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BenchmarkingMajor and Mid Value DonorsTrends

Where do BIG donors come from?

This might surprise you: Your next generation of mega-donors are not hiding out at the country club or in CEO suites at the tops of the tallest buildings in town.

They may or may not be at those places. But nearly all of those who will eventually be your top donors are already on your mailing list. They’re donating to your direct mail. They’re giving above-average amounts, but not so high that you’ve noticed them yet.

Here in Australia as well as in the USA (and pretty much the rest of the world), the percentage of major donors who started their relationship as regular direct mail donors ranges between 85% and 95%!

How do you find these hidden-treasure people?

The first step is wealth screening — where a company compares your donor list with wealthy people or known large givers.

Next step: Meet these potential large donors!

And it usually starts with a phone call. These are not sales pitch calls. They are question sessions: the goal is to get a meeting with the donor — but only if it is worthwhile. A visit is not worthwhile if you determine that the prospect is not a major gift prospect (maybe they tell you they are broke, just lost their house, gone bankrupt etc.).

Here’s how to start: Introduce yourself, thank for previous gifts and ask something like “I understand that you were recently at my hospital and I would be interested to hear about your experience there”.

Examples of questions assessing interest:

  • Tell me about your personal experience
  • How do you see your involvement
  • Would you be interested in learning more about our work?
  • What areas interest you most in our work?

Basically, ask why they believe in your cause.

Examples of questions to determine the next steps

  • I’m planning a trip to (your town) next week, would it be convenient to meet in person?
  • I would like to invite you to a unique tour of our facility
  • Would you like a tour of something else?

That should help you get appointments.  But remember: you won’t get through to everyone you want to. It’s a numbers game, and it takes methodical patience. But the payoff will be HUGE.

Want to know more about Mid-Value Donors? Sean covers this important topic in the Mid-Value Donor Super Course which is available for all members of The Fundraisingology Lab.

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Who is more likely to give you $5000?
BenchmarkingMajor and Mid Value DonorsMaths of Fundraising

Who is Most Likely to Give You $5,000?

Quiz question: Who is most likely to donate $5,000?

Picture this scenario. You have two donors.

Donor A

Kate (and her husband, Clarke).  In their mid 40’s, with two kids.

They donate automatically every month through their credit card.  They sponsor two children, costing them about $1,200 a year. They’ve done so for three years.

Two or three times a year their own kids swap letters with the sponsored children. They also get regular progress reports on the sponsored children, their families and local community.

Donor B

Margaret, in her late 60’s.

She has donated three times in the last four years. Each time was $1,000 in response to direct mail. No donation in year three, but her most recent gift was about nine months ago.

No other correspondence, except that she received a thank you call from your CEO after the most recent $1,000 donation. This is when you started trying to call donors like her to say thanks.  She said she liked the work the charity was doing and to ‘keep up the good work.’  No other communications.

The ask

You have a mid-value donor program, meant to raise $100,000 from about 100 people, aiming for an average donation of $5,000.

You only have the resources to follow up 100 donors and have decided to visit them at their homes.  But which donor is most likely to give us $5,000 if you ask?

For a little more context, we know the average five-year-value of a monthly giver who is also a child sponsorship donor is around $2,000. Our average five-year-value of a direct mail donor is about $400.
So Kate and Clarke, as well as Margaret, are already telling us they are ‘better than average’ by beating that average soundly within just three years.

The charts below show average values of donors by ‘type,’ focusing on how they were acquired in the first place. You can see we are already at the top end with our five-year average.

5 year value by charity 2008-2010

Five-year value of face to face acquired regular donors. From Pareto Fundraising Benchmarking 2016.

Gifts of $1k - by age

Five-year value of cash donors. From Pareto Fundraising Benchmarking 2016.

5 year value by charity - mail

Cash gifts over $1000 by age. From Pareto Fundraising Benchmarking 2016.

Who is most likely to give us $5,000?

The answer seems obvious.  Surely Kate and Clarke?  They give more, are more reliable and they correspond with their sponsored children. They seem more committed – more involved.

On the other hand, they are younger than Margaret and probably arrived at the cost of sponsoring through a discussion process and most likely budgeted for it.  They are likely giving what they think they can afford.

Also, they likely have less disposable income because of a mortgage, school costs and other high expenses.

Margaret, however, is likely to not have these things and she donated a grand without an intimate relationship.

I would love to speak to them both, but I haven’t the resources.  So I am going to focus on Margaret.

Margaret is most likely to give me a larger one-off gift.

Even without my theorising about budgeting process, mortgages and all that, I would still go for Margaret.  It is her age that seals the deal for me.

The plan

My plan would be to send Margaret a great high-value direct mail piece and am also keen on following her up with a personal visit.

Quiz answer

In reality, you don’t know.  But you have limited resources.

Want more help on knowing how to use your limited resources to cultivate your mid-value donors? Join us inside The Fundraisingology Lab.

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The Maths of Mid-Value Donors
BenchmarkingMajor and Mid Value DonorsMaths of Fundraising

The Maths of Mid-Value Donors

Firstly, well done for reading past the title of this article. The word Math can scare many fundraisers away.

But you and I know that any serious fundraiser needs to understand the numbers behind fundraising.

And this is rather easy math, I think you’ll agree.

In the years that I have been working in fundraising, I have noticed that many major donor programs fail.

You have probably noticed that many mega-donations go to universities, hospitals, schools, zoos and other institutions. It’s far less common for ‘classic’ charities like Make A Wish, Cancer Research, WWF and Save the Children to get these mega gifts. Usually only if they are running a capital campaign.

Yet generally when we start a major donor program, we think big! Maybe not $5 million from Dick Smith, Richard Branson or Bill Gates BIG, but certainly aiming for gifts over $100,000. And mostly our aim misses. Badly.

Of nearly 100 Australian charities, including most of the top thirty fundraising charities, we see little income from $100,000 plus donations. Even drilling down to $25,000 plus we don’t find a growing pot of gold.

Note the chart below showing these charities just over $30 million from donors giving more than $25,000 (follow the arrow) in 2007 It was about the same in 2015.

Cash Gifts 1K by year and value band with arrow

Data courtesy of Pareto Fundraising’s brilliant benchmarking project.

In the same time frame, total revenue from individuals grew from $800 million to $1.4 billion in Australia. Clearly, we are underperforming in the higher value areas.

When a charity has a major donor strategy, most are aimed at donations above $25,000. But there’s a lot of benefit in working with donors who give less than that.

Some charities have done so much better by setting up systems and processes to grow the donations of people around $1,000 to $25,000 through a combination of better direct mail, stewardship and visiting.

The growth in this area is much better.

The chart below shows growth from about $40 million to nearly $70 million:

Cash Gifts 1K 25K by year and value band

Data courtesy of Pareto Fundraising’s brilliant benchmarking project.

I don’t think we should ignore the potential from the group of donors giving at levels above $25,000 but we certainly should think about the group a little below that first.

Why?

There are more of them. It is easier to reach them. And I know that you can get results very, very quickly for your cause.

For any charity with individual donors, action on this group is the quickest, cheapest and easiest way to boost funds.

Sean

Want to know more? Then please join The Fundraisingology Lab.

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Really Integrating Direct Mail with Major Donors and Bequests
BenchmarkingBequests and LegaciesDirect MailMajor and Mid Value DonorsMaths of Fundraising

Really Integrating Direct Mail with Major Donors and Bequests

I believe the new big thing for charities (and something Roger Craver of The Agitator has pointed out) is something really old-fashioned: talking to your donors face to face. Especially mid-value donors and those considering making bequests.

The charities that grow and raise more money for their beneficiaries are those with a long-term view. They have a cohesive, coordinated and focused strategy.

With only 301 charities (1%) accounting for half of total revenue in Australia, it is relatively easy to get hold of some really fascinating data. Especially when many of the larger charities collaborate in Pareto’s annual benchmarking exercise.

Let’s take direct mail.  If you haven’t already got a large database of donors through direct mail, the costs of donor acquisition, setting up a team and database, bringing in the right skills and more can mean it will take years to break even, much less generate funds for the cause.

Despite that, approached holistically, the bottom line is that direct mail, in most countries, still produces one of the very best medium and long term returns of any acquisition.

Related blog: Do I Still Love Premiums!?

You are probably asking… what is this ‘holistically’ caveat? Well, a few things actually.  Direct mail-acquired donors produce the best results when:

Preferably more than 50% but at least 35% of acquisition costs are recovered by donations to the acquisition mailing.

And…

Your team works together.  Direct mail, bequests, mid value, digital and major donors.

And…

You are focused on maximizing net income in the long term, not on short-term Return on Investment.

And…

There are people prepared to, and trained to, approach and ask donors and bequests for additional funds on a personal basis.

Take this example, based on real data and modelled for a new entrant to direct mail in Australia.

The charity invests $1 million per year, for five years, on direct mail acquisition.  Other costs such as ongoing house mailings, calling donors for regular (monthly) gifts, thanking, processing and developing packs are additional to that million but included in the model.

After ten years the charity would have raised over $7 million net.  A lot of effort and risk for what is an OK return.

However, what if the charity ‘lifted’ the values of some of these donors through major donor activities? Applying the growth that we have seen the best charities get through their major donor programs, and including some costs for staff and materials, we end up with $13.6 million.  Now we are talking growth!

Related blog: The Missing Millions in YOUR Charity’s Database

And what if they were great at legacy fundraising too? Well, they’d be up at $21.3m net, with an annual net income looking forward in excess of $3m which is pretty much in the bag.  A superb, reliable and expandable revenue.

Here it is illustrated:

Comparing direct mail with bequests legacies and major donor 65pc ROI

A great chart for your board when you are seeking investment, and a great approach for breaking down internal silos.

If you’d like to learn more about how you can mine this gold, check out my Mid-Value Donor Super Course that is available to all members inside The Fundraisingology Lab

It’s the quickest, cheapest and easiest way to raise more money for your charity!

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Monthly GivingBenchmarkingTrends

Your Definitive Guide To Face-To-Face Fundraising

Please click here to get a PDF of Your Definitive Guide to Face-to-Face Fundraising sent to your inbox.

Face-to-face has been a great way to find new supporters and raise money. But is ‘face-to-face’ monthly giving acquisition a worthy strategy beyond 2017?

First, let’s get our definitions clear. I’m referring to the mass acquisition of monthly donors by canvassers approaching strangers in the streets, at events, or door to door.

Like these wonderful UNICEF fundraisers I met in Brazil…

Picture1

These canvassers are NOT asking for cash or a one-off gift. They usually only accept ongoing, automatically debited donations. Nowadays, they are often using iPads or something to enter data straight away.

For a long-time, face-to-face has dominated monthly giving acquisition in Canada, Australia, New Zealand, UK, Hong Kong, Singapore, Philippines, Ireland, and many more.

But things are changing…

New channels challenge face-to-face

For Pareto Fundraising – the full-service agency I co-founded in Australia – digital donor acquisition to monthly giving has been growing.

Sister agency, Pareto Phone, makes phone calls on behalf of charities to ask people to become monthly givers. A huge proportion of these calls are to people who responded online or through SMS to online and offline media advertising. This is growing in volume dramatically.

Thai charity Soi Dog Foundation has generated nearly all its thousands of monthly givers directly online (mostly through Facebook) or online, followed by a phone call.

In other countries, there is a new big thing. And this big thing is huge in the UK. Fundraisers are acquiring monthly donors in a two-step process. They use outdoor, digital, and TV advertising to drive people to send text messages (SMS). Then, they call these lovely people and ask them to start an automatic monthly donation.

Bad press for face-to-face

The media loves to spin a yarn about how bad face-to-face agencies are, with stories of inappropriate training, simplistic views of how much goes to the charity, and more. It’s mostly just yarn-spinning, exaggeration, and selective facts.

But there are some real issues. A couple of face-to-face vendors in Australia were caught by labour or tax laws. I know one made a genuine mistake and moved quickly to rectify. But this is not something charities want to associate themselves with.

Any charity thinking of hiring a face-to-face agency should check references and ensure the agency has been audited and complies with all laws.

But despite competition and the odd bit of bad press, face-to-face still provides the most monthly givers in Australia, NZ, and probably everywhere else it is practiced.

But is it still worth it?

Sean doing F2F

Me canvassing for Mind in the 90s. I was the marketing and fundraising director at Mind, a UK mental health charity. I thought I would go through the training and get out there myself. I was not very good. The guy I am chatting to was French, and we couldn’t get non-UK credit card holders to sign up. But we had a good chat.

A look at the data on face-to-face

Every year, loads of the largest fundraising charities in Australia (over 80 in 2017) get together to share information, so they can understand the market and maximise efficiency.

It’s an amazing collaboration. They do not share any data that could compromise an individual’s privacy, but they can look at millions of transactions.

Pareto Fundraising’s Benchmarking looks at a decade of data, which includes monthly givers acquired by all channels, and the volumes are huge.

This is truly how donors behave, not how they say they behave.

Slide016 Round 14 Scale

Nearly $1.4 billion of donations from individuals are included in the Pareto Benchmarking study. And you can see from the circle above, just under half comes from regular (that is, monthly) giving.

Face-to-face has achieved something no other fundraising channel has: getting younger people to donate in meaningful numbers. (And by younger, I mean under 60.) Before face-to-face, the average age of a donor was around 70.

Face-to-face brings in donors with an average age in the early to mid-40s. This is remarkable, and the volumes have been huge.

The cost of face-to-face

Most canvassers don’t work directly for the charity. They work for agencies that organise the mechanics of canvassing.

Many passionately believe in the cause and love that they can make a living and do good at the same time. Some canvassers may work for several charities, exposing them to different causes.

But face-to-face is expensive – travel, salaries, materials, databases, follow-up systems, SMSs, email, videos, welcome packs, welcome videos, admin processes and systems, stamps… none of these are free.

Like any marketing, expensive doesn’t mean bad. The question is whether it’s effective in achieving its purpose.

Is it working?

Let’s define ‘working’. For me, it means you make a net return in a reasonable time frame and not cause damage to the brand of the charity.

Net return is obvious, but damage to the brand is harder. Looking at a charity’s impact (the work it does) and its overall income – beyond face-to-face and over many years – is the best objective measure.

Also, ‘working’ would be influenced by how well it ‘works’ compared to other fundraising channels, such as digital, mail, phone, outdoor, TV, radio etc.

So, let’s start with volume. In 2016, around 380,000 regular givers were acquired by the charities in the study. And nearly 300,000 were through face-to-face.

Slide088 New RG recruits

These numbers are so massive, it’s clear that, if you are serious about growing regular giving, you must do face-to-face.

But do these donors stay with you?

When we look at 2010 to 2015, we see that about 52% of the donors acquired by face-to-face were still giving 12 months later.

Slide105 Year 1 RG Attrition from starters by channel

But how does retention of face-to-face compare to other methods? You can see in the chart above that face-to-face has the worst attrition.

It seems obvious – non-face-to-face methods are better than face-to-face!

But look at the volumes. Losing 48% of 300,000 leaves us with more than 155,000 people giving every month, twelve months later. All the other channels add up to about half that number, despite their low attrition.

Why does face-to-face have the worst attrition?

Age is key. I am sorry to tell you this, but generally, younger people don’t give as well as their older counterparts.

Face-to-face has younger people giving in strategic volumes. But when they give, they are less ‘loyal’ than older donors.

Because face-to-face gets younger donors, it has a worse attrition. However, although half of those younger than 60-year-olds are not giving a year later, half still are.

The chart below (from the 2016 benchmarking report) shows a massive difference in attrition by age. Older is better.

Slide126 RG attrition by age F2F BM13 2016

Okay, you believe me – face-to-face works in terms of the number of sign-ups. But we need money, not just sign-ups, and you probably still prefer those lower attrition non-face-to-face donors.

The chart below shows the rise in income for charities over the past ten years, driven mostly by face-to-face.

Slide086 RG Income by channel

Clearly, the big income driver is face-to-face.

Another way of looking at the quality of a relationship with donors is to look at the proportion of people who stick with their payments but increase their contributions.

The chart below shows face-to-face donors are about as likely to upgrade over the years as any other method.

The phone is better, but if you consider that upgrading is best done on the phone, you can imagine the contact rate of people acquired by the phone is much better too; we know they are phone responsive.

Slide118 RG Upgrade rate by channel

So, face-to-face gets the volume. It has good (but not great) retention. It has good upgrade rates. And it provides lots of income.

What should you do?

The right plan is to acquire as many regular givers through non-face-to-face as you can. Then, top up your targets with face-to-face.

Just keep an eye on net revenue: Face-to-face donors are worth about $750 each over five years, but non-face-to-face donors vary between $600 and $1,750. Make sure your costs make sense against your estimated value.

But what about brand damage?

Seriously – Greenpeace, Heart Foundation, Amnesty, World Vision, WWF, Red Cross, UNHCR, Oxfam …  these are all major users of face-to-face. Damaged brands? No.

Most have been doing this for many years, with no negative impact on the brand, donor relationships, or their ability to do good.

Is face-to-face fundraising worth it for your charity? Yes, but only if you have good, tight automated admin, a need for money, good communication systems, and a great monthly proposition (offer).

Should you start face-to-face?

It depends. As you can see, face-to-face donors are the worst type of monthly donors. But they provide the largest volume.

For most charities starting monthly giving programs, you should have a balanced portfolio that starts by converting your current donors to monthly by mail, phone, and online.

Then you may want to look at online – if you have good enough content and stories.

Only then should you embark on face-to-face. But when you do, you will need a big budget!

I hope that this guide to face-to-face is useful. Please share your experience with face-to-face, or your question by leaving a reply below.

Please click here to get a PDF of Your Definitive Guide to Face-to-Face Fundraising sent to your inbox.
If you are in New Zealand, Netherlands, or Australia, Pareto Benchmarking is up and running! In all other countries, if you are an agency/vendor or a charity and you are interested in getting benchmarking going, please check out the Pareto Benchmarking website here
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BenchmarkingDirect MailDonor PsychologyMaths of Fundraising

How Many Times Can You Mail Your Donors Before They Rise Up And Kill You?

So how often should you mail?

Pareto Fundraising, the company I co-founded before Moceanic, looks at data and tries to work out what the optimum communications program should be to maximise lifetime value from donors.

Donors are very expensive to get on board, and it is imperative that you look at your data to maximise return on that initial investment.

The most important factor for whether someone will give to you is whether they gave you previously.

Then, the most important variables are how recently and how many times. The more recent someone gave, the more likely they are to give again. 

Let me say that again, because it’s so important, and you might not believe it: The more recent someone gave, the more likely they are to give again.

So, mailing, emailing or phoning more often means that you are constantly communicating with donors more recently, and therefore more likely to get gifts from them.

Also, the biggest cause of attrition is not giving for a while (!). Fewer communications mean that the gap between giving is greater.

If you don’t communicate very often, your attrition goes up, not down. Unless your communications are not very good.

When it comes to asking donors for a monthly gift we also note that there is an optimum time. It does vary slightly, depending on the cause, channel of solicitation, etc. but it is always going to be within a couple of months of a gift.

Four to six weeks is the right place to start. We are not alone with this approach, anyone else who measures lifetime value and optimum ‘conversion’ timings finds the same answer.

And this does not appear to vary between countries.

We took that learning from data in the UK and applied it in Australia to find the same.

Analysing data across other countries gives us the same result.

This approach is not aggressive and is not subjective or an opinion.

It is maths. Across any given data set, increasing communications tends to increase the lifetime value of that data set. Not just short-term income, but overall lifetime giving.

Managed well, it should also increase your number of bequests.

Moceanic’s fellow Fundraisingologist, Jeff Brooks advocates as many as thirty asks per annum.

That seems a lot, but he says that he has never seen increasing the number of asks decrease the total value given.

Create better donor communications than ever before – check out Jeff’s course!

The limit on the number of communications is likely to be forced on you for internal reasons – your capacity to produce multiple communications, for example.

Related blog: You have no dramatic stories to tell? You’re looking at it wrong!

Whilst increasing the number of asks (and appropriate thank yous) is likely to increase total given, and increase retention, each time it occurs also increases costs and reduces the amount given on that occasion.

Consequently, an initial increase in return on investment (ROI) as you go from say four to eight communications will reverse, and you will probably begin to see a decline as you go from say eight to sixteen.

Even so, net income is the best measure – not ROI – from warm mailings to your own donors.

It is better to raise $700k at a cost of $300k than $500k at a cost of $100k. More donors, more security, more room for error, more legacy potentials, etc = more money in the end.

So, how many times should you ask?

It depends – mostly on the size of your fundraising database, and on the fixed costs associated with pulling a mailing together – the costs of copy-writing, design, staff, etc.

More asks will most likely raise more, and improve donor retention and lifetime value – but they will cost more, and take more time.

Related: Here’s some tips to help overcome those barriers to mailing more.

Could that time be used more wisely? In the end, it comes down to maths, not donor fatigue.

I’ll try to illustrate it in this simple chart, showing three charities of various sizes. The columns recommend their total income, net income (profit) and their ROI (return on investment – how much you get back for every $1 you spend).*

Chart1

chart2

Chart3

What do you think? Do you mail your donors more frequently? Or do you try to keep the number of mailings low? Why?

Please share your experience by leaving your reply below this blog.

Sean

P.S. Jeff Brooks’ course Irresistible Communications for Great Nonprofits shows you step-by-step how to create perfect donor communications and raise more money for your cause. Check it out!

P.P.S. *A bit more detail for the modellers who are curious about my charts!

  • Each charity spends an average of $1.20 per pack mailed, gets an average donation of $50 and has an average of 20% response rate when they mail twice a year.
  • The average number of donors available to mail decreases as the number of mailings increa; reducing by 10% every time they double the number of mailings.
  • In addition, the response rate decreases – from 20% for each of two mailings, then 16.6% for four mailings, 13.8% for eight, 12.4% for twelve and 11.5% for 16.
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Beware Don’t Make These Mistakes When Measuring Success Colin Shaw Featured Image e1519875069306
BenchmarkingMaths of FundraisingTrends

How the Way You Measure Success Can Shape Your Organization’s Future

When corporations fail to invest in their future, we shake our heads and wonder why they’re so shortsighted.

Think of the once-important ice-delivery companies. They didn’t realize they were in the business of providing ice; they apparently thought they were in the business of finding and delivering ice. They might have used their expertise with ice to develop (or at least sell) those new-fangled home refrigerators. But they didn’t, so they were destroyed by the new technology. The minute there was a better way to have ice in the home, everybody shifted to the better way.

How could the ice companies have been so shortsighted? Well, it’s not hard to see why.  They had a great thing going, so they never thought ahead, paid little attention to changing technology.

We should look at nonprofits the same way.

Those that don’t pay attention to the changes around them and invest have a grim future ahead. Changing technology, demographics, media use, and competition will chip away at their fundraising revenue until the ground drops out from under them like a sinkhole.

The difference between an investment-oriented nonprofit and one that’s not paying attention can be hard to see. To show you that difference, I’m going to plunge deep into the weeds for a moment…

There are two key performance indicators in fundraising that measure exactly the same thing: return on investment (ROI) and cost per dollar raised (CPDR). Here’s how you calculate them:

  • ROI is revenue divided by cost: If you raised $600 from a campaign that cost $200, the ROI is 3. If you raised less than you spent, your ROI would be below 1. It is sometimes expressed as a ratio (3:1), a dollar amount ($3), or just as a number.
  • CPDR goes the other way: cost divided by revenue. The preceding scenario, where it cost $200 to raise $600, would give a CPDR of $0.33 — it cost 33¢ to raise each dollar. If you spent more than you raised, the CPDR would be above $1. CPDR is usually expressed as a dollar amount.

Both figures measure fundraising efficiency. They both answer, with some precision: Was that worth it? The actions for improving both ROI and CPDR are the same: you can lower costs and/or you can improve response. Responsible organizations pay attention to both.

I’ve encountered few organizations that use both ROI and CPDR. Anyone could use both, but hardly anyone does.  Because I think you’re either a CPDR organization or an ROI one. There’s a fundamental difference:

  • ROI organizations tend to focus on improving results — that is, making their ROI higher. They make bolder decisions, innovate more often, and generally have a mind-set that they can and should make their fundraising better all the time. They are more investment-minded.
  • CPDR organizations zero in on lowering their CPDR by cutting costs. This fosters a narrow approach and a fear of failure. Vision and innovation come hard and rarely for CPDR organizations. But hey, at least they keep costs down!

Which approach do you think is more likely to wow donors, win enthusiastic support, and uncover new ways to raise funds? Not the organization that’s always looking for ways to do less.

As the old cliché goes, You can’t cut your way to greatness.

Does measuring ROI instead of CPDR make you bolder? Or does having an investment mind-set lead you to prefer ROI? Chicken or egg?

The important thing is that you should focus your thinking and planning on investments, on opportunities, on improvement.

An organization with an investment approach is always asking these questions:

  • How will we reach donors we haven’t reached before?
  • How can we touch donors more deeply?
  • What do our donors really want from us, and how can we give it to them?

They ask these questions, and they seek the answers. They spend time and money seeking them. They find partners that help them invest and think about the future. Of course, you owe your donors and your cause prudent frugality. But be sure to spend your best time and energy investing in donors.

This post is excerpted from my book The Money-Raising Nonprofit Brand.

Thoughts on how what you measure shapes the way you think, and how you can be a more forward-looking and investment-oriented organization? Share your ideas in the comments!

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TrendsBenchmarkingMaths of FundraisingMonthly Giving

Should My Pareto Score Worry Me?

Should you be concerned about your Pareto ‘score’?

Following a post on Moceanic Facebook about the Pareto Principle, Daniel Peyton from Habitat for Humanity asked me if there was a Pareto split that a charity fundraiser should be concerned about.

For example, if you look at your data and find out that 20% of donors DON’T give 80% of revenue: should you be worried!?

Well, it depends.

Very few charities have a true 80/20 split – a ‘perfect’ Pareto score. But when you combine the data of a number of charities, they usually come close. The diagram below shows the Pareto Principle across all of Pareto Fundraising clients – representing about $1.4 billion.

It turns out that of all donations, 20% of donors give 73% of donations, and four percent of donors give 46% of donations. A little ‘flatter’ than the ‘perfect’ Pareto score.

Take monthly giving out, and only look at one off donations, and those ratios come much closer to the true Pareto principle at 78% of donations from 20% of donors, and 56% of donations from just four percent of donors.

So the lessons from Pareto – put your effort into the top 20% – still apply!

Pareto Principle

But what about monthly giving? Here the numbers are much flatter, with just 45% of revenue come from the top 20% and 16% of revenue from the top four percent. Concentrating efforts on the top donors is likely still worth it, but not to the same degree as with one-off donors.

So what should concern you?

Let’s look at some scenarios:

‘Extreme’ Pareto

My Pareto split turns out to be 95% of income from 20% of donors. Is this a concern? Possibly. If I raised $1 million from 10,000 donors that means $950,000 was coming from 400 donors (average $2,375) and just $50,000 from 1,600 people (average $31).

Let’s say it was just one donor who gave me $750,000.

Take that out, and I am raising $250,000 from 9,999 donors.

I still raised $50,000 from 1,600 (average $31) lovely people and $200,000 from the top 399 donors (average $501). My Pareto split is now 80/20!

So is it bad that I got that huge donation? Probably not. BUT it is risky if such a high proportion of my income is from just one donor. Perhaps a government grant?
If I were head of fundraising I would want to diversify, probably with a monthly giving campaign.

‘Flat’ Pareto

My Pareto split turns out to be 30% of income from 20% of donors. Is this a concern? Probably.

If I raised $1 million from 10,000 donors, that means $300,000 was coming from 400 donors (average $750) and just $700,000 from 1,600 people (average $437).

This looks like a monthly giving program to me. And it looks like we are doing well on initial retention (otherwise I would have more people giving very little) and are not doing great at upgrades (otherwise I would have more people giving much more).

It also tells me I am likely not doing well with major donors or bequests. So in this case, if I were head of fundraising I would want to diversify, probably increasing investment my major donor and bequest marketing.

If you do look at your data, you will likely see you are actually closer to a Pareto split unless you have one or two massive donors, or the lion’s share of your income is from monthly giving.

Thanks Daniel for this great question!

Sean

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TrendsBenchmarking

Fundraising in Australia From Individuals: a Lovely Infographic

Every year loads of wonderful Australian and New Zealand charities collaborate on learning about their market together.

Here is the infographic summary for Australia.  Useful abroad too!

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And if you are based in Australia or New Zealand, click here to register.  As long as you have more than 10,000 transactions you could join, and the basic report is free!

Sean

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