE?

List management is extremely important for any nonprofit. A well-maintained list can pay enormous dividends, and one that is managed badly can actually hurt the effort. List exchange is a part of that equation done well, it can work well, done badly, it can be counterproductive.

According to Monica C. Smith of the database firm Marketsmith, there are several factors to keep in mind to maximize the results from a list exchange.

Estimate of specific mailing requirements, broken down monthly or quarterly by plan, mailing or drop.
Historical mailing results analyzed down to contribution to profit and overhead per new customer. Identifying which of these top lists have been taken on exchange is important.
Decision criteria for including a list in the circulation plan, including: What is your contribution per customer goal? Are you willing to spend money to acquire a new customer? How much are you willing to spend?
Beginning exchange balance for your top exchange lists based on the reported balance from your list manager and agreed to by the list owner.
Tolerance for increasing order quantities on any list over time as necessary.
Expected changes to the quantity available for any list/segment.
Expected number of names that each list owner will take from your list.

THERE WILL BE A TEST ON THIS!

Although guidelines for testing may seem obvious, Mal Warwick points out in his book Testing, Testing, 1,2,3 that forgetting the basics can sabotage results.

He counsels that organizations always remember to:

Keep list coding easy and keep a written key to the coding system so test history can be tracked over the years and throughout personnel changes.
Keep tests clean. Test only one thing at a time. Overzealous direct mail fundraisers can unwittingly invalidate their own tests by making “just one little change” to a package.
Keep the number of test cells manageable. It’s easy to get “testing fever” and go overboard with the number of test cells. Smart mailers keep it simple, using such models as the six-cell test: one control cell, four test cells that are variations on the control, and one new package cell.
Keep mailing your control even when testing. Even though a concept works for one organization, it might not work for another. Test, test, test.
Eliminate unusually large gifts when measuring the revenue impact of the test. If most gifts were in the area of $25, a few random gifts of $100 or more could skew results.
Test even the best of packages. A direct mail fundraising manager may be reluctant to make any changes in a package crafted by a top professional, but there is no reason not to do everything you can to turn it into a bigger winner.