Back in 2011, I wrote True ROI: Why “Matching Back” Online Contributions Makes Sense – where I took you through the importance of matching back online contributions (also known as attribution) to their original sources.
I would like to revisit that post today and to underscore that matchbacks are excellent tools for revealing a direct marketing program’s true, multi-channel ROI – but only when they are reported properly.
Recently, I have noticed a disturbing trend. Some organizations are attributing full matchback income (both online and on-site) to their direct mail reports—considering matchbacks part of baseline performance. This is not only misleading – it’s wrong. Attribution without nuance distorts analysis, making it difficult to evaluate each channel’s effectiveness for meaningful insights. This in turn undermines strategic planning and decision-making for your fundraising program.
The antidote? Attribution calculations should be transparent and data-driven, in order to avoid double counting or overstating revenue.
As we know, one size does not fit all in direct marketing, and matchbacks are no exception. The best attributions reflect the campaign’s strategy, factoring in, for example, a communication’s target audience. (Are they prospects or current supporters? What is their demonstrated channel preference?) We also recommend using control groups whenever possible, so you can better understand the incremental impact of attributions for your direct marketing efforts.
At Avalon we’re always looking for ways to make online fundraising – which has such great potential – a winner for our clients. So I read the recent annual M+R/NTEN eNonprofit Benchmarks study with great interest, and some of the takeaways, as usual, were surprising. For example, while the study shows 14% growth in online revenue, it also shows declines in fundraising metrics like opens, click-throughs, and response rates.
This suggests that many nonprofits both lack digital multi-channel strategies and suffer from under-investment in the digital space (especially acquisition) – two shortfalls that hold organizations back. Although email still accounts for about one third of online fundraising revenue, organizations must diversify online revenue streams and implement comprehensive multi-channel strategies in order to achieve meaningful success online. To move your digital program forward, you must examine the whole digital landscape and leverage each digital channel.
As always in our industry, smart testing is essential for every organization. This can mean optimizing your website by testing different elements, making it mobile-responsive, testing online advertising, or experimenting with search and social media to drive website traffic. Be sure to track the source of every donation – your email donors may also give through other fundraising channels. Because up to 70% of online revenue is driven by direct mail-acquired donors, it is critical to understand the breakdown between true online joins and channel migration.
Last year, I wrote an FYI post on what motivates performing arts donors to give. My primary point was that, although arts organizations are passionate about their missions, what really motivates donors to write checks is benefits. Like it or not, “what’s in it for me?” is top of mind for performing arts donors.
Avalon has tested and tested this premise – both because it is so fundamental and because arts organizations still need convincing. Anecdotal research like focus groups often highlights arts donors who recall how important the arts were to their childhoods and who pledge to pay it forward. What’s more, arts staffers tend to believe that their donors are more motivated by altruism than by self-interest – an assumption upheld by those staffers’ own (and admirable) commitment to the arts.
But the numbers don’t lie…
Arts donors are primarily benefits-motivated. Our testing proves this time and again – take away the benefits and watch both acquisition and retention drop. For example, Avalon has tested a philanthropically focused ask for several performing arts centers, and, due to weaker response, the cost to acquire a philanthropic member is, on average, four times higher – and it is unsustainable. Similarly, renewal testing has resulted in 48% less revenue from philanthropic packages.
How should performing arts organizations respond to this? With strategic messaging. Even the smartest direct marketing tactics are ineffective without it.
Messaging is a labor of love – it is always a hard work in progress, supported by controlled testing with statistically valid, analyzed results. However, done well, messaging achieves the ambitious goals of both securing the financial support your organization needs today and strengthening the donor relationships that will fuel your program for years to come.
For performing arts organizations, the main challenge is to make meaningful connections between benefits-based and mission-based messaging.
In a September 2013 post, we summarized the key findings of Blackbaud’s Next Generation Study. Blackbaud just released a YouTube video about those findings.
Earlier this month, I attended this year’s NTEN Nonprofit Technology Conference with my colleagues Amy Padre and TJ Hillinger. We fanned out to cover as many presentations as we could, and pooled our notes for some interesting takeaways:
1. A sneak peek of the M+R eNonprofit Benchmarks showed a 13% open rate, a 0.18% unsubscribe rate, a 2% return rate on advocacy, and a 0.07% online fundraising response rate. This session’s presenters also mentioned that for many organizations email revenue is flat, but revenue from email lists is growing. They posited that this could be due to people reading their emails on mobile, but giving via web/generic URL or via search. This is an interesting thought and worth checking out for your organization. The full benchmark study will be released April 9.
2. Nonprofits are testing Facebook custom audiences and lookalike models, as well as email link cookie-based retargeting. These are interesting new ways to leverage ads to complement other marketing efforts and measure their impact on online and direct mail giving.
3. Testing session: bottom line – test wisely. A presenter/former ACS staffer said that even with a $20 million fundraising budget (and likely the quantities and resources that go along with such a large budget), she would only test two variables a year. She would choose two tests at the beginning of the year that they were curious about, test one repeatedly for the first half of the year, and test the other throughout the second half of the year.
4. Regarding holiday giving, it’s important for organizations to distinguish themselves from the crowd. But decide what the core sentiment of the holiday is and how it relates to your mission, instead of the “Hey, it’s a holiday, so give us money!” approach. You can consult a Cause Awareness Day Calendar here – so you can give your donors a more compelling reason to give on certain days.
I attended the DMFA’s Successful Membership Cultivation and Stewardship Strategies Seminar last week and came away with a lot of good ideas and reminders for keeping donors happy. The overall message was the importance of donor stewardship – quickly responding to donors’ questions or concerns and ensuring that your organization makes quality customer service a priority instead of an afterthought.
It’s a question of training your staff to respond promptly, thoughtfully, and helpfully to all queries – by phone, email, or snail mail. Because unhappy donors are unlikely to renew their support.
Dana Campbell, Senior Member Services Manager at the Human Rights Campaign spoke about HRC’s member services goals when handling donor issues. In short, her staff finds that quick response times and thorough, quality answers have helped HRC keep and renew member support. Here are the basics that work for HRC:
Vice President for Marketing Jenn Vanderveld of the Marine Corps Heritage Foundation had some interesting insights on donor upgrading and making sure donors get the personal touch.
She says it’s critical that, as much as possible, you know and understand your donors. In her case, everyone who works at the National Museum of the Marine Corps is considered a development officer, since anyone who comes into contact with the Museum may be, or could become, a donor.
This is a crucial mindset for organizations with physical locations that donors visit – staff must be carefully trained to answer questions and help as necessary. Jenn gave the example that since most donors and many visitors to the Marine Corps Museum are retired or current Marines, it is imperative that the staff understand rank and Marine Corps history. So whenever possible, Jenn’s staff welcomes their donors to the Museum in person. Also:
We have arrived at Part II of our Donor Acquisition blog series.
So we’re all on the donor retention bandwagon, right? Treat your donors well; use their personal information to show that you know what interests them; thank them promptly and frequently; describe the impactful results of their support, etc.
But what about the acquisition variable in the retention equation?
While the above techniques are important, they all happen after the donor comes in the door – but retention potential comes into play long before that moment. And if donors don’t join your organization for the right reasons – namely, passion about your mission and a desire to make a real difference – then no amount of engagement and retention activities will keep them on board.
And here’s why: we often talk about "dating" (educating, cultivating) our donor prospects before asking them to "marry" us (donate) – but when we're “marrying” incompatible people, it's no wonder our relationship often ends in divorce!
So as I see it, the retention discussion needs to include the answers to these critical questions:
Where is the focus on first gift? Avalon’s analysis has shown a clear break in donor value at $25. Start with a first gift below $25, and the donor value doesn't change much over the lifetime of the donor. Start with a first gift above $25 and the donor value takes off – resulting in a stronger, more productive relationship with that donor. Bottom line: yes, you'll always get a stronger response rate when you ask for $10 instead of $25 – but at what price?
Where is the focus on message and package ROI? Have you been bringing in donors with a single issue that’s rarely addressed in your ongoing mission work? Then don't expect those donors to stick around. Trying to acquire donors with just a one-paragraph case for support? Good luck. Donors need to know what your organization does and how they can help make the world a better place by supporting it – you cannot possibly say that convincingly in four sentences. Giving away lots of premiums? Who wants to be in a long-term relationship where someone only stays if the gifts are good enough? Renewal strategy must be a part of every acquisition messaging discussion.
Where is the talk of list ROI? Some lists have incredible up-front results, but then those donors never give again. Other lists might have a lower response, but the donors acquired are engaged from Day One and return the investment in less than a year. A good acquisition mail plan balances solid up-front returns with even stronger list ROI. Don't be afraid to pay a little more for a donor who will double his or her giving in a year – instead of throwing money at donors who are waiting around for the next big discount or premium offer.
But wait, there’s more:
Blackbaud’s annual report – the 2013 Charitable Giving Index – is out with some interesting facts and figures.
This comprehensive report includes overall giving data from 4,129 nonprofit organizations representing $12.5 billion in total fundraising in 2013. It also reports on online giving data from 3,359 nonprofits representing $1.7 billion in online fundraising in 2013. This year’s report features the addition of overall charitable giving data from 985 organizations and online giving data from 778 organizations.
Here are some highlights:
DMAW’s annual meeting included a timely and important discussion of charity evaluators, impact strategy and that controversial measure of nonprofit effectiveness—the overhead ratio. The panel, “Charity Watchdogs, Donor Perceptions and the Overhead Myth” featured an impressive lineup, including:
Three conclusions stood out to and, frankly, inspired me that evening: an alignment of interests among the parties represented, a call for strategic responsibility, and a related call for better and braver messaging.
Alignment of Interests
Contrary to popular belief, charity evaluators, nonprofits and impact prophets don’t need to duke it out. While nuanced arguments remain, the big players in this debate share some important commitments. Most importantly, they are committed to the work that nonprofits do—maximizing benefits to their constituents and local communities.
Each perspective is exactly that—a perspective on how nonprofits can best go about their work. The so-called “watchdogs” are evaluating nonprofits in order to safeguard the public trust and donors’ commitment to philanthropy writ large. Nonprofits are doing the work they do best—addressing the needs of their constituents and executing their missions. And those who prioritize impact are urging nonprofits to think bigger and do more.
They offer different angles on a shared concern—strengthening and scaling the missions of nonprofits around the world. A hostile or oppositional posture does nothing to further that purpose. To that end, Dan Pallotta rightly suggests that we stop using the word “watchdog,” favoring instead a collaborative framework.
Smart nonprofit leaders understand the root causes of an organization’s overhead, as well as the high-altitude decisions that have led there. They also understand the decisions that can either change that result or maintain it. And they own the responsibility to make those decisions purposefully on behalf of their nonprofits’ missions and stakeholders.
Steven Nardizzi offers Wounded Warrior Project as a compelling case for choosing one’s overhead ratio. For example, Wounded Warrior does not accept government funds, a commitment that increases the nonprofit’s overhead ratio, yet gives it a stronger position when advocating for injured service members on the Hill. They have likewise refused sponsorship from companies selling alcohol, again choosing to accept a higher overhead rate on behalf of Wounded Warrior’s constituents, who suffer from higher than average rates of substance abuse. This example teaches us that overhead ratios aren’t a circumstance happening to nonprofits—certainly not the strategic ones. Like Nardizzi, nonprofit leaders should put their strategy first and stop managing to rigid overhead thresholds.
The thresholds are counterproductive when they cause nonprofits to underreport costs or spend inadequately. They generate bad decisions that result in withering donor files and stunted potential. We agree with Dan Pallotta that, in order to grow, nonprofits must increase their investment dramatically—and we agree that most are not investing sufficiently. Nonprofit leaders are too often afraid to authorize the very growth strategies that will enable them to do more for their constituents. Stanford Social Innovation Review has called this the “Nonprofit Starvation Cycle.”
The tough reality here is that nonprofit leaders must get comfortable discussing these matters. They have a responsibility to morph stakeholders’ concern for overhead ratios into more substantive conversations about an organization’s strategic mission. Peter Kramer recently made a complementary case for candidness in The Chronicle, addressing the need for complete and specific financial discussions between nonprofit leaders and funders.
Last week, Andrew Watt urged the DMAW audience to “change the tide” on this discourse, reprimanding us all for failing to communicate what we do and why. This is a tough, but vital, call to action. Nonprofits need institutional communications strategies and marketing strategies, not just fundraising strategies—and they should be prepared to invest there too.
Fundraising professionals who get this—both within nonprofits and in counsel to them—should lead the charge to clarify message across departments and throughout hierarchies. We must advocate for our nonprofits to invest as required. And we must coach our colleagues through this process. Why us? Because we are experts at messaging—it is the cornerstone of our impact as fundraisers.
The Integrated Marketing Advisory Board (IMAB) just held its first annual The IMAB Virtual Marketing Conference for Nonprofits – a one-day, conference call conference with seven sessions and as IMAB put it, “A wealth of insights for nonprofits.”
The Conference was a huge success and IMAB has received terrific feedback from participants. So did you miss part or all of this inaugural Conference? Don’t worry – we’ll get you caught up. Click here for a full wrap-up (by IMAB guest bloggers) or view the session recordings at your convenience and share them with your colleagues.