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Direct Response: Ways to Cut Costs, Not Returns
Looking to tune up your direct mail campaign and trim some excess costs? Before you start loosening screws and removing parts, read this advice from a veteran direct response expert.
“Stick with what is working well,” says Mal Warwick, founder and chairman of Mal Warwick Associates, provided you are seeing fair returns on your program. “In a bad economy, the best course is caution. He emphasizes that now is no time to panic. “For most nonprofits, panic leads to pulling back dramatically and essentially no longer asking for money,” Warwick says. “Not asking, however, is exactly the wrong thing to do.”
There are ways to save money without harming your program in the short term. For one, if the machine runs, don’t spend time tweaking it. “A recession is a bad time to be testing, especially testing minor questions such as the color of envelope when your overall package is performing fine. We shouldn’t stop doing tests, but we need to pay more attention to the value of the ones we conduct.”
Warwick explains that there are definitely engine parts that need to stay intact. “Don’t stop testing lists and don’t stop acquiring new donors,” he says. “That’s a recipe for bankruptcy.” Conversion rates of first-time donors to repeat donors are, as a rule, low, he explains. These numbers may be even lower in a recession, so if an organization cuts back on acquiring new donors, its donor file will inevitably shrink. Fundraisers, therefore, cannot afford to stop prospecting.
So, no drastic changes. Don’t build a new engine or remove critical elements. But what about trimming down to meet a thinning budget?
Where to Cut Costs
Warwick gave eWire a sneak peek at his upcoming new book called Fundraising When Money Is Tight: A Strategic and Practical Guide to Surviving Tough Times and Thriving in the Future. In a chapter titled, “Cut costs—with a scalpel, not an ax,” he offers the following advice:
Rethink where you draw the line between major donors and small donors. Too often donors who give $1,000 in response to a letter or phone call are handed over to the major gifts department for future cultivation. But experience has shown that $1,000-size gifts and greater can be effectively collected by direct marketing (phone, mail and online) techniques. This saves you having to hire more major gifts officers and frees up the ones you have for even larger gifts.
Consider outsourcing gift processing and donor file maintenance. Calculate the real cost of having an in-house back office—including hiring, training and supervisory costs, the space, the hardware and the software—and you may find that hiring a good processing firm that specializes in fundraising can actually be a significant cost-cutting measure.
Concentrate on reactivating lapsed donors. We know that renewing the support of those who have not given in a year or two is cheaper than acquiring a brand new donor. If you have a substantial number of lapsed donors (5,000 or more) it is cost-effective and highly worthwhile to create a special mailing targeting them. Telemarketing to these lapsed donors can also be very effective.
Gang print your materials. Find ways of printing at once the components of different mailing projects. Order six or 12-month supplies of standard materials, such as envelopes, rather than making a new order each mailing. Collaborate with a non-competing organization to print at once items of similar specifications (same size and shape of paper, ink colors). A better knowledge of the printing process and a good relationship with your printer can make for efficient—and thereby cheaper—projects.
More advice from Mal Warwick can be found in the white paper, “Fundraising in Tough Economic Times.” The white paper is listed in AFP’s Fundraising Survival Toolkit on the AFP homepage, www.afpnet.org. His new book on facing a bad economy will be released late-March. Other recent titles by Warwick can be found in the AFP Bookstore (to access AFP’s bookstore go to AFP Marketplace and Bookstore on the AFP homepage, www.afpnet.org).
- The Mercifully Brief, Real World Guide to Raising $1000 Gifts by Mail
- How to Write Successful Fundraising Letters, Second Edition
- Revolution in the Mailbox: Your Guide to Successful Direct Mail Fundraising
Finally, check out the November/December 2008 of Advancing Philanthropy for extensive coverage of trends and techniques in direct-response fundraising (pgs. 35-41).
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Expand Your Mail Campaigns Into Web Campaigns...And Other Online Tips
Do you believe that your organization is not sophisticated enough to enter the world of online giving? Think again.
Not only can you likely achieve more on the web than you currently are, but if you track your successes, you’ll learn how better to reach your constituents.
Valerie Lambert, assistant director of development at the Johns Hopkins University Center for Talented Youth, has experience with fundraising shops both large and small. She has several creative ways to move donors online, whether you have the capacity to email hundreds of thousands of people at once or still run a direct mail-only campaign.
Lambert will be speaking at the AFP International Conference on Fundraising on Tuesday, March 31, at 8 a.m. She will present How to Incorporate Online Giving With Your Annual Fund…And Track It! (Session AG5).
From Mailbox to Inbox
In addition to having a Donate Now button prominently located “above the fold” on your website, most important, Lambert explains, is to have several distinct hyperlinks that are meaningful to the donor, such as www.company.org/donate. “You don’t want the URL to look like something devised by the IT department and have nothing to do with fund raising or marketing,” she explains. “It needs to be short, memorable and related to what you are asking the constituent to do, or to the mission of the organization, such as feeding children or providing scholarships.”
The reason for several hyperlinks, according to Lambert, is to track different appeals. While all of her online giving forms are simply replicas of each other, the various hyperlinks correlate to different mailings or e-mail appeals. When donors give online, she then knows if they responded to a spring mailing, an annual report, or a fiscal year-end email, etc. Each appeal has a separate mail code as well, so she knows how much income was from funds via mail vs. the web.
- Include the direct hyperlink in all portions of direct mail pieces: in the letter (P.S. recommended), the reply card and near the stamp corner on the return envelope, encouraging people to “go green and go online” instead of mailing their donation.
- Print your appeal code on both the reply card and the return envelope, since donors often mail contributions with one and not the other. This will improve tracking of gifts.
- Always track two appeal codes (mail and web) separately for mail appeals, but consider tracking a third code for gifts made by phone if you get many such donations. (You simply ask, “And what prompted you to give today?”)
- Don’t assume that people are either mail or web donors, regardless of their age. Studies have shown that most people use both—and higher average gifts come from a cross-pollination marketing approach.
- Analyze your data after each appeal and find your successes as well as your shortcomings. Every appeal has them. Whether or not you made more overall income, there are successes. Did you have a higher average gift? Splice out renewals and acquisitions, etc., and look at those pieces of the pie. Perhaps the percentages of the whole are increasing, decreasing or the overall contributions are better in one area or the other. Know your trends!
- Use your data to lobby for trying new (or more of the same) things. Opinions don’t win debates, but facts often do. You should stop doing what doesn’t work for your organization and invest more in what does work, but you won’t know until you collect and analyze your data.
For a small sample of Lambert’s upcoming AFP conference session, go to www.cty.jhu.edu/donate/lambert.ppt.
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Industry Outlooks: The New Fundraising Paradigm
In the United States, Canada and countries around the world, direct marketing is rapidly changing. Most organizations are experiencing declines in the number of donors responding, acquisition efforts are becoming less effective and renewal rates for long-term supporters have begun to fall.
These changes are not a result of donor fatigue, the economy or any other short term impact. They are a signal that donors are changing, the media is changing and the competition is changing. Consequently, organizations had better be changing if they want to survive.
Donors are changing
The World War II generation was all about hard work and trust, and they responded to need. This generation communicated by mail and preferred to support many charities with relatively small gifts. But this audience is shrinking at a rate of almost 5 percent per year and is being replaced by an enormous wave of Baby Boomers who are quite different.
This boomer generation is more cynical, insists on accountability and is more tech savvy. They are not loyal to a given charity, but prefer to invest their money with the charity that can best demonstrate they can solve a problem. They prefer to support fewer organizations with larger gifts.
Media is changing
In the 1980s, media options were limited, paying bills and donating by check were the accepted practice and relying on single-channel direct mail was extremely successful. Today, the average household receives a record 118 television channels and is exposed to hundreds of advertising messages a day. To stand out in today’s clutter, integrated marketing is the answer. Not only does this increase awareness and visibility of your message, but t it also improves retention, gift frequency and higher lifetime value from your donors. In order to tap into the Baby Boomer bulge that is upon us, successful organizations will use direct mail even more, but it will be used to drive response by phone or the Internet.
Competition is changing
While the number of nonprofits has increased 54 percent over the last decade, that is only part of the story. Today, corporate America has become a competitor to nonprofit organizations. When you purchase Ethos water from Starbucks, you are helping to provide clean water for children around the world. Or how about Warren Buffett? He donated billions of dollars to the Bill and Melinda Gates Foundation because he felt they could solve problems more effectively than any charity. And finally, there’s Kiva.org. Instead of giving donations to international relief agencies, now you can lend money to help entrepreneurs start new businesses in places like Uganda or Bolivia.
What to do
The speed of the paradigm shift will begin to accelerate over the next few years as more Baby Boomers hit 60. You should not make radical changes to your current program, but it is imperative that you take action and begin testing new strategies. The old paradigm will continue to be effective to the builder generation, but current trends are not going to reverse course with minor tweaks in offers, list strategy or the design and message of appeals.
The number of potential donors moving into their prime giving years presents a huge opportunity, but there are two paths you can take. If you choose to stay the current course, stop focusing on growth, strive to maximize net income per donor and manage your expectations. Your program will continue on a slow decline.
If you want to survive and thrive, budget for innovation to find what motivates this new generation of donor to support your organization. Test more color, photos and eye-catching content that are supported in an integrated way. The copy should be inspiring, tangible and focus on solving a problem. Don’t just bury a website address at the bottom of the letter. Make it very clear and visible that there are multiple channels available in which to respond. And most importantly, commit the necessary resources to create closer relationships with your donors.
Direct response fundraising has an incredibly bright future, but only for those organizations that adjust to the new paradigm.
Chip Grizzard is CEO of Grizzard, a direct response marketing firm with offices in Los Angeles and Atlanta.
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Written Appeals: Imaginative Ways to Ask Donors to Give More
Caught in a rut with how you make the “ask” in your appeal letters? Want to encourage annual fund donors to give more? Here are some effective strategies.
The following is an excerpt from the book, Open Immediately! Straight Talk on Direct Mail Fundraising: What Works, What Doesn’t, and Why by Stephen Hitchcock, available for purchase at the AFP Bookstore.
Ways of Asking for the Gift
“Last year you generously contributed $25 to support our Annual Fund. This year, I hope you’ll consider a gift of $50 to help us reach our more ambitious goal.”
What you see above is the usual way fund raisers try to encourage donors to give more. It works. Sure. But there are more imaginative ways to ask – much more imaginative ways – and my experience shows that they often work better. The ones you see below have brought in direct mail gifts of $100, $1,000, and even $5,000.
Your current donors want to contribute as much as they can to efforts that they feel deserve support. But they need your guidance to know what your organization really needs. If it seems to be $5, they’ll send $5 – year after year until you tell them you need $50. Then, with many of them, it will be $50 – year after year.
So, how do you increase giving? Here are six ways to do it:
1) Ask for just one amount – and make it significantly more than the donor’s highest previous gift. This may startle the donor, but it will also challenge her to rethink your cause and her giving patterns.
2) Describe BIG projects – projects with high status and significant impact.
“Our delegation will include members of Congress, business persons and journalists. I hope you will support this dramatic private initiative with a special gift of $1,000”
3) Invite the prospect to be part of a more exclusive group of supporters.
“I am turning to you, and to 25 other special friends of the Center, to ask that you provide leadership gifts of $5,000.”
4) Change your language when asking for larger gifts.
“Your gift of $500 will be an investment that will underwrite this project.”
5) Offer your donor publicity – recognition for his or her larger contribution. (But be sure to give the donor a chance on the gift card or reply device to make the contribution anonymously. Not everyone likes publicity.)
“When you underwrite this venture with a gift of $1,000, you will be joining others in the film industry as well as leading private citizens. Your name as an Associate Producer will be listed on the credits of this powerful video, as it is distributed across the country!”
6) Take a different tack. Don’t ask for a bigger gift. Ask for more gifts. For example: increase the number of gifts by using monthly giving options: $20 a month equals $240 a year. Requests for monthly pledges work well in thank-you letters and in appeals to donors who’ve given you more than one gift.
Only a small number of donors will make monthly pledges. You’ll have to wait a few years before there’s a meaningful number of monthly donors. But eventually these monthly pledgers will provide a significant portion of your cause’s annual income.
“Your generous gift of $20 arrived yesterday, and I’m writing to say how much the Center appreciates it and to assure you that it will have an immediate, positive impact on the children here. But this letter has another purpose, too: To invite you to join the ‘Partners in Caring,’ a group of donors much like yourself who support the Center with regular monthly gifts. If you could do what you did this month, every month, the impact of your support will be tremendously amplified.”
The above is a reprint of a chapter titled “Ways of Asking for the Gift,” reproduced with permission from Emerson & Church Publishers. To purchase Open Immediately! Straight Talk on Direct Mail Fundraising: What Works, What Doesn’t, and Why by Stephen Hitchcock (2005), go to the AFP Bookstore. Go online to the AFP website, www.afpnet.org, and click on AFP Marketplace and Bookstore.
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AFP Works with Coalition to Educate Parliament on Current Giving Challenges, Proposals
AFP and members of Canada’s charitable community are posting advertisements in newspapers around the country about the current economic challenges affecting giving and nonprofit organizations.
The messages, addressed to key members of Parliament, urge the federal government to support three specific proposals:
- 1. Exempt gifts of private company shares from capital gains taxes
- 2. Exempt gifts of real estate from capital gains taxes
- 3. Level the playing field between “arms length” and “non-arms length” employees who exercise stock options and give the shares to a charity within 30 days
While the federal budget will be tabled on Jan. 28, the main decisions will be made two or three weeks prior to that date. In order to raise public awareness of these proposals, and the benefits to Canada’s nonprofit sector, AFP and other participating organizations supported running these ads.
The ads were signed by the heads of leading national umbrella organizations representing the nonprofit sector, as well as the leaders of prominent hospitals, universities, social service agencies and arts and cultural organizations. Amanda Gellman, chair of AFP's Canadian Government Relations Committee, signed the messages on behalf of AFP Canadian members.
A full-page advertisement appeared in the Jan. 5 editions of The Globe and Mail and National Post. Similar ads will also be running throughout this week in other newspapers across Canada, including the Sunday (Jan. 11) Toronto Star, the Winnipeg Free Press, Calgary Herald, Ottawa Citizen and Montreal Gazette.
AFP wishes to thank businessman and philanthropist Donald K. Johnson for leading this initiative and to all those who collaborated on and supported this strong message to our Federal leaders.
A copy of The Globe and Mail advertisement is available from a link in the electronic version of this story.
CORRECTION: AFP inadvertently included Imagine Canada in the group of organizations that were involved in this project in its Friday email. Imagine Canada was NOT involved in this project and AFP regrets the error.
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Help Rebuild in New Orleans at This Year's Conference
As part of AFP’s International Conference on Fundraising you can spend time volunteering to aid restoration efforts of communities devastated in the 2005 Gulf Coast hurricanes.
There are several opportunities for conference participants to donate time, energy and support to help people rebuild their communities. There is also a tour available for you to visit areas of the city that have been restored thanks to volunteer efforts.
The AFP Day of Service, as well as a workshop event by The Center for Black Philanthropy, will take place Saturday, March 28. The New Orleans Philanthropy Tour happens that day as well. There is also a special fund that has been set up by the AFP Foundation for Philanthropy that will give AFP membership to deserving New Orleans fundraisers.
See below for more details on these events and opportunities to help fully restore the great city of New Orleans.
AFP Day of Service
Saturday, March 28, 2009, 9 a.m. to 4 p.m.
The Preservation Resource Center of New Orleans' Rebuilding Together program offers a hands-on volunteer experience to repair the storm-damaged home of a low-income, elderly or disabled homeowner. A professional team captain will supervise the work. This house will be referred to as the home rebuilt by the Association of Fundraising Professionals. You may sign up on the conference website (http://conference.afpnet.org) or on the registration form. Transportation and lunch will be provided.
Philanthropy in New Orleans Bus Tour
Saturday, March 28, 2009, 3 p.m. to 6 p.m.
Departure from Convention Center (Halls I & J)
$45 per person
This tour is an opportunity for you to see firsthand how fundraising and philanthropy have helped restore New Orleans. The tour includes roundtrip transportation via motor coach departing the Convention Center near Halls I & J and taking you on your way to discover the Ninth Ward, City Park, and the International School of Louisiana. There will also be a briefing from a volunteer organization representative. This tour is $45 per person, and you can sign up online or on your registration form (a small subsidy has been added for a donation to the AFP Foundation/New Orleans fund).
Hands-On Philanthropy Day
Hosted by The National Center for Black Philanthropy Inc.
Saturday, March 28, 2009
During the 46th International Conference on Fundraising, The National Center for Black Philanthropy will be working with the Louisiana Recovery Development Foundation and two local community agencies to develop a volunteer program that will have meaning beyond the few days of the conference. Preliminary plans call for special workshops to be offered outside the conference someplace in the local community. The training will be followed with one-on-one consultations and technical assistance with volunteers. Attendees will again have the option of making a financial contribution to the agencies the volunteers work with. Additional plans are also being developed. For NCBP conference information please visit their website, www.blackphilanthropy.org.
Support the Fundraisers of New Orleans
The AFP for Philanthropy/New Orleans Fund
If you cannot participate in any of the above programs but want to give back to the people of New Orleans, you can make a donation to the AFP Foundation for Philanthropy/ New Orleans Fund. This fund will offer to deserving fundraisers of New Orleans the benefit of AFP membership. Also, a library consisting of 36 books on philanthropy and fundraising will be donated to the fundraising community in New Orleans. The library embodies the fundamental knowledge base of the fundraising profession. A donation may be made on the conference registration form in step 5, or you can donate online today through the foundation's website. Go to www.afpnet.org/afp_foundation_for_philanthropy.
Register now for AFP’s 46th International Conference on Fundraising, happening March 29-April 1, 2009, in New Orleans, Louisiana. Go to http://conference.afpnet.org.
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Now Open! Registration for the 2009 Web/Audioconference Series
AFP has a tremendous new lineup of Web/Audioconference programs in 2009. Plus, we are offering a special member price of $99 per program when you order 10 or more programs at once! There are more than 20 programs offered. Don’t miss this great opportunity to hear from experts in the field. Go to the AFP website, www.afpnet.org, and click on Education and Career Development for more information.We are starting 2009 with these two great AFP Web/Audioconferences!
Jan. 15, 2009, Recession-Proof Your Annual Campaign presented by Stanley Weinstein, ACFRE, EMBA
Jan. 27, 2009, Raising Big Money Through Golf Events in a Down Economy with Phil Immordino
Related AFP ResourcesTrends in Corporate Fundraising
Nonprofit Videos (on a Budget) that Engage and Retain Donors
Transformational Giving: A Different Approach to the Fundraising Case For Support
Blackbaud Report on Online Giving
Different Connections-Working With Colleagues and Donors with Disabilities