Part one: All roads lead to a planned gift
In this third instalment, I want to dedicate some time and space to the use of incentives and more importantly, the value of monthly donors—two very different topics not often given the careful consideration they deserve.
7. The true value of incentives and swag
I’ll be honest. I’m not a big fan of stuffing envelopes with address labels, calendars, key chains, fridge magnets and other trinkets in the hopes that donors and prospects will feel guilty enough to make a gift. I prefer encouraging a contribution based on the merits and success of an organization and the cause they serve. But incentives work, right? Maybe. But they’re expensive, right? Most certainly.
The value of an incentive needs to be measured beyond the campaign in which it is used. True, an appeal that includes personalized address labels, writing pads, or sets of note cards will usually generate a higher response rate: but it comes at a cost. What you really need to determine is how many incentive-based donors renew their contribution when asked to give again. In order to do that properly, you need a control group of donors who initially responded to a non-incentive appeal. Then you can compare the second and third gift request response rates of these donors with donors who responded to an incentive appeal. Do the incentive donors renew as well as the control group? Are the average donations similar? What was the true cost of acquiring that incentive donor when you take renewed gifts into account?
Incentives can be an expensive habit and many organizations are already hooked on the initial higher response rates they sometimes generate. I recommend using incentives intermittently, measuring their value over the long term and ensuring they are connected to your organization or cause. A calendar featuring artwork of children or adults who have been assisted by your organization, or a wallet card with helpful information on your organization’s cause, may go a lot further in terms of increasing response rates and building donor loyalty than that next set of misspelled address labels.
8. The true value of monthly donors
So much has been written on this topic that it’s difficult to understand why there are still many organizations that don’t have a formal monthly giving strategy and program. Acquiring a monthly donor or converting one to monthly giving is one of the best investments an organization can make. With proper stewardship, monthly donors will prove to be incredibly loyal by contributing to your organization for years to come. They can also be upgraded—some are even prospects for major and planned gifts.
In fact, I encourage many clients that don’t have the capacity to invest in building a traditional donor base to skip that very expensive phase and go straight to recruiting and acquiring monthly donors through modest in-house appeals, peer-to-peer communications and social media strategies. A small base of monthly donors can outperform a much larger base of single gift donors, especially when measured on a net revenue basis. While monthly donors benefit from some communications over the course of the year, they don’t require the regular appeals integral to a direct mail program. Building a monthly giving donor base can take time and not everyone will convert to this format of giving. However, those who do convert represent a significant long-term value to the organization.
Let’s say your charity was able to secure just 25 monthly donors at $18 per month. This generates a monthly revenue stream of $450. Ok, nothing to write home about. However, over the next 12 months, these donors will contribute $5,400. Even with a modest drop off, or rate of attrition, every year this same group of donors will generate approximately $10,000 over 24 months, $20,000 over 48 months and $30,000 over six years. Even after that, most of these donors will still be, collectively, giving about $3,200 every year. All of this is assuming that none of these donors have been upgraded.
Securing 250 monthly donors at $18 per month will generate $54,000 within 12 months and $300,000 over six years, including attrition. Keep at it year-over-year and it’s not unreasonable to build a base of 500 or more monthly donors within three or four years that will provide your organization with a steady annual revenue stream of $100,000 to $150,000.
Formulas for determining the long-term value of monthly donors, including reasonable rates of attrition, vary from organization to organization. The better the stewardship, the lower the number of donors that will cancel their monthly commitment. In turn, these donors will be more open to the idea of upgrading their monthly gifts.
So when do you ask for a monthly gift? At every opportunity, including:
Be sure to frame your monthly giving request around a formal program that includes brochures or other collateral material. Donors are joining a special group and need to be made to feel that way.
Monthly giving is convenient and advantageous for both the donor and the organization. Just recently, I wanted to make an annual commitment of $1,800 to an organization that I volunteer with. Giving $150 every month was a lot easier on my bank account than writing a cheque for the full amount. And once I reach my $1,800 goal, I will probably continue to make my $150 monthly contribution. Keep this in mind the next time you are asking a donor for a significant donation. Accepting a monthly commitment will almost always result in higher long-term financial support.
My next article in this series will get down to the basics of a strong direct-mail package including the outer envelope, the letter, the all-important insert and the often neglected reply device.
In my first two Hilborn Charity eNEWS installments of twenty things you should know before planning your next direct response campaign, I outlined a ‘potential value’ orientation with respect to individual donors, the importance of a well-organized database, basic guidelines for data segmentation, measuring success, targets to shoot for and campaign expenses. If you have had a chance to read these articles and have any comments or questions, I’d like to hear from you at phoppe@rhafund.com.
