Smart Tips for Working Through a Lapsed Donor p g g p Problem Lawrence Henze July 21, 2011
Today’s Presenter • Managing Director/Principal Consultant, Target Analytics • • 31 years in the nonprofit industry 31 years in the nonprofit industry • Author and frequent presenter on fundraising and nonprofit topics • B. A., Political Science, Carroll University, M.A., Public Ad Administration and J.D., University of Wisconsin-Madison i i t ti d J D U i it f Wi i M di
Today’s Agenda • Fundraising Basics and Donor Development • Solving a Problem Before it Starts • Proactive measures • Annual Giving Analytics Annual Giving Analytics • Metrics, Data Mining, Predictive Modeling • 5 Proactive Measures – Promoting Donor Retention • 5 Reactive Measures - Recapturing Lapsed Donors • Questions and Answers
Basic Discussion Points… • “We have always done it this way” is not a statement of success • Unless, of course, the program is actually working • Fundraising should be a long-term endeavor with both g g short and long term outcomes • Short-term focus increases the likelihood of lapsed donors • Donor-centered fundraising requires donor participation Donor centered fundraising requires donor participation • Perception is reality • How does the donor view giving? • How do you communicate your needs within an understanding of the donor’s interests?
Donor Development Loyal donors give 60% of the time (for example, 3 of 5 years) Loyal donors 8-9 times more likely to rise to top
Gifts of Cash – Giving Progression o Mid-Level Giving falls between annual giving (or direct marketing) and major giving Mid L l Gi i f ll b t l i i ( di t k ti ) d j i i o Prime Upgrades are ready to move from Annual Giving into Mid-Level Giving o Transitional Donors are traveling up the pyramid to Major Giving Major Annual Giving Giving Giving Giving Prime Upgrades Transitional Donors Retention and donor loyalty makes this progression possible Overlap area offer opportunity for different stewardship strategies
Fundraising Basics - Today’s Donor Pyramid
Gift Chart Analysis • Comparison Period – Use a meaningful period of time to measure fundraising activities (below is unique donors that gave within the last fiscal year) • Gift Levels and Programs – Look at donor counts in your organization’s key program levels (example below shows org focused on annual giving) Conclusions • Giving plateaus at the $1k and $2,500 levels • Donors are not progressing up the pyramid py • Major giving pipeline is fairly weak .
Like the Ancient Pyramids, Gift Pyramids Provoke Thought • From an annual giving perspective • What might this mean? g • Acquisition v. retention? • Mid-level weaknesses? • Over solicitation? • Over-solicitation?
Giving METRICS What Do We Need to Know to Be Successful? How We Use Information to Proactively Address Retention How We Use Information to Proactively Address Retention (The Anti-Lapse Cure)
Tracking Communications (University Example) How often are you touching these prospects? H ft t hi th t ? Time to get your communication stream in order! January January February February March March April April Development Membership Special Events Stewardship Information Athletics Cultural Other Other Channels: Print (P); Telephone (T); Electronic (E)
Meaningful Measures - Retention • What do you need to know to study and analyze the effectiveness of annual giving (areas for stewardship/donor relations): • First year retention First-year retention • Multi-year retention • Overall retention • N mber (percent) of retained Number (percent) of retained with positive trajectory ith positi e trajector • Reactivation • By past giving history • Committed (given in all of the past 6 years) C itt d ( i i ll f th t 6 ) • Loyal (given in 3, 4 or 5 of past 6, at least one gift in past 3 years) • Occasional (no more than 2 gifts in past 6 years, with no more than 1 in past 3) past 3) • Lapsed (at least one gift in past 6 years, no gifts in past 3 years) • Non-donor (no gifts in past 6 years)
Meaningful Measures Overall Index Medians Year-over-Year Change in Key Measures 2.2% Revenue -1.1% -0.1% Donors -2.0% -4.3% New Donors New Donors -6.2% 3.8% Rev / Donor 2.2% 1.5% Overall Retention -0.7% -0.8% 1st-Year Retention -3.2% 0.4% Multi-Year Retention -0.8% -1.9% Reactivation -5.0% Q3 2006 YTD to Q3 2007 YTD Q3 2007 YTD to Q3 2008 YTD
Meaningful Measures Knowing demographic information allows you to craft specific messages and thank- yous, increase retention
Proactive and Reactive MEASURES 5 Steps To Avoid Lapsed Donor Issues 4 Recapture Strategies 4 Recapture Strategies
5 Proactive Measures • Proactive Research • Lifetime Giving Potential • Stewardship • Solicitation Frequency • Testing New Renewal Strategies Testing New Renewal Strategies
Proactive #1: Donor Profiling - Niche Clusters • Household level clusters • http://www.equifax.com/consumer/marketing/en_us • Group people by life stages • 26 Niches ranging from the young and wealthy "Already Affluent" Niche to the least prosperous "Zero Mobility" Niche, these clusters provide a picture of your prospects and donors and make it easier to craft the kind of targeted communications that d d d k it i t ft th ki d f t t d i ti th t make people feel like you are talking to them individually. • Niche A – Already Affluent Average Age: 29 Average Income: $166K • The households in this Niche are extremely upscale, both with respect to their earnings y g and their propensity to spend. The household typically consists of two adults between the ages of 18 and 34 with no children. They own their homes with an average value of $221,000 and are more likely to have a length of residence less than 5 years. They are highly educated with most completing college or graduate school. Majority of the households are employed in professional, technical, managerial and sales/service occupations .
Donor Profiling – Append Niche Clusters and Analyze % % of Donors by Descriptive Niche f D b D i ti Ni h Niche A Niche B Niche C Niche E Niche G Niche H c e Niche I All Other Niches Predominant descriptive clusters for committed and loyal donors
Donor Profiling – Niche Cluster Analysis • Applications of cluster data • Append cluster codes to your entire database • Segment donors and non-donors by dominant clusters • Segment donors by level of loyalty • Analyze the distribution of codes y • For example, 77% of donors are described by 7 of the 26 clusters • 39% of the non-donors are also described by the same 7 39% of the non donors are also described by the same 7 clusters • Concentrate on the non-donors who are included in 1 of the 7 clusters for acquisition or recapture clusters for acquisition or recapture
Donor Profiling for Retention Donor Profiling for Retention • Further application of cluster data • Use descriptive components of cluster to tailor thanking strategies • Use descriptive components of cluster to tailor thanking strategies • Craft messages by cluster – improve retention • Use clusters to segment responders by channel: • Direct mail • Telephone • Email • Personal solicitation
Other Profiling Solutions • Donor database cooperatives • Predictive modeling • What are the common characteristics of these donors? What are the common characteristics of these donors? • You will learn who they are and how they give.
Proactive #2: Determining Lifetime Value • Not all donors have equal value • Those with higher LTV deserve greater retention • Predictive models (i.e. major giving, target gift range) tell you which donors, lapsed donors have greatest potential TGR 1,2,3 TGR 1 2 3 TGR 4 TGR 4 TGR 5 TGR 5 TGR 6 7 TGR 6-7 $1-$250 $251- $500 $501-$1,000 $1,000-$5000 AGL 801+ 306 1817 3716 4469 Excellent AGL 601-800 4748 2799 1075 437 Very Good AGL 401-600 51,963 5082 1739 566 Good AGL 301-400 36,669 1791 554 198 Some AGL < 300 22,057 489 116 56 Unlikely Unlikely
Lifetime Value Using likelihood and capacity scores, we identify top prospects today but also prospects to cultivate for future major gifts. g p y , y p p p y p p j g High likelihood scores Highest scores and Highest scores and and mid-level target and mid-level target high capacities giving ranges Further qualification Implement targeted and research upgrade, mid-level major and planned gift major and planned gift I Immediate individual di t i di id l strategies cultivation Increase annual giving Lower likelihood L Low likelihood scores lik lih d scores, but high target and low target giving giving ranges and ranges assets Minimize investment Need to be sold on your mission Consider reduced resource application Longer term cultivation
Proactive #3: Stewardship • If you know who is most likely to be retained… • And those at risk of lapsing… • You can create a proactive thanking program that concentrates only on keeping people as continuing donors • Inform donors of the value/uses of their gift support g pp
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