Smart Tips for Working Through a Lapsed Donor p g g p Problem - - PowerPoint PPT Presentation

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 i i t ti d J D U i it f Wi i M di Administration and J.D., University of Wisconsin-Madison

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

Mid L l Gi i f ll b t l i i ( di t k ti ) d j i i

• Mid-Level Giving falls between annual giving (or direct marketing) and major giving
• Prime Upgrades are ready to move from Annual Giving into Mid-Level Giving
• Transitional Donors are traveling up the pyramid to Major Giving

Annual Giving Major 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)

H ft t hi th t ? January February March April How often are you touching these prospects? Time to get your communication stream in order! January February March 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 ith positi e trajector

• Number (percent) of retained with positive trajectory
• Reactivation
• By past giving history

C itt d ( i i ll f th t 6 )

• 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) 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%

• 0.1%
• 4.3%
• 1.1%
• 2.0%

Revenue Donors New Donors 3.8% 1.5%

• 6.2%

2.2%

• 0.7%

New Donors Rev / Donor Overall Retention

• 0.8%

0.4%

• 3.2%
• 0.8%

1st-Year Retention Multi-Year Retention

• 1.9%
• 5.0%

Reactivation

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 d d d k it i t ft th ki d f t t d i ti th t and donors and make it easier to craft the kind of targeted communications that 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

• ccupations.

Donor Profiling – Append Niche Clusters and Analyze

% f D b D i ti Ni h % of Donors by Descriptive Niche

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 4 TGR 5 TGR 6 7 TGR 1,2,3 $1-$250 TGR 4 $251- $500 TGR 5 $501-$1,000 TGR 6-7 $1,000-$5000 AGL 801+ Excellent

306 1817 3716 4469

AGL 601-800 Very Good

4748 2799 1075 437

AGL 401-600 Good

51,963 5082 1739 566

AGL 301-400 Some

36,669 1791 554 198

AGL < 300 Unlikely

22,057 489 116 56

Unlikely

Lifetime Value

Using likelihood and capacity scores, we identify top prospects today but also prospects to cultivate for future major gifts.

• Highest scores and
• High likelihood scores

and mid-level target

g p y , y p p p y p p j g

Highest scores and high capacities

• Further qualification

and research I di t i di id l and mid-level target giving ranges

• Implement targeted

upgrade, mid-level major and planned gift

• Immediate individual

cultivation

• Lower likelihood

major and planned gift strategies

• Increase annual giving

L lik lih d scores, but high target giving ranges and assets

• Need to be sold on your
• Low likelihood scores

and low target giving ranges

• Minimize investment

mission

• Longer term cultivation
• Consider reduced

resource application

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

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
• http://www.cygresearch.com/publications/orderReport.php
• Once people lapse, they may be solicited even more frequently to

reactivate

• Counterproductive and counterintuitive

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 email in advance of a

direct mail solicitation lifts response rates

5 Recapture Methodologies

• Qualified lapsed donors are better prospects
• Predictive modeling provides focus
• Not all lapsing is bad
• Memorial and honorary giving
• Data hygiene

Data hygiene

• Keeping your file current

Recapture #1 – Better Prospects

• Recapturing lapsed donors may be a better strategy than acquiring new

donors

Si l t th h i i th t

• Simply put, they have given in the past
• Does your annual giving strategy reflect that likelihood?
• My observation: acquisition often takes primary importance

Thi i l t d if it i hi ti t d i iti

• This is only warranted if it is sophisticated acquisition

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
• nly
• Or, through a donor database cooperative, use their lapsed donor

g p p scores

Recapture #3 – Not all lapsing is bad

• Some very loyal donors begin to limit their cash contributions post-

retirement

• 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

g p connection

• $5, $10 and $25 contributors may give five, six, and seven-figure planned gifts
• Bequests average $35,000 to $80,000

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

i i t i ti giving 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
• If you use modeling, concentrate your best resources on the top scoring

memorial/honorary donors

Summary and Questions

• Contact:

Lawrence.Henze@Blackbaud.com 843 991 9921 843-991-9921

• White Papers:

White Papers: http://www.blackbaud.com/company/resources/whitepapers /whitepapers.aspx