Smart Tips for Working Through a Lapsed Donor Problem

Transcription

1 Smart Tips for Working Through a Lapsed Donor Problem Lawrence Henze July 21, 2011

2 Today s Presenter Managing Director/Principal Consultant, Target Analytics 31 years in the nonprofit industry Author and frequent presenter on fundraising and nonprofit topics B. A., Political Science, Carroll University, M.A., Public Administration i ti and J.D., University it of Wisconsin-Madisoni

3 Today s Agenda Fundraising Basics and Donor Development Solving a Problem Before it Starts Proactive measures Annual Giving Analytics Metrics, Data Mining, Predictive Modeling 5 Proactive Measures Promoting Donor Retention 5 Reactive Measures - Recapturing Lapsed Donors Questions and Answers

4 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 short and long term outcomes Short-term focus increases the likelihood of lapsed donors 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?

5 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

6 Gifts of Cash Giving Progression o Mid-Level Givingi falls between annual giving i (or direct marketing) and major giving 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 Annual Giving Major Giving Prime Upgrades Transitional Donors Retention and donor loyalty makes this progression possible Overlap area offer opportunity for different stewardship strategies

7 Fundraising Basics - Today s Donor Pyramid

8 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 Major giving pipeline is fairly weak.

9 Like the Ancient Pyramids, Gift Pyramids Provoke Thought From an annual giving perspective What might this mean? Acquisition v. retention? Mid-level weaknesses? Over-solicitation?

10 Giving METRICS What Do We Need to Know to Be Successful? How We Use Information to Proactively Address Retention (The Anti-Lapse Cure)

11 Tracking Communications (University Example) How often are you touching these prospects? Time to get your communication stream in order! Development Membership Special Events Stewardship Information Athletics Cultural January February March April Other Channels: Print (P); Telephone (T); Electronic (E)

12 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 Multi-year retention Overall retention Number (percent) of retained with positive trajectory Reactivation By past giving history Committed (given in all of the past 6 years) 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) Lapsed (at least one gift in past 6 years, no gifts in past 3 years) Non-donor (no gifts in past 6 years)

13 Meaningful Measures Overall Index Medians Year-over-Year Change in Key Measures Revenue -1.1% 2.2% Donors -2.0% -0.1% New Donors -6.2% -4.3% Rev / Donor 2.2% 3.8% Overall Retention -0.7% 1.5% 1st-Year Retention -3.2% -0.8% Multi-Year Retention -0.8% 0.4% Reactivation -5.0% -1.9% Q YTD to Q YTD Q YTD to Q YTD

14 Meaningful Measures Knowing demographic information allows you to craft specific messages and thankyous, increase retention

15 Proactive and Reactive MEASURES 5 Steps To Avoid Lapsed Donor Issues 4 Recapture Strategies

16 5 Proactive Measures Proactive Research Lifetime Giving Potential Stewardship Solicitation Frequency Testing New Renewal Strategies

17 Proactive #1: Donor Profiling - Niche Clusters Household level clusters 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 t communications that 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 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.

18 Donor Profiling Append Niche Clusters and Analyze % of Donors by Descriptive Niche Niche A Niche B Niche C Niche E Niche G Niche H Niche I All Other Niches Predominant descriptive clusters for committed and loyal donors

19 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 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 clusters Concentrate on the non-donors who are included in 1 of the 7 clusters for acquisition or recapture

20 Donor Profiling for Retention Further application of cluster data 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 Personal solicitation

21 Other Profiling Solutions Donor database cooperatives Predictive modeling What are the common characteristics of these donors? You will learn who they are and how they give.

22 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 AGL 801+ Excellent AGL Very Good AGL Good AGL Some AGL < 300 Unlikely TGR123 1,2,3 TGR 4 TGR 5 TGR 6-7 $1-$250 $251- $500 $501-$1,000 $1,000-$ , , ,

23 Lifetime Value Using likelihood and capacity scores, we identify top prospects p today but also prospects p to cultivate for future major gifts. High likelihood scores and mid-level target giving ranges Implement targeted upgrade, mid-level major and planned gift strategies Increase annual giving Low likelihood lih scores and low target giving ranges Minimize investment Consider reduced resource application Highest scores and high capacities Further qualification and research Immediate individual id cultivation Lower likelihood scores, but high target giving ranges and assets Need to be sold on your mission Longer term cultivation

24 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

25 Proactive #4: Solicitation Frequency More and more analytical and anecdotal data that suggests that more frequent solicitation decreases the likelihood of retention See, for example, Cygnus Report Once people lapse, they may be solicited even more frequently to reactivate Counterproductive and counterintuitive

26 Proactive #5: Testing Strategies More and more pressure to use multi-channel solicitation strategies Think of using multi-channel to thank and inform, not to solicit more For example, evidence shows that an informative in advance of a direct mail solicitation lifts response rates

27 5 Recapture Methodologies Qualified lapsed donors are better prospects Predictive modeling provides focus Not all lapsing is bad Memorial and honorary giving Data hygiene Keeping your file current

28 Recapture #1 Better Prospects Recapturing lapsed donors may be a better strategy than acquiring new donors Simply put, they have given in the past Does your annual giving strategy reflect that likelihood? My observation: acquisition often takes primary importance This is only warranted difiti it is sophisticated t acquisition iti

29 Recapture #2 Predictive Modeling Identify donors who have been recaptured Build a predictive model that identifies these characteristics Use the model, score the lapsed population, solicit the best prospects only Or, through a donor database cooperative, use their lapsed donor scores

30 Recapture #3 Not all lapsing is bad Some very loyal donors begin to limit their cash contributions postretirement Fixed income is the motivator, not loss of interest Many remain excellent planned giving prospects Reach out to these donors through stewardship to maintain their connection $5, $10 and $25 contributors may give five, six, and seven-figure planned gifts Bequests average $35,000 to $80,000

31 Recapture #4 Memorial and Honorary Giving These donors typically lapse at the highest rates Three-tier strategy Offer opportunity, if possible, to renew their gift support for original gift purpose Alternatively, compile a report on the impact of memorial and honorary giving i to your organization Encourage these donors to renew their support with other similar donors If you use modeling, concentrate your best resources on the top scoring memorial/honorary donors

32 Summary and Questions Contact: White Papers: White Papers: /whitepapers.aspx