modeling

What is the value of an email address?

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There are any number of ways to acquire an email address.  Change.org or Care2 will run cost-per-acquisition campaigns with you.  You can do online advertising (paid or Google Grant-ed) that drives people to your site.  You can e-append your offline constituents in the hopes of further cultivating your relationship with them.  And there’s organic — getting people to come to your site, then getting to sign on the line that is dotted.

These all have one thing in common: they cost.  They cost in time, treasure or both.  So you need to know whether the effort is worth it.  And for that, you need to be able to put a price tag on a constituent.

This is anathema to some.  Witness our (fake) debate on whether we want more donors or better donors: there are some intangibles that are, well, intangible.

But we are judged against numbers.  Our goal is to raise money and make friends, in that order.  So let’s quantify what we can.

While we are attaching caveats to this, let’s also stipulate that you should do this exercise both for your average email address (since you won’t always know from whence your constituent came) and for as many subsegments as you can reasonable do.  The value of a Care2 advocacy person will be different from an organic advocacy person, which will be different from someone who is looking for information on your site, which will be very very different from an offline donor or a walk donor that you are working to make a multichannel or organization donor.  Each will have its own value and price.

So I’m going to describe the exercise for how you would do a generic email address; the principles are the same for any subsegment.

The first step is to determine the lifetime value of the person’s online donations.  Again, I’m going to eschew attribution modeling as very complex — do it if you can, but if you can’t, you are in the right place.

denslows_three_bears_pg_3

You might think, as I once did, that the way to determine this is to take the online donations you have for a year and divide by the number of email addresses.  However, this ignores that many of your donations are made by people who are not online constituents (and may never be).  So this estimate will be far too high.

You might think, as others I’ve seen do, that you can derive this by totalling the amount given by the amount given to ask emails throughout the year.  However, this ignores that your email may stimulate a desire to give that is fulfilled on another device, another day, and even by another method (more on that later).  Counting just donations given directly to emails will give you an estimate that is too low.

So those are the Papa Bear and the Mama Bear solutions; what does Baby Bear say is just right?  I would argue that you should count the donations given online by those who were signed up for and receiving emails at the time of their online gift.  This too will be an overestimate — you might have received some of those gifts if you didn’t have those folks as constituents.  However, it’s much closer than the Papa Bear model and, as you will see from having run your numbers on revenue per page from yesterday, a constituent gift is far more likely than a person-off-the-street gift.

You also need to factor in the lift that online gives to other channels.  I recently saw an analysis of an e-append that still has double-digit increases in both response rate and average gift of the mail donors four years later.  And this included people who had since unsubscribed.  So properly written and targeted emails can be a strong retention tool.

You can look at your file and see what the offline donation and retention rates are for people for whom you have email addresses and those who don’t.  The challenge is that these are likely to be different types of people.  You ideally want to compare someone to themselves before you had their email address as well as a control audience.

That’s why I like to look at e-appends of the past for this.  You can determine:

  • Value of average donor before e-append who got appended
  • Value of average donor before e-append who didn’t appended
  • Value of average donor after e-append who got appended
  • Value of average donor after e-append who didn’t appended

From that, you should be able to derive the lift that email itself gave.  (If you need the formula, email me at nick@directtodonor.com; it’s a bit boring to go through in detail here.)

Similarly, for events with online registration, the good news is that a lot of walkers fake their email addresses or don’t give you one.  How is that good news?  It gives you a nice experiment.  Take the people who gave you their emails versus those who don’t and their return rates and gifts given/raised amounts.  My guess is that being on your email list should increase both retention and value.  These too can go into the lifetime value hopper.

Now you have a formula to got back to your analysis of pages.  Maybe those advocacy participants of today are likely to be your donors of tomorrow.  Or maybe your Change.org advocates didn’t convert the way you would like in the long-term.  These will help you make choices around investments, pages, and people.  Hope it helps!

What is the value of an email address?

Quantity versus quality of pieces in donorcentric fundraising

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Food for the Poor, the DMA’s Nonprofit of the Year last year, sends 27 mail pieces in its control donor series throughout the year.  These are all very good donorcentric letters, focused on the impact that you as a donor are having in saving people in their times of desperate need.

Another nonprofit of my acquaintance that will remain nameless, sends out one appeal per year.  When they asked me whether they should send a second piece, I told them that they should make their one piece work first, because it was not a compelling appeal.

There are wonderful donorcentric people who argue that nonprofits need to reduce the amount they communicate across the board.  I would argue that they need to reduce the amount they communicate badly.

Let’s take a look back at the reasons that people give for stopping giving to a nonprofit from Dr. Adrian Sergeant (first covered in Wherefore Segmentation):

 

reasons-for-lapse

As you can see, 72% of the reasons were related to not getting our message across like “other causes are more deserving” or “I don’t remember donating” or “they don’t need money any more.”  Less than four percent said inappropriate communications.  People are leaving because we persuade too little, not too much.

And as for the sentiment you may get about mailing too much, Van Diepen et al looked at irritation from nonprofit mailings.  They found that irritation can be incurred from mailings, but that it had no impact on revenue per mailing.  That is, people kept donating at the same rate per piece.

As Jeff Brooks put it in his wonderful book The Fundraiser’s Guide to Irresistible Communications:

[A] typical donor gets at least 10 pieces of unsolicited mail every delivery day.  That’s 3,000 pieces a year.  If you write to a donor twelve times a year, you’re sending 0.4 percent of her yearly total.  If you stopped mailing, the daily average would drop from 10 to 9.96.  Not a meaningful difference for you and your donor.

But for you, that cutback would mean lost revenue, forever.  A loss of hundreds, maybe thousands, of dollars from each donor.

You’ll never solve the Too-Much-Mail problem if you treat it as a numbers game.  The real issue is the relevance of the mail, not the volume.

All of that said, you could be mailing too much, as measured by both your net revenues and a true donor focus.  Here are some of the symptoms:

  • Channel mismatch. It is correct and laudable to try to get an online donor to give offline and vice versa.  However, there is a point of non-response (that varies by organization) at which the online donor is very unlikely to give.  For example, if someone gave their first gift online, continues to give on online, and hasn’t so much as looked at 10 mail pieces from you, you might be wasting money in sending those appeals (note: I say those appeals – perhaps a mailing that encourages her to go to the Website and make a donation is just what the doctor ordered).
  • Seasonality mismatch. If someone donates every November or December like clockwork, but never a second gift in the year over five years, you are probably safe in reducing the mailings they receive in spring and summer.  Note that I don’t say eliminate.  It could be that the updates they are receiving in the summer are the reason they donate in the winter.  But you can probably save some costs here.
  • Mismatch of interests. As we’ve advocated in the “change one thing” approach to testing, you can find out what messages people will respond to and what they won’t.  One you learn that, for example, a person only gives to advocacy appeals, you can safely cut some of the other types of messages they get.  Or someone who only gives to premium pieces get premiums (but for whom they are a turn-off don’t).
  • Systemic waste. Additional mailings should do two things: increase retention rates and increase total program net revenue.  That is to say, it’s not enough to say “this piece is a good one because it netted positive”; you need to be able to say that without the piece revenues would have been down overall.

To make the math simple, let’s say you mail three pieces, each of which gets $100K net revenue.  If you eliminated one of them and two pieces started making $150K net, that third piece was not netting program revenue (unless it was a cultivate piece that set up future year’s revenues or had an upgrade component or the like.

What this nets out to is that in a donorcentric future (or, at least, in my donorcentric vision of the future), people will ask how many control pieces you send and you will have to say that it depends greatly on the donors themselves (or give a range like somewhere between two and 30 pieces per person).

And, of course, that each of these pieces is customized and crafted to appeal to that particular donor or segment.  That, in my mind, is listening to the donors and not trying to let a Platonic ideal donor get in the way of each precious unique donor snowflake.

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Quantity versus quality of pieces in donorcentric fundraising

Escaping fixed ask strings

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Most of the science of ask strings that we’ve talked about is related to variable ask strings that depend on who the potential donor is.  However, when acquiring new donors, this is often not possible, since you know little to nothing about who the person is (yet).  Thus, while we’ll talk mostly about variable ask strings or topics that apply to both fixed and variable ask strings, it’s important to discuss fixed ask strings.

Namely, don’t use them whenever possible.  Yes, they are necessary for some acquisition purposes, but the effort to customize them to even what little you know about a donor is worthwhile.  Some tips:

Online donation forms are usually customizable.  CDR Fundraising Group estimates that this simple step can increase your response rate by 50% and your average gift by 40%.  In fact, they’ve posted code for how to do this in Salsa Labs. What if you don’t use Salsa Labs?  Usually searching for “dynamic ask strings XXname of giving platformXX” will get you some tips on how to.

But if these tips are Greek to you, you can always take a shortcut: setting up multiple donation forms with different ask amounts and sending the links to customized segments of your audience.  This isn’t ideal, but it gets you most of the way there.  Even if you take a very shortcut and have a $100+ versus under $100 versions of your donation form to send, you will be customizing the experience for your online donor a little bit.

Use intelligence from your outside list selects.  If you are like many organizations, your outside list selects will feature a minimum threshold below which you won’t accept donors (often $5 or $10).  Chances are you have tested into these amounts:one list is productive without a threshold, so you haven’t incurred the cost; another had subpar performance, so you asked for a more select group of donors.

Chances are, your $10+ donors from one list will behave differently from your $5+ donors from other and from your “anything goes” donors from list number three.  Thus, you can use this threshold as a customization point for your fixed ask, making sure to ask people who give more for more.

Make sure your ask string testing doesn’t select just one winner.  When you test an ask string in acquisition, there’s a temptation to treat it like a traditional control and test, where a winner is chosen and rolled out with.  Here, however, you may find that even though the majority of lists performed best with your control ask string, there were a few lists that had demonstrably better results with your test version.  Since different lists have different donor characteristics, you may get better results by keeping with an ask string that better fits those donors.

Use modeling to determine your ask.  List cooperatives will be only too happy to create models for you.  Chances are, they can do a response model that maximizes response and another that maximizes average gift.  The folly is when both of these groups get the same ask strings when they were set up with different goals in mind.

However, you don’t have to use a co-op or pay a PhD to run a basic model.  Simply take the average gifts from your current donors at acquisition by ZIP code, standardize them (rounding to the nearest five or ten for fluency), and use that as the basis for your fixed ask strings.  After all, there’s no reason you have to treat 90210 as the same as 48208 in Detroit.

Make sure you are using information from multichannel giving when running a conversion program.  Sadly, walkers, event donors, volunteers, online donors, and e-newsletter subscribers are often dropped into an offline acquisition with nary a thought as to ask string.  Please don’t do this.  You could be asking your $500 online donor or your gala chair to sign a $20 check.  It’s debatable whether it would be worse if they didn’t give a gift or if they did.

Instead, make sure all giving, not just channel-specific giving, is taken into account when formulating your asks.  Additionally, even if someone has not given, you can apply filters like ZIP code or historical data (e.g., last time, your volunteers’ average donation was twice that of your e-newsletter subscribers; why not ask for twice as much?) to your ask string.
Hopefully, these tips help make even your fixed ask string more customized.

This is a special bonus Sunday blog post.  As I was writing my mini-book on ask strings, I realized this was a topic I hadn’t covered yet on the blog, so I’m putting up a draft version of the content here.  Please let me know what you think at nick@directtodonor.com so I can improve it.  And, if you would like a free copy of the book when it is ready, sign up for my weekly newsletter here.

Escaping fixed ask strings

Implications of more donors versus better donors

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Let’s say you’ve organizationally had the debate that we’ve been following the past three days and you have come down on the side of better donors: you’ve taken into account all of the long-time and non-financial benefits of lower-dollar donors and still can’t make the average $10 or less donor work for you organizationally.

Here are the steps you can take in your program to skew your results toward getting fewer, better donors.  Note that if you decide the other way — neither of these approaches are right or wrong — just do the opposite of everything listed below.

Up your ask strings.  As we’ve seen in two different studies of ask strings (here and here), increasing the bottom number on your ask string increases average gift.  If you are in a Pareto efficient model like we talked about on Monday, there will likely be a resultant decrease in response rate.  

Like this study indicates, I would do this with single donors and not try to get my multi-donors to elevate when they aren’t ready to.  There, I think you would be wise to keep the highest previous contribution as the base donation, but increase your multiply.

Change your defaults.  This can be the default online (where you have the radio button start on $50 instead of $25) or the amount you circle on a direct mail piece with the social proof “Most people give X”.  Moving the default up should get you fewer higher-value donors.

Move up your list selects.  When you rent or exchange with outside lists, even if a list works well for you with no qualifier on it, you can request only $5+ or $10+ donors to that organization.  It will cost a little bit more to get that list, but you will be able to cut some of the potential tippers out of your program.

Incidentally, there is a trick you can do here with a list that performs well and offers a higher-value list select (say, $50+): rent the list twice.  Once, rent it with a $10+ select and the other with a $50+ select.  Then, you can separate out your ask strings to those two lists and mail the $50+ list twice (like multis) with an appropriate ask string.

Work with your modeling agencies and coops.  They will be more than happy to build you a model that maximizes gift instead of maximizes response rates.

Invest in telemarketing upgrades.  Upgrading seems to work better when people talk with other people.  I would counsel doing this with a monthly giving ask with the appropriate audience — it’s literally the gift that keeps on giving.

Shift your lapsed reacquisition selects.  Because you “own” those names, you have the most freedom to play around with who you are trying to reacquire.  You may be able to change the complexion of your file by communicating less deeply (say, moving from 12 months to six months) among under $10 and more deeply (say, moving from 36 months to 48 months) among your $50+ donors.

Use ZIP modeling.  This can work with both acquisition and donor communications.  In both cases, you can get more aggressive about your ask strings with wealthy ZIP codes.  In acquisition, you may even choose to omit the bottom half (or whatever) percent of ZIP codes from some lists.  As with tighter donation selects, you will pay a bit more for those names, but you will get higher average gifts.

Invest in your second gift apparatus.  This is probably a good idea regardless, but if you are going to bleeding donors intentionally, you are going to need a way to make sure you are converting those you do bring on.  This may be an investment you only make for $20+ donors or the like, but a welcome series for this audience will help you keep the donors you want to keep.

Thanks for reading.  Be sure to sign up for my newsletter to keep up with the latest debate.

Also, I’d appreciate it if you’d let me know at nick@directtodonor.com if you like the debate format.  If so, we can try this with some other hot topics in nonprofit direct marketing.  If not, then we need never speak of this again.

Implications of more donors versus better donors

Using your real estate better: customization

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One of the very few useful concepts I remember from undergraduate economics is the difference between fixed and marginal costs. This is in part because I was taught in the pre-behavioral economics days, so the world the equations described was entirely unfamiliar to me.  But it’s also because this difference reverberates for me even today.

To review, the difference is what you have to pay regardless of the scope of the project (fixed costs) and what you have to pay per quantity generated (marginal costs).  If you want to send out a mail piece, the copywriting costs are fixed — they are the same regardless of whether the piece goes to one or one million.  But the paper, postage, etc., are not.

For implications, think of Metcalfe’s law that the value of a communications network is proportional to the square of the number of users connected to it (which is why Facebook will be hard to dislodge — it’s tough to leave a place where all of your friends are).  A recent HBR article showed the dark side of this law when the marginal cost of some communications are so low:

w160219_mankins_darkside-850x544

It’s tempting to look at this graph and say “30,000 messages?  Sounds like Thursday.”  And that’s the challenge — we are inundated as consumers and inundating as marketers.

This means we want to maximize the real estate that we have in our communications.  While we have a constituent’s or donor’s attention, we want to milk it for all it’s worth.

pch-sweepstakes-partsOften, this is done crudely.  When a direct mail envelope is stuffed with so many offers, buckslips, and tchotchkes to make a 1980s-era Publishers Clearing House mailing blush, the effectiveness of any one offer is diminished and the ask can often go missing.  

(Incidentally, the modern Publishers Cleaning House is a great transitional story; look at this case study for a quick idea of just the social media side.)

Similarly, many email newsletters look like nonprofit Christmas trees, where every department wants to hang a few ornaments on them.

But this week, we’re going to explore some untapped resources and hidden gems — places you can put content that are both impacting and low (marginal) cost.

And, since every blog post should have at least one good tip in it and not be full of just introductory material, one of the biggest and easiest of these is:

Customization

When you decide to send a mail piece or make a phone call to a person, the vast majority of the costs of that communication are already incurred. Then, it’s just a question of what you put into that communication.

True, there is an additional cost of customization.  But once you customize anything in a phone script or on one side of a letter, the marginal cost of adding in additional customization is almost nothing — maybe some additional data costs.

The return is almost always positive.  And, since the alternative to getting additional revenues is likely communicating more, which incurs additional costs and has diminishing returns, it’s a preferred route.

So here are some ways to customize your communications that will let your donors know you know them and increase their receptiveness to your appeals:

All of these can cost you little, but bring you significant results.  This is what we’ll shoot for for the rest of the week, so if you don’t think you’ll be back, please sign up for our weekly newsletter here for a digest of these tips and tricks, plus some secret subscriber benefits.

Using your real estate better: customization

A direct marketing bridge to… monthly giving

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I had the pleasure of hearing a speaker from Greenpeace talk about how you should never ask for a one-time gift.  In fact, he went so far as to say that you should turn down the one-time gift if offered because it is the wrong response.

I loved this talk, but I will freely admit that I lack the intestinal fortitude and the spinal integrity (guts and backbone) to try this approach.  Monthly giving is certainly more and more popular and more accepted in the United States, both with credit cards and with EFTs.  Electronic banking has helped with this; hacking scandals hurt, as you force everyone who shopped at Target (a purely hypothetical example) to change their credit card on your site.

 

2000px-target_logo-svg

I can’t imagine why hackers would aim for this company…

But it still seems like we have at least one technological generation of people to go before every gift will be a monthly gift (Greenpeace, with a substantially younger supporter base than the average nonprofit, may already be there).

So I will confess that this is the wimp’s guide to getting into monthly giving.

First, as with planned giving yesterday, plan out your systems.  Part of this is the giving society you have for monthly giving (and benefit levels, if you choose to have them or incorporate a membership concept).  But the major part is managing exceptions.

You want to have a plan when credit cards are declined to try them again, potentially twice.  Then, you want to have a plan to reach out to that donor to attempt to obtain their new credit card information and a continued gift (telemarketing and email, not in that order, are preferred for speed).  Failing all attempts to get them into a monthly cycle again, you want to restart the appeal process, ideally to rejoin the monthly giving society.

The best way to do this is to charge all of your credit cards on one day a month.  Which is another way of saying “don’t use Luminate CRM for your monthly gifts.”  I had the pleasure of meeting with my then Convio, now Blackbaud, rep about one time per year and every time I would ask them to create the ability to charge all on one day so you can automate the recapture process and coordinate it with offline monthly donors.  They would look at me with the same expression that a Labrador retriever would use to regard the space shuttle and say they had never heard of something so absurd and no one else in history would ask for such a thing.

While just meant that I talked to more of their customers than they did because most people I talked to bemoaned the lack of single day processing.

So you want an online and an offline system for processing your cards and EFTs in place and a system for following up on declines.

Now, as for getting monthly donations, you should definitely have monthly giving incorporated into your online strategy and as much a focus of your donation forms as you can without giving away net.  You should also have it mentioned in direct mail pieces, especially in acknowledgment follow-ups (a good opportunity for a buckslip for the people who aren’t getting the planned giving one) and donor newsletters.

But telemarketing is the best means I have seen of getting a bulk audience of monthly giving donors.  Modeling your donors helps immensely. Your donors who already use online banking, who are receptive to telemarketing, and/or who do frequent online ordering are going to be good targets for this. Also, your telemarketing vendor should have a history of who paid by credit card in the past.  I’m not saying the people who send checks in for a pledge will be entirely useless for monthly giving, but I will say they will be mostly useless (for this; they are lovely people who are doing great work through great causes).

Since I’ve been critical of Blackbaud above with my Luminate ravings, I will say that I’ve had good experience with the Target Analytics Group’s telemarketing receptivity index.  I’ve found that it does a good job of separating out among people who haven’t given by telemarketing to find who is most likely to (that said, everyone who had given a gift in telemarketing before outpaces everyone who hasn’t in terms of calling).

One weird data anomaly – when I did sustainer calling, the best performing group were the people who had given through telemarketing to us, but rated low on the TAG telemarketing index.  We hypothesize that these were our special little snowflakes who we knew gave through the phone, but no-one else did.

Use a follow-up ask in traditional telemarketing. While you can and possibly should do telemarketing strictly for monthly givers, you can work with your callers to ask for a monthly gift after they have the credit card information from a donor.  The script would go something like “Thank you, Mr. Hinx, for your donation of $40 today.  Before I process that, would you like to be part of our [name of monthly giving society]?  It’s for especially loyal donors who make a gift each month on your credit card that you can cancel at any time.  I could set you up for a donation of $10 a month instead of your $40 donation today?”

The divide by 3-5 to get the monthly gift is a pretty good rule of thumb.  Before I had a lot of online giving experience, I took our average offline gift, which was about $28 at the time, divided it by 12 to get $2, then set up an ask string of $2, $4, and $8 for a monthly gift.  The average monthly donation on that form was almost $10 – the first and only time I’ve had the average gift be higher than anything on the ask string.  So learn from my idiocy.

In fact, if I had to rename this blog today, I could do far worse than LearnFromMyIdiocy.com.  It is available, but at some point, I’m going to have to blog about how rebranding is almost never the answer to a fundraising question, so Direct to Donor it is.

Thank you for reading once again.  Please let me know what you’d like me to cover next at nick@directtodonor.com or in the comments below!

A direct marketing bridge to… monthly giving