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Fundraising Maths of Fundraising

What NEVER to Cut from the Fundraising Budget — and What’s Okay to Cut

Sooner or later in almost every fundraiser’s life the memo comes: You must cut your fundraising budget!

It’s probably not a good move, because fundraising is the lifeblood of most organizations. But let’s be realistic — when times are tough, the pressure rises to make cuts, and you don’t always win the battle.

The truth is, not all cuts are going to kill you. The best strategy is to choose your budget battles. With that in mind, here are two battles: one you should fight and another you can afford to gracefully give up.

The budget battle to fight

You’d be crazy to cut new donor acquisition. This will be a tough battle, but you should fight it like a rabid weasel.

I’m pretty sure the knife-wielders have their eyes on your donor-acquisition program. They imagine it’s a big, juicy, painless cut. Most likely, acquisition is a net cost to your organization. That means every dollar cut from acquisition improves your bottom line. Today. While everyone is feeling the pressure.

But here’s the problem: Cutting donor acquisition doesn’t inflict any immediate pain, but it’s going to hurt in the future. It’s going to hurt a lot, and not just people’s feelings. Abandoning acquisition can create catastrophic and lasting financial impacts in the form of depressed fundraising for years to come.

The hard-to-see truth is that donors grow more valuable to the organization every year they’re with you. Their responsiveness, retention, even their likelihood of upgrading their giving amounts — they all increase every year. Here’s how it plays out:

At the point of acquisition, you’re losing money. Almost everyone does.
If your program is healthy and consistent, you’ll start to break even on that initial investment in 12 to 18 months (give or take a few!)
After another year, you’re earning a 2-to-1 return from those donors who are still with you.
In the third year, your return rises to around 3-to-1. Starting to look good.
The real payoff comes in the fourth and following years, when those established donors are returning $10 (or more) for every dollar you spend.
More important are those who upgrade to higher levels: Those who become major donors, bequests donors, or monthly donors. If you don’t get any new donors, you don’t have a source for those super-important donors.

Those cuts to donor acquisition leave a black hole in the middle of your donor base — a vacuum where there should have been responsive, committed donors.

Every fundraising campaign you launch for years to come will do worse than it should because you’re missing those donors. It’s not just fewer bodies. It’s fewer committed supporters. And that empty donor class continues to echo through your fundraising. The pain tends to peak three to four years after the cuts, but it will be meaningful and measurable for seven to 10 years.

Do your budget-cutters know this? Would they still make the “easy” cuts to donor acquisition if they did? They might think that cutting acquisition is no worse than getting a bad haircut. But it’s actually more like amputating your legs.

The budget battle to let go

You might do better in the critical battle to protect donor acquisition if you’re willing to give the knife guys something they can slash without a fight.

This is going to make me spectacularly unpopular in some quarters, but I’m putting the whole class of branding and awareness activities in the go-ahead-and-cut category. That’s because there’s no direct, measurable connection between those expenses and any meaningful impact on your bottom line. Cutting these activities doesn’t hurt in the short term or in the long term.

Spending on advertising is an act of faith. Faith can be a beautiful thing, but it’s not the best basis for business decisions. In hard times, you’ve got to put your dollars into measurable activities.

Some brand advocates will tell you their work is measurable. They’ll cite metrics like “unaided recall” — meaning that when surveyed, more people mention your organization’s name than did before — or “aided recall,” where people claim to have heard your name when they hear it.

Pardon me, but do you mind if I roll my eyes? Measuring “recall” and things like it is almost completely bogus.

It’s possibly true (though it can’t be proven) that someone who’s heard of you is more likely to donate than someone who hasn’t heard of you. But that’s not a fact you can take to the bank. For one thing, it doesn’t cost anyone a cent to tell you they’ve heard of you — it’s just a thought, an idea. For another thing, as all direct marketers know, the divide between what people say and what they actually do is wide. Since we’re talking budgets here, stuff you can take to the bank is pretty much the whole thing.

Think of it this way: Would you rather move 100 people 10% of the way toward giving or move 10 people 100% of the way toward giving?

In the first scenario — which is a branding or awareness campaign — your revenue is zero, no matter how much you spent. In the second scenario — a classic direct-response fundraising campaign — you end up with revenue. The only question is whether it came at an acceptable cost.

In flush, easy, noncutting times, you might be able to spend money on speculative ventures like branding and awareness and be okay with the non-measurable benefits that could come as a result.

But not when the budget cutters are active. So hand branding activities over to the knifers. You’ll make almost everyone happy.

Read more about smart budgeting for fundraisers:

How Cost-Effectiveness Could Destroy Your Charity

Discover how you can connect more with your donors, grow your fundraising income, and master your career. Join The Fundraisingology Lab and you join the thousands of smart fundraisers who are becoming EXTRAORDINARY FUNDRAISERS. Check it out.

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Direct Mail Maths of Fundraising

Pop Art Surprised Businessman e1517479584911

Should You Dive into Direct Mail? Here’s What You Need to Know First

You’ve heard the news: Direct Mail is not dead. In fact, it’s still where much of the action is for fundraisers.

Does that mean your organisation should dive into Direct Mail if you are not already doing it?

Maybe.

I’m going to give you some facts and figures that can help you decide whether or not you should fire up a direct mail program. It can be expensive, difficult, and it takes some time to start paying off.

To get us started, let me give you what might be a startling figure: 0.6%.

That’s six out of a thousand.

Not much, but it’s a pretty average response rate for “cold” direct mail in well developed direct mail markets (like USA, UK, Australia, NZ, Hong Kong). “Cold’ is mailing to people who have never donated in response to mail, to you, before. That includes bought or rented lists, people who are on your database but never donated, attendees of events and anyone else.

For now, 0.6% is what you’ll get, unless or until you know otherwise. Response often ranges up toward 1% and sometimes even higher.

That 0.6% guess will help us calculate the volume of your direct mail program. Which leads us to the second magic number: 200.

You always need at least 200 responses in any test group to be able to statistically compare.

If you can’t afford to mail enough pieces to get 200 responses then the whole thing is pointless. Don’t do it.

To get 200 responses at 0.6% you need to mail 33,000 packs.

If you want to test two packs against each other (which you should be doing) then you have to mail 66,000 packs.

If you can afford to mail that 66,000, you’re on target — so far.

But there’s one other step.

That 66,000 mailing will hopefully get you around 400 new donors. That’s not enough donors for a sustainable direct mail program. Basically, they won’t donate enough to cover the cost of your time, database, processes etc.

For that, you need to get at least 1,000 new donors within your first 12 months. To get that, you need to mail 165,000 packs in the next year. Our third number.

So if you can’t afford that, or you can’t find that many names to mail, don’t invest in direct mail acquisition.

But if you can, here’s the next level: Knowing if it’s not just numerically successful, but also financially viable.

Which brings us to our fourth number, which is your Return On Investment (ROI) from your direct mail — or how much you got back for every dollar you spent. ROI is not a good measure for warm fundraising activities (it is actually destructive) but very useful for acquisition.

You calculate ROI by dividing the total income your donor acquisition brought in by the total cost of producing and mailing it. That should include all costs, including the cost to print and mail, list costs, and the cost of writing, design, strategy, project management, etc.

ROI can improve three ways:

Your cost is low.
Your response is high.
Your average gift is high.

They’re all important, but you should focus most on #2 and #3. Extreme cost cutting often ends up lowering response, so it’s self-defeating. Control those costs, but really work to increase response and average gift.

Any ROI above 1.0 on a volume of 66,000 (meaning you brought in as much as or more than you spent) is practically a miracle. If you are trying direct mail in a country where it isn’t well established, maybe you have a better chance of a miracle: if you can get hold of a good list.

Rare these days. More likely, you’ll get back less than you spend.

An ROI above 0.65 ROI (65¢ for every dollar you spent) is very good. If you get that, it means you should almost certainly keep doing direct mail, and on a larger scale.

If the ROI is below this your direct mail is probably not viable. The ongoing donors will not likely cover their cost over many years.

Let’s summarize those BIG 4 direct mail acquisition numbers:

Response rate: around 0.6% or higher.
200 (or better yet, 400 total responses, which means mailing about 66,000 to start.)
1,000 new donors in your first 12 months. That means mailing about 165,000 packs in that first year.
ROI: if it’s 0.65, great; if it’s 0.40 to 0.65 it might work; if it’s under 0.40, there are likely better options for you.

That’s a good start. Once you establish that you have a viable program, you need to track some other things you can’t measure until a year later:

Second gift rate: how many of your new donors go on to give again within 12 months. Only 35%-50% of donors ever give a second gift.
Annual giving: add up how much they gave in 12 months since they came on board. This is how you’ll move from losing money to making it.
Monthly gift conversion. Encouraging your new donors to become monthly donors is one of the keys to success. PLEASE call all new donors and ask them to be a monthly giver within weeks of their initial donation.
Any donors who give more than twice the average donation: call them immediately, thank, and call them again a few weeks later asking for that second gift.
Estimate the 5-year ROI using some basic modelling.

You also should keep track of these other long-term things:

Donor response to a survey: send a supporter connection survey. That’s the best way to upgrade donors to their highest possible level.
Bequest commitments.
Volunteers (if that is important to your organisation).
Cross selling to donors if there are other ways to support your mission beyond donating.

Sounds hard work. Why bother?

Direct mail is still far and away the BEST source of major donors and bequests. Like 5-10 times better than anything else.

If you have a great, integrated program with the direct marketing team, marketing-communications and major donor/bequest people working together: it can beat everything else in the long term! It is just hard!

In fact, it’s so hard, I’d say don’t do direct mail acquisition AT ALL unless…

You are only mailing locals, swapped lists or a well-defined “tribe”
You hire a professional direct marketing fundraising agency (not an advertising agency) with a good reputation.
You have superb integration with major donor and bequest people willing to follow up these mid value and bequest leads.
You have puppies. (Just kidding. But only a little; puppies are probably the most effective subject for fundraising – even if you aren’t an animal charity, squeeze some in!)
Don’t make it up. Learn. If you are serious about investing – even if you meet the criteria above, PLEASE talk to me about how I can help through our one-to-one coaching. You’ll easily cover the investment in savings and have a more informed view!

I hope this helps you make the decision about diving into direct mail acquisition. It’s not for the faint of heart! But it can power the funding of your organisation like nothing else!

Before you embark on a new or revised donor acquisition strategy – even before you begin to look at the budget – please talk to us! We have tons of tools, data and helpful advice that will make it so much easier. Use this link to book a free call with Sean. He’ll give you some very valuable free advice on the direction you should probably go, and will show you how we can help you more through our Coaching+ program.

Related posts about direct mail fundraising:

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VIDEO: How Much Do You Cost?

Too often we treat the time of fundraising professionals like you as if it’s a free resource.

But it’s not at all free. In fact, it’s the most precious and irreplaceable resource you have. And when you put a dollar value on your time, you’ll have good answers to questions you may have struggled with before:

Should I be working on that event we’re doing?
Should we outsource something I’ve been doing?
Is now the time to hire a new person?
Is it better for me to spend my time doing activity A, or activity B?

The formula gives you straightforward, no-ambiguity answers to questions like these. Because the second you put a real value on your time, the light will shine on those questions. And you’ll find that your time is treated with the respect it deserves!

The formula is easy. You can do it in your head. And watch how it guides your thinking and strategy! Watch the video!

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6 Ways to Measure Your Fundraising to Understand Your Donors

I love data. Please don’t worry about me, I also like skiing, Star Wars, sneakers, dancing, and playing Lego with my daughter. I also really like people-watching. I can easily spend hours watching people and pondering why they are where they are, what they are thinking, why they are interacting the way they do. My Mum calls it nosey. I call it research.

My love of data is part of my nosiness. In fundraising, data represents people and the way they behave. And in some cases, it can help us understand not just the what they do but the why.

Here are six critical things you should be watching carefully:

1.Response Rate

The number of people who responded divided by the number you contacted.

This will be a number under 1.0.

Example: If I mailed 1,000 people with my Spring Campaign and 245 respond with a donation my response rate is 245/1000 which is 0.245.

This can be expressed as 24.5%.

Number of responses / Number of people asked = Response rate.

There is no best practice response rate, whether we’re talking acquisition or donor cultivation, other than that cultivation response rate tends to be 5 to 10 times higher that acquisition rates.

Take direct mail acquisition for example … if you have been doing this for many years your response rates will likely start declining as your exposure to available lists increases. If you are new to direct mail acquisition, mailing the same lists will likely get a higher response rate.

You should be able to find out the generally acceptable response rate by asking other fundraisers in your market though and use this as a benchmark. Most important is you compare your response rate to your recent past response rates to assess if things are on the up or down.

2. Average Gift

Income generated divided by the number of donations made.

Example: If I raised $65,000 from 245 people their average gift is $65,000/245 = $265.31

Average gift should be stable or growing, not declining.

Compare like campaigns, such as Christmas last year compared to Christmas this year. If your average gift is decreasing over time, you may have an issue with your ask strategy and/or your targeting. If it’s staying the same, you likely have an opportunity to test upgrade ask strategies.

New donors will pull your overall average gift down, so looking at average gift for new donors versus retained donors will ensure you aren’t making decisions for everyone that are influenced by a specific group, such as brand-new donors.

3. Return on Investment (ROI)

Revenue divided by expenses.

Example: If it cost me $3,000 to mail my 1,000 targets then my ROI is the $65,000 / $3,000 = 21.6 — I brought in $21.60 for every dollar I spent.

You should calculate ROI not only for a single project, but over time. Look at the return over 12 months, 3 years, even 5 years to get a better insight into the value and potential of that activity. Donor acquisition activity will rarely produce a positive result from the recruitment campaign alone, but will grow based on future giving. It’s also important for Monthly Giving programs, as the returns may be 12, 18, even 24+ months out from the initial recruitment.

BEWARE: ROI can be a blunt tool. Its two inputs are revenue and expenses. Reducing expenses can produce a better ROI, BUT reducing expenses in campaigns often leads to decreased revenue, leading to the same or even worse ROI. ROI does not tell you how much net income you generate for your cause. In fact, sometimes a low ROI will get you more income than a high ROI.

Where I find the most ROI most important is when looking at acquisition campaigns. You can compare the ROI of different acquisition activity to help with your investment decisions and you can monitor a particular acquisition activity over time to assess if it remains viable.

4. Second gift rate (usually measured within 12 months)

Number of new donors who made a second gift, divide by the number of these donors who had made their first and only gift, within 12 months.

Example: If I recruited 545 donors via my Christmas direct mail acquisition campaign in December and by the following December 263 of those donors had made at least one additional donation each then my second gift rate, over 12 months, would be 236/545 = 0.433 (43.3%).

It is rare in most markets for second gift rates – except for monthly givers – to be more than 50%.

You might say that a donor who has given you only one gift isn’t quite a donor — yet. It’s kind of like that way a first date is not relationship. That happens over time. Or not.

Second gift rate is usually measured over a set time frame, like 12 months. There are several factors that affect second gift rate. The main ones being the number of opportunities a new donor is presented with to give again, and how quickly they are asked again.

(See this blog for more on how you can secure this critical second gift: The Most Important Gift from Your Donor – It’s the 2nd, Not the 1st!)

I recommend assessing second gift rates after 3 months, 6 months, 9 months, 12 months, 18 months, and 24 months, as each of these will give you insight into how effective your communications in each period have been at engaging your new donors to give again. In some cases, I have seen second gift rates double between 12 and 24 months. The cost to secure the second gift needs to be considered to understand where there is value in continuing to ask.

5. Attrition rate

Monthly giving attrition is a measure of the number of people who were giving last year but not this year.

Example: If I recruited 200 Monthly Givers in January and I have 120 still giving then I know that 80 stopped giving the next January, then my attrition rate is;

80/200 = 40%.

Attrition is a very good measure of success of a monthly program, but not that relevant for one off givers.

6. Income per donor

Total income generated by a particular donor program divided by the number of donors who gave to that program. This gives you the average dollar amount generated per donor over 12 months.

Example: If your appeals program generated $600,000 in total last year and 4,500 unique donors who gave one or more times, then your annual income per donor was $133.33.

This measure tells me the relative value of your donors in your program and is even more helpful when benchmarked against the industry but it’s enough to start looking at your own levels over time. Income per donor should be increasing year over year. If it’s falling, there is a problem. If it is stagnant, you likely have some latent growth potential with your longer-term donors.

Acquisition usually drives down your overall income per donor (the average new donor gives less in a year than the average continuing donor), so it’s helpful to look at income per donor separately for new and continuing donors.

Happy measuring. Please get in touch if you want to take a deeper dive into how to measure you campaigns, programs or donors.

We can help you explore your Donor Service needs and opportunities through our one-to-one Coaching. To find out more and book a free call visit: www.moceanic.com/coaching-plus/

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VIDEO: How Much Do YOU Cost Your Organisation?

Should you write that appeal? Plan that event? Make those phone calls?

Or would it be smarter to outsource it?

There’s an amazingly easy way to calculate that.

In this short video, I’ll show how an astoundingly complex bundle of facts all boil down to a super-simple formula that shows exactly who much you (or any person on salary) costs your organisation — by the day or by the hour.

Empowered with this knowledge, you can make smart decisions about how you spend your time. Get rid of the bonehead stuff that doesn’t make sense. Spend your time doing things that have the most impact!

Please share your experience with decisions about outsourcing or not by leaving your reply below. We’d love to learn from your experience.

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Pop Art Businessman watered money dollars from a watering can

How Cost-Effectiveness Could Destroy Your Charity

Write down these three things:

Your favourite charity — not the one you work for
How you support that charity (monthly gift, volunteer, occasional donation)
Why you support them

Here’s mine:

My favourite charity: The Sumba Foundation
How I support it: Regular gift from credit card plus an occasional extra donation
Why? I went to see them at Christmas last year and met loads of the kids. Before the Sumba Foundation started its work, half of all kids would die before they get to adulthood, mostly from malaria. It is easily prevented. And I was really motivated.

Please go ahead and make your list. It will be worth it.

It’s a curious thing, but most charities, much of the media, and an annoying number of public servants appear to think that the percentage of money raised by charities that are spent on the core charitable work is the most important measure of worth.

So much so, that for some states and nations, return on investment (ROI) is one of the key measures that charities must report.

That obsession with ROI damages our ability to make the world a better place.

And I have the data to prove it.

So often, fundraisers are given the challenge to increase income by some amount without lowering the ROI (or, to put it the other way around, without raising the cost of fundraising, or COF).

ROI can be a useful measure – for example, when a fundraiser is considering tactic A vs tactic B to acquire new donors and there is a limited budget. Provided ROI is considered over several years, measured holistically (ie to include additional gifts, upgrades and bequests), and the rollout/repeat potential is considered, then ROI can be the best measure.

So why does it make me so angry? Principally, because an obsession with ROI above all else kills growth. Too many charities choose the path of slow growth – or even reject otherwise successful strategies – because of their fear of low ROI.

For example, charity A raises $40,000 from its Christmas appeal to donors, which costs $10,000 – an ROI of 4. They know that by increasing the amount of time spent on the appeal, sending out more information and writing longer, more professional copy (in other words, by spending more money) they could likely increase the donation income to $100,000. But the pack would then cost about $50,000. And the ROI would be 2.

So the boss says no, and the charity continues the old way, maybe improving income a bit by writing longer copy. Net income stays at about $30,000. An improved and more expensive method would have netted $50,000.

Apart from the fact that the charity has $20,000 less to spend on services (or fundraising growth) in the short term, the decision is even more harmful in the long term.

Meanwhile, Charity B, which decides to go the more expensive route, will benefit from:

Higher net income immediately.
Many more donors giving again and again for years to come.

This is not just some hypothetical example. The chart below depicts a real-life Australian case study. This charity decided to look at the long-term picture, and not worry about ROI.

net vs roi

The consequence for this charity of their shift in mindset was enormous.

You can see that after a number of years with lower ROI, it is creeping up again. More importantly, the overall amount available for services (that is, net income) from Tax 04 to Xmas 07 was $2.08 million. (Charities in Australia usually have two peak times for mailing – Christmas and “tax” – which is mailed around April/May). If they had kept to the old strategy, and experienced a bit of growth, they could have expected to net about $600K.

I repeat: the organisation could have raised a net of $600,000, at an impressive average ROI of 7. Instead, they raised $2.08 million, at an average ROI of 2.8. Which result is going to help its beneficiaries more?

Why are so many intelligent people led astray by ROI to the point that they choose to be far less effective at what they exist to do in the first place?

The answer is simple – they’ve been told that this is what is important to donors.

But we keep hearing “ROI (or cost of fundraising, COF) is important to donors.” But who says so? Well, the media, common sense – and even the public. The problem is that this is what people (donors and non-donors) really do think. But it’s not how they behave. The charity above clearly had no problem.

I have lots of other examples.

The charity probably had to explain the strategy to some major donors and even the authorities. But its economic basis was so solid that those guys were not going to have a problem with it. Normal donors still gave – and they did nothing to “hide” their drop in ROI.

The reason donors give is that they are asked properly and they care about the cause. People who harp on about the amount of money that goes on administration are normally non-donors. They just use the cost of fundraising as a good excuse for not giving. (And they’re not going to give anyway — they’d find some other excuse if that weren’t available to them.)

I recall being told about an experiment where a group of people were given real money to donate. They were given choices based on photos, stories about beneficiaries, and pie charts of expenditure. Never were the pie charts a significant factor in choosing which charity to support.

I am not as extreme on this point as Professor Myles McGregor-Lowndes of the Australian Centre for Philanthropy and Nonprofit Studies at QUT. During a presentation on accounting for charities (which he managed to make interesting), he called on the Fundraising Institute of Australia to bar charities who focus on how low their cost of fundraising is.

But no fundraiser should allow their organisation’s beneficiaries to suffer because they are bamboozled by the unsubstantiated bollocks that passes for fact when it comes to ROI. Of course, you need to be careful with your funds – I am not suggesting charities go out and take ridiculous risks – just plan strategically.

Don’t believe me?

Remember the exercise I asked you to do right at the beginning? For the third question (Why you support your favourite charity) did you write something like this?

Their cost of fundraising is really low and I am impressed by their effective admin systems…

Of course not. Do you even know their cost of fundraising?

Donors care about what you do and the impact that you have. Not what it costs you to raise it.

Please share your experience with reporting ROI or cost of fundraising by leaving your reply below. We’d love to learn from your experience.

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Domino's Pizza learned and put to work in their marketing.

VIDEO: How to Use — or Misuse Donor Lifetime Value

Professor Adrian Sargeant of The Philanthropy Centre, talks about Donor Lifetime Value – an important measurement that can vastly improve your fundraising if you use it well… or dig you into a very deep hole if you use it poorly!

Learn what P&O Cruises and Domino’s Pizza learned and put to work in their marketing.

This may surprise you!

Please share what you’ve experienced working with Donor Lifetime Value by leaving your reply below. We’d love to learn from your experience.

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Major and Mid Value Donors Maths of Fundraising Monthly Giving

Pop Art Woman talking on phone e1511128330370

The Challenge with the Phone and Fundraising

The telephone is one of the most important tools fundraisers have. It truly is a wonderful machine, because it allows us to speak with our lovely donors for little cost.

But there’s a problem.

Quite often we simply can’t get through to the donor we want to.

What can we do about this?

One solution is to use a professional telephoning agency. It is well known that these agencies are used widely for lower value donors (especially for monthly giving calls). But these companies can also help build relationships with mid to high-value donors, and with legacy prospects.

Using these agencies is usually cheaper than making the calls yourself when you factor in the costs of your time preparing, failing to get through, having the conversation and typing up the notes in the database.

One of the secrets of success for phone agencies is ‘penetration’. They have systems and processes to make sure that they can get through to as many people as possible. Even with all that though, penetration can vary from 40% to 65%:

Unfortunately, no technology exists to allow you to get through to everyone.

However, not all charities can use these agencies. Perhaps your volume is not high enough to prove good value for you, or no appropriate agency has the capacity to take you on when you need them. So what then?

The key is to take a leaf out of the agencies’ (phone) book. They understand that it is about numbers, so that’s where you should start.

Let’s say you want to get through to 50 donors to invite to an event.

Firstly, you are probably going to have to attempt to call them an average of five times. And even then you may only get through to about one in three.

So to get your 50 invites, you’d need to try to call 150 people on average five times each. That is dialling 750 times! Sorry, this is just reality!

Calling donors is a good and wonderful thing to do. Just make sure you have the resources (people and budget) and patience.

The phone is an important part of a powerful mid-value donor program. Want to learn more about how to use it? Take the Moceanic Mid-Value Donor Super Course which includes one full module about Top Tips for the Conversation that Gets the BIG Gift from the Mid-Value Donor. You can get access to that and more when you join The Fundraisingology Lab.

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Benchmarking Major and Mid Value Donors Maths 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.

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