How a Donor Becomes, Well, a Donor
As fundraisers, we spend the vast majority of our time persuading people to act now.
We raise more money when we mobilize our existing supporters than when we engage people who haven't the faintest idea about our work. Customized appeals are always more successful than general appeals that try to interest everyone. Relevance to donors is paramount.
So how do we grow the pool of relevant prospects?
Let’s remind ourselves how our current donors became, well, donors.
In this blog, we'll define the five key steps that all donors go through before you're aware of their gifts. Our next blog will share a case study about one of our clients, which applied these principles to its direct mail program.
Awareness
The first step is for people to be aware of the causes and social change movements that your nonprofit belongs to. For instance, Kiva.org connects donors with entrepreneurs in emerging markets. Kiva.org belongs to the social entrepreneurship and microfinance causes.
If you're Kiva.org, both your current donors and prospective donors are, at some point, aware of social entrepreneurship as a movement.
This awareness leads adults to fall into two buckets: those predisposed to become donors and those who are not.
Although this five-step process is not always linear for donors, let’s start with people already predisposed to contribute to your organization because of their awareness about your cause.
Image Matching
At some point in the contribution process, donors visualize themselves as belonging to your cause. They co-brand themselves with your work because of the positive association your cause brings them.
Fact Matching
People who see themselves as connected to your work begin to educate themselves about it. They might Google broad industry terms or they might speak with friends or colleagues to learn more about the depth and breadth of your cause.
Organization Matching
While donors are researching your cause, they will inevitably come across your organization as well as your competitors. They've strengthened their engagement with your movement and are looking for opportunities to express their values. Make sure you are easy to find!
Gifts
You did it! Donors just completed the important journey to find you and make a contribution.
Thursday, September 3, 2009
Wednesday, August 12, 2009
Lapsed Donors: Top 10 Ideas
1. Do a matching gift. Raise a set amount that you can leverage for a direct mail appeal. Have the appeal come from the donor and share why s/he cares so much about your cause.
2. Tell the story of why your cause matters from the perspective of a volunteer or client.
3. If you have a local community leader engaged in your work, have an appeal come from him/her.
4. Do a micro-campaign. Launch a small campaign around one, tangible outcome - say it costs $5,000 to provide a medical service to a patient – and build your appeal around improving that one person’s life. Remember, have a launch, beginning and celebration.
5. Remember, in difficult economic times, more people give – but they are more likely to give smaller amounts. Create an appeal around that concept. Select a low per person cost service – maybe it costs $10 to feed a family for one day – and ask small gift donors to help one family.
6. Start with an email ask; 7-10 days later, follow up with snail-mail (or vice versa). Snail-mail everyone on your list – or just those who opened the email but didn’t contribute.
7. Reacquaint donors with your mission. Many donors simply forget why you matter. Focus on what still needs to be done, rather than what you’ve already accomplished.
8. Reinforce donors’ image of themselves as important philanthropists. Phrases such as “as somebody who makes a difference in the community, you…” strengthens giving as part of their value systems.
9. Offer donors the option of making special occasion gifts. Tie in your appeal with holidays or other mission-based events – say, Mother’s Day for breast cancer.
10. Create multiple engagement opportunities. Prospects who write letters or volunteer will become donors. Donors appreciate that you value more than just their contribution.
2. Tell the story of why your cause matters from the perspective of a volunteer or client.
3. If you have a local community leader engaged in your work, have an appeal come from him/her.
4. Do a micro-campaign. Launch a small campaign around one, tangible outcome - say it costs $5,000 to provide a medical service to a patient – and build your appeal around improving that one person’s life. Remember, have a launch, beginning and celebration.
5. Remember, in difficult economic times, more people give – but they are more likely to give smaller amounts. Create an appeal around that concept. Select a low per person cost service – maybe it costs $10 to feed a family for one day – and ask small gift donors to help one family.
6. Start with an email ask; 7-10 days later, follow up with snail-mail (or vice versa). Snail-mail everyone on your list – or just those who opened the email but didn’t contribute.
7. Reacquaint donors with your mission. Many donors simply forget why you matter. Focus on what still needs to be done, rather than what you’ve already accomplished.
8. Reinforce donors’ image of themselves as important philanthropists. Phrases such as “as somebody who makes a difference in the community, you…” strengthens giving as part of their value systems.
9. Offer donors the option of making special occasion gifts. Tie in your appeal with holidays or other mission-based events – say, Mother’s Day for breast cancer.
10. Create multiple engagement opportunities. Prospects who write letters or volunteer will become donors. Donors appreciate that you value more than just their contribution.
Wednesday, February 18, 2009
Measuring Donor Growth Rate
Perhaps the most important metric in analyzing your nonprofit's long-term sustainability is your Donor Growth Rate.
Donor Growth Rate measures the net change in the number of donors to your nonprofit.
Use the following equation to determine your Donor Growth Rate:
(Number of New Donors – Number of Lapsed Donors)/Active Donors
New Donors: Donors who make their first gift to your nonprofit
Lapsed Donors: Donors who gave last year, but do not the next year
Active Donors: Total number of donors who gave last year
Donor Growth Rate is measured in percentages: a Donor Growth Rate of 25% means you have 25% more donors this year, relative to last year; a Donor Growth Rate of -10% means that you lost 10% of your donors over the previous year.
Let's look at the impact on your gross revenue of various Donor Growth Rate scenarios.
For simplicity's sake, we've controlled the average gift and assumed other constants over a five-year period. We've also excluded inflation or the time value of money from our analysis (this analysis would result in lower revenue values after year one).
Negative Donor Growth Rate
Assumptions
Active Donors = Number of donors who gave in the prior fiscal year
Donor Growth Rate = Annual Total of -5% (any combination of lapsed donors and new donors that totals -5% of Active Donors)
Average Gift = This value remains unchanged at $75
| NEGATIVE DONOR GROWTH RATE | ||||||
Y0 | Y1 | Y2 | Y3 | Y4 | Y5 | |
| Active Donors | 5,000 | 4,750 | 4,513 | 4,287 | 4,073 | |
| Donor Growth Rate | -5% | -5% | -5% | -5% | -5% | |
| Annual Net Donors | 5,000 | 4,750 | 4,513 | 4,287 | 4,073 | 3,869 |
| Average Gift | $ 75 | $ 75 | $ 75 | $ 75 | $ 75 | $ 75 |
| Gross Revenue | $ 375,000 | $ 356,250 | $ 338,438 | $ 321,516 | $ 305,440 | $ 290,168 |
The impact of negative growth rate is significant over five years:
- Number of donors declined by 23%
- Absolute revenues dropped 23%
Zero Donor Growth Rate
In this scenario, your nonprofit adds exactly as many new donors as it loses. Assuming your average gift does not change, your gross revenue remains the same over the five-year period.
Positive Donor Growth Rate
Assumptions
Active Donors = Number of donors who gave in the prior fiscal year
Donor Growth Rate = Totals 5% (any combination of lapsed donors or new donors that total 5% of Active Donors)
Average Gift = This value remains unchanged at $75
| POSITIVE DONOR GROWTH RATE | ||||||
| Y0 | Y1 | Y2 | Y3 | Y4 | Y5 | |
| Active Donors | 5,000 | 5,250 | 5,513 | 5,788 | 6,078 | |
| Donor Growth Rate | 5% | 5% | 5% | 5% | 5% | |
| Annual Net Donors | 5,000 | 5,250 | 5,513 | 5,788 | 6,078 | 6,381 |
| Average Gift | $ 75 | $ 75 | $ 75 | $ 75 | $ 75 | $ 75 |
| Gross Revenue | $ 375,000 | $ 393,750 | $ 413,438 | $ 434,109 | $ 455,815 | $ 478,606 |
The impact of a positive growth rate is equally significant:
- Number of donors soared by 28%
- Absolute revenues grew by 28%
- Not only are these metrics impressive, but you've also positioned your overall fundraising program for further growth:
- You'll likely need to re-segment your Major Donors from your Annual Fund Donors and maybe expand the number of donor segments.
- You may need to begin offering new giving vehicles to match the new and emerging needs of your new donors. New vehicles might include estate planning giving options, stock contributions, or automatic giving via credit card.
- You'll likely need to re-segment your Major Donors from your Annual Fund Donors and maybe expand the number of donor segments.
Below is a chart that diagrams the difference between a positive Donor Growth Rate and a negative Donor Growth Rate.
Donor Growth Rate Effect on Dollars Raised Over Five Years
Don't bother squinting to see the individual values; this chart demonstrates how quickly a relatively small variance between positive (the orange line) and negative (blue line) Donor Growth Rates quickly escalates to a significant gap in just five years.
In addition to determining whether your Donor Growth Rate is positive or negative, you should consider the impact of your Donor Growth Rate on your revenue. For instance, you might find yourself with a negative Donor Growth Rate, while your total revenue increased. This is likely caused because you added new donors who gave gifts large enough to compensate for your volume losses. At best, this is a stop-gap strategy for the short term, but it won't sustain your organization into the future.
Your Donor Growth Rate gives you valuable information about the effectiveness of your appeal and your communication of your value to all donors. If you have a positive Donor Growth Rate, you're messaging well and the community generally believes your organization is a valuable asset.
However, if you have a negative Donor Growth Rate (sustained over a couple years), you need to re-examine your communication with donors. Explore investing in e-communications strategies and testing new messages about your mission and work that are relevant to your donors.
Most organization's fundraising goals are set based on last year: let's look at what we did last year and improve slightly. However, if you are off - even just a little - year-over-year, your nonprofit can quickly find itself in a significantly weakened financial situation.
Knowing your organization's Donor Growth Rate, on a multi-year basis, should be one of the first metrics you consider when forecasting your current year-end outcomes and when creating next year's budget.
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