[Editor’s Note: This blog post derived from a recent interview that LAPA President, Michael L. Taylor, CFRE, had with Steve Hitchcock. Steve is author of Open Immediately! Straight Talk about Direct Mail Fundraising (Emerson and Church, 2004) and co-author with the legendary Mal Warwick of Ten Steps to Fundraising Success (Jossey-Bass, 2002).]
Steve started right off by saying that “Acquiring new donors, and keeping the ones that you have, requires strategy, staff capacity, and a budget.” Many questions arise, though, prodded Michael. For example, “What strategy works best? How many new donors should you acquire? Where will you turn to get these donors, and will they be aligned with our mission?”
For Steve Hitchcock, the exemplarily senior fundraiser at Bread for the World, the answers to these questions depend on where you want to end up. The exact landing point is different for each nonprofit, depending on your budget size, and current donor portfolio.
Here are key new donor acquisition options that Steve suggests we consider:
Turning to List Brokerage services, Steve states, is an effective way for medium sized ($5-10 million annual budget) nonprofits looking to acquire new donors, but only cost effective if your organization plans to acquire new donors in larger numbers. With a thoughtful plan for several mailings, a list broker can help an organization attract thousands if not tens of thousands of new donors in the course of a year.
For those wary of the financial investment required for large scale acquisition mailings, Steve reminds us to look at the costs as “investment capital that will produce a later return.” Similar to traditional investing practices, one’s return is most lucrative in the long run.
Steve lays out the math as such, “if you acquire the right set of 1,000 donors, we know that only around 30% will make a contribution the next year. In effect, your nonprofit could spend around $50,000-60,000 to acquire those donors and not breakeven in the first year.” Nonprofits can expect to earn net revenue on their investment within 3 to 5 years following the initial investment in an acquisition mailing.
Additionally, Steve notes that, “out of this list of new donors, an organization can expect that 1 to 5 percent of those individuals will eventually go on to make gifts of $5,000 or more. For many nonprofits, half of their major donors started out giving small gifts in response to mailings.” That reality can help rationalize right budget for donor acquisition.
A list broker will likely recommend renting (for one-time use) subscription lists, like subscribers to magazines. Steve noted the value of subscription lists, saying, “Magazine readership usually consists of folks who respond to direct mail. They are older, like to read, and have discretionary income.”
List brokers can also arrange the exchange of donor lists from a nonprofit similar to yours. In this way, Steve explains, “list brokers act as the middleman in acquiring comparable nonprofits’ lists.” In this “scout’s honor system,” your nonprofit approaches another organization and says, “We have 1,000 donor names. Can we trade you for 1,000 of yours for a one-time mailing?” Usually, this list will consist of donors who have donated in the last 0 to 24 months at a gift level of$1 – $99. However, Steve notes that some nonprofits prohibit this practice. List exchanges is ideal for any sized nonprofit and are often cost effective.
You can find reputable list brokers by noting those who are affiliated with the Association of Direct Response Fundraising Counsel (ADRFCO) and The Alliance of Nonprofit Mailers.
However, if your goal is to double your donors from 2,000 to 4,000, “…a list brokerage service is not cost effective,” says Steve. Nonprofits in this ballpark should look for more organic and bootstrap approaches when growing their donor list, looking at lapsed donors and list swaps first.
Steve’s next suggestion for growing your donor base is through cooperative or modeled databases. A list broker typically recommends those modeled lists they think will work best for your organization. Some nonprofits work directly with the providers of these databases. It is a powerful approach to donor acquisition because it can work in large scale. Your nonprofit provides a of list of your donors. Then, according to Steve, the database service, “models your donor names against a huge number of other donor names for those who participate in this cooperative database.” When you provide the names of individuals, the data process then runs those names against everyone else in their database to find similar prospects with profiles similar to your donors.
The comparative aspect of this method comes from the ability to collectively aggregate names from comparable organizations. Once you provide your list of donors, they become part of this collective aggregate, but the organizations that use the collective database will never know which specific organization (more likely several organizations) from which a specific prospect came. Unlike working with a List Broker, your organization cannot request donors from a specific organization even if that organization uses the cooperative database. The cost for renting modeled or cooperative prospects runs anywhere between $55 to $95 per 1,000prospect.
Bring back lapsed donors
If your goal is to double your donors from 2,000 to 4,000, “then a list brokerage approach is not cost effective,” says Steve: Nonprofits in this ballpark should look for more organic and bootstrap approaches. Directly arranging smaller list exchanges with similar organizations is one approach. But he most programmatic approach is almost always with your lapsed donors.
Donors leave for many reasons: their personal circumstances change, they choose to focus on a new cause, they don’t feel appreciated, or they don’t see the impact your organization is making. Surveying your lapsed donors will help you.
Of course, a responsive and robust thank you program will help your organization keep donors from lapsing in the first place.
You can also integrate an automated response once a donor makes a gift, seamlessly and instantaneously starting a dialogue with your giver. Steve stressed that it’s incumbent upon fundraisers to continue a conversation with donors to avoid losing them.
Advanced Prospect Research: Steve did state that he is impressed by LAPA’s approach to acquiring new donors through prospect research. In the past decade the methods of advanced prospect research have proven to be a stellar option to deepen our understanding of a donor’s capacity to give. This White Paper serves as a solid primer on how to think about prospect research. Drawing on wealth indicators from large, public databases around the world, donors are chosen who support similar nonprofits. Prospect research at this level can have an immediate positive impact on your major donor pipeline. The costs are higher, but the return on investment is also very high. For example, 5,000 new valued aligned donors – with a custom program to cultivate and solicit them – could cost $18,000 $22,000, But the documented return is often as high as $6 for every dollar invested, twice the industry standard as set by the Better Business Bureau.
Before you choose
Before choosing the right option for your nonprofit, you need the development infrastructure (staffing, technology, a budget) in place to efficaciously cultivate and solicit donors.
Regardless of what option is best for your organization, heed Steve’s fundraising tenet, “if you’re not acquiring new donors, you’re shrinking.”
Steve advises LAPA’s leadership team as it designs and implements annual fund and donor communications work for LAPA clients. His bio may be viewed here.
We welcome your comments about this post on the LAPA blog.