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Getting the Message Out on the IRA Rollover

November 9, 2008

(Nov. 10, 2008) What is the best way to spread the word about the recently extended IRA Rollover provision? Research into efforts to increase visibility of the provision in 2006 offers some lessons for future marketing efforts.

Lessons Learned
By Larry P. Stelter

On Oct. 3, President Bush signed into law, as part of the Emergency Economic Stabilization Act of 2008, an extension of the charitable IRA legislation. Originally enacted in the Pension Protection Act of 2006, this legislation provided people aged 70½ or older with tax incentives for charitable rollovers. This provision was in place during 2006 and 2007 but had expired as of Dec. 31, 2007. With the extension, however, people can continue making gifts through 2009.

Thanks to the reinstated legislation, your donors can once again fulfill their charitable plans without the income tax burden typically associated with IRA assets. So what’s the problem? Oh, right…what’s the most efficient way for nonprofits to get this message out to current and potentially new donors? Let’s look back to 2006 and review the lessons learned from the results of our post-legislation research. 

Multimethod, Frequent Promotion

“How do we tell them?” was the question asked at nonprofits everywhere.

Which channels of communication—print, Internet, email, phone and personal visits—should be tapped, and to what degree? In a perfect world, every available avenue would be used to promote this limited-time opportunity. However, not all nonprofits have the resources to tackle that scope of effort. In fact, the fundraising resources of even the largest nonprofits have limits.

To find out what channels of communication were most effective, The Stelter Company created a web-based survey in which 652 nonprofits participated. The survey asked three questions:

  1. Did the organizations publicize the change in the law to donors?
  2. If so, what tools did they use?
  3. What were the results?

The findings provide useful insights into how charities can better respond to future opportunities.

A wide variety of nonprofit organizations took the survey, including educational, health care, and religious organizations; arts institutions; and other community-centered nonprofits. Participants were from all sections of the country. Among those that answered the questions, four out of five (82 percent) said they did some type of promotion of the retirement-account contribution changes contained in the Pension Protection Act of 2006.

Among those that did no promotion, the most common reason for failing to do so was lack of staff or time. That may have been a costly failure, however, because the organizations that did promote the law change received an average of 11 responses each and closed an average of eight gifts each. The average size of a gift was $28,278, which means that the organizations promoting the change brought in an average of more than $200,000 each as a result of their efforts to spread the word about the change in the law.

Roughly one in five of the organizations that promoted the change used more than one type of promotion. The most common method for telling donors about the change was through newsletters. (Two out of three organizations that publicized the change used newsletters.) Personal letters were the next most common method used.

The survey also revealed that postcards and web content are popular secondary methods of communication. For example, while only 3 percent of promoters used postcards as a single method of promotion, everyone who used multiple methods of promotion used postcards. Similarly, while only 37 percent used web content as their sole promotion, 76 percent of multiple method promoters used web content.

The chart below shows which methods were used by the 537 nonprofits that engaged in some type of promotion.

Table 1: Methods of PPA Promotion

                                            Total (n=652)                     Promoters (n=537)
Newsletter                   56%                             69%
Personal letter             41%                             50%
Web content                34%                             41%
Postcard                      16%                             19%
E-mail                         16%                             17%
Other                          28%                             34%

The “other” category included advertising in others’ publications, handouts, in-person meetings, phone calls, word-of-mouth and workshops.

As mentioned previously, the survey found that many organizations used more than one method of promoting the change. Also, roughly one in five of the organizations reporting said they used the same method of promotion, such as newsletters or emails, more than once. Multimethod promoters tended to get better results. They were more likely to receive more than the average number of responses and more likely to close a higher number of gifts.

Many of those who participated in the survey expressed concern that the change in the law favoring retirement account rollovers to nonprofits was difficult to describe to potential donors. For that reason, some suggested that the best way to close a contribution once a prospect has been found was to meet with the donor and, if possible, enlist the assistance of attorneys or accountants. Others suggested using testimonials and allowing at least six months for the advantages of a retirement account rollover to sink in before expecting to close donations.

Multimethod promoters also were more likely to attract new donors. The 441 organizations answering a donor-breakdown question said they reached people through promotions as follows:

Table 2: Donor Descriptions
                                                                                           Total (n=441)
Longtime, consistent donors                                                    78%
Annual major donors                                                               42%
Donors fulfilling outstanding pledge obligations                          34%
New donors                                                                             30%

The survey revealed that universities were among the most successful organizations in raising more money and in reaching new donors, primarily because they were nearly twice as likely (38 percent) as other nonprofits (18 percent) to use multiple methods of promotion.

Another reason was that universities started their promotions early. Nearly three out of five of those that responded (58 percent) sent out promotional materials before November 2006, compared to less than half (46 percent) of the other organizations.

Timing and Frequency

The survey results were gathered during August and September 2007 because charities were likely implementing the last of their promotional efforts at that time or, in some cases, had completed their promotions entirely. When asked about the timing of their promotions, most of the nonprofits responded that they did most of their promotions of the IRA Rollover Provision during October and November 2006. There are two possible reasons for this.

  • That time was about as early as most organizations could ramp up their efforts, since the legislation had just cleared Congress and was signed by the president in August 2006.
  • October and November are historically prime months for promoting planned giving because people are thinking about year-end tax planning and charitable giving.

Thus, the results of the survey suggest two clear courses of action: Use at least two methods of promotion and promote early. Organizations that did both reported receiving more responses, closing more gifts, raising more funds and reaching more first-time donors.

The data suggest that if you can do only one of these things, using multiple methods of promotion is more significant in producing stronger numbers than early promotion.

If you can, however, do both.

Larry P. Stelter is the president and CEO of The Stelter Company in Des Moines, Iowa, which specializes in gift-planning strategies for nonprofits.

Editor’s note: This article first appeared in the January/February 2008 issue of Advancing Philanthropy.

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