Vive le donor difference

When I was but a wee lad, I played youth baseball.  Or perhaps more accurately other kids played baseball at me.  I excelled in three things and three things only:

• Bunting
• Getting hit by pitches, to the point that I once got hit by a pitch that was called a strike.  I had to wait to get hit by the next pitch to take my base.
• Stealing signs.

This last was where my “talent” was.  I would watch the third-base coach and when I thought a steal was coming from the signals, I would yell into the pitcher and catcher from my position in right field.  (Of course I was in right field.  There’s a chance someone might hit the ball to left field.)  I probably caused more outs with catching signs than catching balls (though still far less than I caused by batting).

The trick to stealing signs is to look for what is different from the usual.  The same is true for catching donor signals – the trick is to look for what is unusual and work from there.  Some tips:

Seasonality: Most donors are season agnostic.  They donate when an appeal touches them or strikes their fancy or they hear about you on the news or they found a \$20 in a purse in the back of a closet.  However, some will renew membership in January like clockwork.  Others believe in end-of-year giving (this is prevalent among online donors).

Like everything else, there is a way of doing a sophisticated model to determine this.  However, like only some things, there is also a fast, relatively easy, and free way to do it in Excel or similar spreadsheet:

1. Pull all of the gifts at which you want to look.  I would recommend donors with at least three years of giving history and at least four gifts, so you have a sufficient history to work with.  You want the gifts labelled by a unique donor ID number.
2. Label all of the gifts by month (1 = January, 12 = December, and everything in between)
3. Run a pivot table that summarizes the gifts by donor with the min month and the max month.
4. Subtract the min from the max.

(If you’d like a walkthrough of this in more detail, please email me at nick@directtodonor.com)

Now look at the results.  The majority of donors will likely have a wide spread of 9, 10, or 11 months.  However, you will also see some 0-3 month spreads, meaning that over (at least) a three-year period and (at least) four gifts, they have given to you only in one quarter of the year.  Thus, you can likely reduce your costs on soliciting them in the other quarters of the year (not eliminate, as you don’t want them to forget you exist).

If you want to be very thorough, add six to each month number and repeat to capture those few donors who may focus their gifting around both the end and beginning of the year, but not the middle.

This is powerful combined with seasonality analysis; if you find someone only gives at the beginning of the year to your membership campaign and has never given to a premium piece, you don’t need to send them address labels in May or the calendar in September or telemarket to them in June.  Instead, you can use lower cost (and more cultivative) pieces like donor newsletters to maintain the relationship with them.  Yes, this may only be saving \$3 per year per donor, but if there are 10,000 of those donors on your file, you are talking about real money.

Out-of-place gifts: Someone has given you \$10 times.  They just make their 11th gift to you: a \$173 check.  What should you logically ask them for next time?

HPC says you should ask them for \$173 (possibly rounding to \$175).  Common sense says that the person may not have turned from a generally smaller donor to a prospective mid-major prospect overnight.

Research indicates a better answer is to use average donation of giving for longer-term donors.  Thus, you see the anomaly, take it into account, but don’t let it drive your decision making.

Another potential treatment is to use a continuous, rather than segmented, version of RFM.  We’ll discuss that tomorrow.

In the meantime, if you are interested in more research on ask strings and amounts you should ask for, I’m working on a book/white paper/whatever it ends up being on just that topic.  Newsletter subscribers will get a free PDF copy of it when it comes out, so if you would like one, please sign up for my free weekly newsletter here.

Lessons in donorcentricity from the for-profit world

In 2008, Walmart asked its customers what they wanted.  They said they wanted wider aisles and less cluttered shelves.  So Walmart spent hundreds of millions of dollars to recreate their stores in this image.  Eight straight quarters of sales decline later (for the first time in Walmart’s history), the aisles narrowed and the shelves cluttered once again.  The total cost of the experiment was \$1.85 billion.

Or put another way, they basically lost almost all of St. Jude for two straight years.

Fortunately or unfortunately, no one in the nonprofit sector is capable of losing that much money.  But that doesn’t mean we aren’t making similar decisions with ill-researched (see my commentary on donor surveys from yesterday) or non-researched forays that have no basis in what works (coughcouchbrandguidelinescoughcouch).

But there are customer-centric companies that can teach us something about how to get revenues from our donorcentric strategies:

Acceptance of non-total loyalty.  Coke is a company that has customers so loyal that the one time it messed with its formula over three decades ago is still synonymous with “marketing failure.”  Yet 72% of Coke customers also buy Pepsi.

What Coke drives for is what it calls “share of throat” – how much of what you drink can Coke own?  By using this metric, they know that if they can increase your loyalty and experience, they can increase their revenue with you still not giving them your unswerving obedience.

The same is true for us.  As I’ve talked about, our donors are good people who do good things in the plural sense.  Almost all of them support multiple causes and organizations.  That’s fine.  What we want to be able to do is create an experience for that donor that makes them want to give us more (share of donations) than other nonprofits.

Realization that your most loyal donors and your best donors aren’t necessarily the same thing.  The top 10% of most loyal Harley-Davidson riders – are probably the people you think of when you think of Harley riders.  They have the tattoos.  Their bikes are pristine.  They are a part of the Harley Owners Group (HOG) and have Harley merchandise.

And they are only 3.5% of Harley’s net revenue.  The reason is that these riders probably own “only” one Harley and likely a lower end model.  On the flip side, the (wealthy) motorcycle aficionado may have ten bikes, three of which are Harley’s.  A less loyal customer, but a more valuable one.

Harley’s strategy is a premium strategy.  Not in the sense that they mail their potential owners with Harley address labels and stickers (although I would love to see that!), but that they intentionally make sure they have fewer bikes produced than are desired.  As a result, they can charge a premium price.

They could realign their business about the most loyal customers.  This would likely involve producing more bikes so these loyalists, who are likely to be price-sensitive in their other purchases, are able to have an easier entry level into the market.  But they don’t, because that is not where their bread is buttered.

Similarly, you likely have a frequent tipper audience.  They give you \$5 or \$10 often when you mail them.  They have been on your file for a number of years.  They are loyal.

But they aren’t for whom you are designing your high-dollar donor newsletter or your handwritten CEO letter.  You are looking for the folks who are capable of making a large or transformative gift.  And high-touch efforts require this level of upside to be worthwhile.

Design around experiences.  I strongly recommend Experiences: The Seventh Age of Marketing by Robert Rose and Carla Johnson.  I won my copy thanks to my knowledge of Firefly/Serenity, but would gladly have paid.

Thank you, Captain Malcolm Reynolds

In it, they talk about how what we are seeing more and more are how microexperiences (and micromoments) are adding up to create the totality of our brand impressions.

So, as we urged with our donor surveys, it’s good to measure what your donor’s experience is with your organization (and former donors) to make sure it ties to what matters to your donors.  There’s a reason people go to Disneyworld, when you can go to a closer and cheaper amusement park.

Microtargeting and the ABCs of customization

Microtargeting is most often thought of in the political realm, where increasingly granular models are able to predict how people are going to vote and think about various issues.  A good example is how Ted Cruz won Iowa: by microtargeting the interests and issues of voters down to fireworks regulation.

But you don’t have that type of time, budget, or modeling power.  Yet you still want to connect with your donors in ways so that they know that you know them.

Enter the poor person’s microtargeting.  We’re going to slice and dice our control letter in such a way that there’s something in it for everyone.

The important thing to remember is that the cost in customization is largely in customizing one side of a piece of paper in the mail.  Online, it’s virtually nothing.*  There can be some data costs, but while the maximum customization approach below may churn out thousands of different combinations of letter, it still is all very simple variables acting predictably.

So here goes the ABCs approach.  Try as many of these as you can on your appeals and see how different one person’s would look from another:

Age:  Does your older donor want a larger font size?  Different levels of formality?  Two spaces instead of one?  Including the Oxford comma?

Buckslip: What could you put in the envelope, based on what you know about the donor that would make them more likely to donate?  Remember, you don’t have to have it for all donors, just some…

Channel responsiveness: Don’t ask someone for their email if you already have it.  But do sent them an email that support the mail package they just received.

Donation history

Event history: “You wanted with us to cure X.  Now we need your help again.”

Frequency of giving: If someone is giving 4+ times per year, might now be the time to ask about that monthly giving program?

Giving history: “your gift” versus “your gifts.”  Also, have they given the same amount year after year?  You probably don’t need to push the upgrade.  However, if they’ve been steadily rising, go for the gusto.

History with this appeal: “As someone who supported our matching gift campaign in the past…

Initiation: “your support has helped X over these past Y years” or “since you joined X years ago.”

Jargon: J is tough, so a reminder to go through your letter and remove anything that sounds like a great buzzword to you, but gobblygook to those outside your organization.

Knowledge: How much explaining do you do?  Is it the same amount for someone who has read 50 letters as someone receiving their second?

Location: “we’re looking for seven dollars from XXCityXX willing to chip in…”  This works.

Mission area supported: tie your ask to what they want to support.

Nicknames: Does your letter sound like it was written by C3PO: “Dear Dr. Lt. Col. R. Winthrop Huntington III, MD (ret.),”?  If you tell by his checks that he actually goes by Bob, do you want to try saying “Dear Bob”?

Online activity: Mention they were a petition signer as an inducement to get them to sign an offline petition.

Postage: Send your most valuable donors’ mail first class.

Questions they’ve answered: The letter of someone whose survey said they thought it was most important you educate young people should look different from the one who said you should be advocating for better laws as a top priority, no?

Rhythm of pieces: (aka cadence, but I already had a C).  Should this person even be getting this piece or are they likely to make a gift without?

Single versus multi: With singles, you can switch up the ask string. Much harder to do with multis.

Tchotchkes: Are you sending premiums to everyone?  Even those people who have never responded to a premium?

Unique URLs: Not necessarily personalized URLs, but different URLs for different messaging so you can see what creates the greatest online response.

VIPs: If someone is a member of the “Founder’s Circle” or the “Legion of Good Deed Doers” or whatever it is you have, are you referencing that?

Wealth screening: You can do a higher-dollar treatment if you know a person has the capacity to make a larger gift.

seX: You didn’t think I was actually going to get a real X in here?  Appeal to women’s emotions in your ask and to men’s self interest

You: I’m cheating with this, because it’s not a customization.  But it does give me the opportunity to quote Jeff Brooks’ sample fundraising ask letter, which makes me happy:

Dear [name]:

You. You. You. You. You. You. You. You. You. You. You. You. You. You. You. You. You. You. You. You. You. You. You. You. Yes, you. You. You. You. You. You. You. You. You. You. You. You. You. You. You. You. You. You. You. You.

Sincerely,

[Signature]

P.S. You. You. You. You. You. You. You. You. You. You. You. You.

Instructions: Liberally sprinkle in nouns and verbs. Use adjectives and adverbs sparingly. Include specific examples of what the donor’s gift will accomplish. Include true-life stories that demonstrate the need for the donor’s involvement. Be sure to clearly and articulately ask for a gift more than once.

Someday, I’ll write a blog post that good.

Zip selects:  Increase your ask string multiplier if they are from a wealthy ZIP code.

* Get it?  Online?
Virtually nothing?  I absolutely slay me.

Increasing your non-electronic mail open rates

These direct marketing kids today, with their emails and analytics and the Facebook — they don’t know how hard it used to be.  Back in my day, we sent people letters.  You couldn’t measure open rates!  You’d just see if they sent back their check and hoped they opened it!  And the mail carrier walked uphill both ways.

The problem is that my day was yesterday.  We still can’t tell if people are opening our envelopes.  Given the amount of testing of colors and windows and teaser copy that goes into this area that can only be measured tertiarily, this is a pity.

Today’s study doesn’t entirely solve this but takes a nice step forward in understanding what gets people to open and react to envelopes.

[TANGENT]

I know I shouldn’t be talking about this right now — I should be writing about direct marketing New Year’s Resolutions, just like I should have done the year in review last week, Star Wars content the week before that, and preparing for year-end giving content in November.

And maybe I’ll do that some day, but for right now, I’m going to try to remain counterprogramming.  Think of me as the nonprofit direct marketing Puppy Bowl — if you tire of zigging, come over here and I’ll probably be zagging.

As Chekov said, if you mention the Puppy Bowl in Act 1,
you must show an image of it in Act 3.

[/TANGENT]

To test envelopes, GfK has a panel of German households who give GfK the direct mail pieces they do not want at the end of each month, either opened or unopened.  The study authors (Feld et al) then looked at the impact of envelopes on the open rate and keeping rate of the mail pieces.  They looked at 68 attributes of 36 design characteristics across almost 400 nonprofit campaigns.  You can get the whole study here if you want the full list, but suffice it to say that when you are looking at what percentage of the response device in an envelope is colored and have five different segments for this, you are doing a pretty comprehensive look at the piece.

The first big result to note is that the open rate did not correlate to the keeping rate. I’ve seen this personally — when an envelope promises something the contents do not deliver, the piece is shredded with extreme prejudice.  Now on the nitty-gritty:

• Colored envelopes decreased open rates.  I know, it’s difficult to cut through the clutter, but that apparently isn’t the way to do it.
• Larger envelopes, questioning teasers, and a promotional design on the envelope back all increase open rates.  I would go one step further and advocate for questions that can’t be answered with a yes/no and that elicit curiosity.  While you could put “What is the capital of North Dakota?”* on your envelope, I wouldn’t recommend it.
• Pre-stamped return envelopes increase keeping rate; postage paid on the outside envelope decreases open rates.  These may seem obvious, but you will have to assess whether the cost involved is worth the increases, as both will increase your cost per piece.
• A testimonial from a helper increases keeping rates.  It seems like I’ve been talking about variants of these for the past couple of weeks — how social proof and authority can help your appeals, as well as how information can enhance persuasiveness among high-dollar donors.
• Premiums can work, but expensive ones decrease keeping rates.  People like to receive things (reciprocity at work), but the idea that the nonprofit is spending more on the premium than on the mission is a significant turnoff.
• Efforts to recruit new members decrease keeping rates. My guess here is that it’s too much too soon.  I’ve seen membership efforts do very well to existing donors (who likely want a sense of belonging), but for new supporters, it might be like proposing marriage on the first date.
• In the letter, logos and fax numbers increase keeping rates.  Yes, fax numbers.  It also appears that having the phone number decreases keeping rates.  I have no idea why this would be.  If you do, please leave it in the comments to help illuminate us.
• People kept letters more closer to the end of the month.  Perhaps a “more disposable income” effect at the end of the month?  I’m not sure here either.

Finally, longer letters and personalization increase keeping rates.  I’ve talked about personalization helping your efforts.  Longer, in this case, means more than one page of letter, but my guess is that there may be a sweet spot after that in the 2-4 page range.

We hear about information overload, but I would argue that there is mostly an overload of bad content generated by the same people who created Mad Libs (e.g., [number] ways to [verb] your [noun]; [number] videos that will keep you [verb]ing: number [number] will blow your mind).

A well-written letter, by contrast, can be a beautiful and effective thing.

So, the idea mail piece in this study (were cost no object) would be a larger than average white envelope.  It would not use the impersonal “postage paid” indicia, would ask an enticing question to get the potential reader interested, and the reverse would feature a strong offer.  A letter with your logo and fax number (for now, don’t question it — just go with it) that is more than one page would be on the inside, featuring a testimonial from a helper.  And your return envelope would be prestamped.

Nothing completely earth-shattering here, I would say, but these are some very solid tips for making your pieces more effective.

* It’s a trick question — both the N and the D are capitals.

Influence in direct marketing: scarcity at work

Scarcity as an influencer should be of no surprise to those who know basic economic theory – as a good gets more scarce, assuming demand remains the same, the price will rise.

Given this, you might think it has no impact on nonprofits, as we sell no goods.  Even the corollary to the supply and demand argument – the idea that there is a psychological fear of missing out that makes people want an item more – doesn’t work for nonprofits, given that one person’s donation makes you no less able to donate.

And yet scarcity can be a powerful motivator in nonprofit direct marketing when harnessed correctly.  Here are five ways how:

Back-end premiums.  This is a way of mixing scarcity with reciprocity.  In the reciprocity piece, I mentioned that back-end premiums (aka the public radio tote bag model) can help increase your donations.  Now, what if there were only so many of those tote bags, calendars, or whatever other premium you have available to go around?  By limiting the premium to only the first X number of people who donate (or take whatever other action you are aiming for), you can have scarcity working for you.

I would recommend layering on a third influencer – social proof – and setting the number of giveaways above what you would expect to get in terms of actions.  This not only mitigates the likelihood that people will take your action and not get the potential reward.  It also has the benefit of making it seem like many people will be taking this action.

Matching gifts.  A matching gift deadline can create scarcity of time – by limiting the amount of time someone has to make a gift in order for it to double, you create urgency in the desire to give that gift.

Exclusivity of information.  In reciprocity, I mentioned that giving someone information that they wouldn’t be able to get elsewhere is a good way of creating the desire in them to reciprocate.  The key part of this is that the information must be scarce – giving someone something that the general public would or could know does not trigger the desire to reciprocate.

Done well, you can also build in authority and/or social proof to this.  Let’s say you do a conference call with a select group of high-dollar donors (scarcity).  The lead speaker is an expert on the harm that your cause is trying to end (authority); supporters can ask questions of him/her (reciprocity and scarcity, as you are providing a unique experience for them) and hear that there are other interested donors on the call (social proof).  Then you follow-up with a transcript of the call for everyone who was invited but couldn’t attend to make sure they can this important information.

Exclusivity of opportunity.  This can also work well with social proof.  Which one of these volunteer opportunities is more appealing:

• We desperately need more people to help serve lunches this week to the homeless.
• There are only six slots left to help serve lunches this week; we may have more opportunities available next month, but it is first come, first serve.

Through a reframing, you have turned your lack of volunteers into an exclusive experience for those people looking to help.

Event exclusivity.  Many of your high-end type events are exclusive in terms of guest list, but there are opportunities for exclusive beyond just this velvet rope effect.  Table sponsorships are one: as you will only have so many tables, you can advertise the number left (and, if you are doing well, ask sponsors to reserve their spots for the following year).

Then there are auction items. In a traditional (non-Dutch) auction, auction winners are like the Highlander: there can be only one.  The exclusivity of a package leads to higher prices as both the auction structure, which economics shows is the way to get the good to the person willing to pay the most, and the fear of missing out on an exclusive good conspire to maximize the price achieved.  The best nonprofit auction images are experiential items that cannot easily be purchased on Amazon – this exclusivity makes it so that only one person can possibly get the item.

The exception to this was a nonprofit I worked with that had an auction item go far beyond the expected price.  Apparently, while the bidding was ever-increasing, they were able to talk with the person providing the experience and negotiate another package.  Thus, at the end, they were able to provide a package to the second-place bidder as well, doubling their rewards.  This was a brilliant strategy – using exclusivity to get the maximum possible price, then expanding the pool (only slightly, so as not to cause regret among the first-place bidder) to maximize returns.

This week has been dedicated to the idea of major influence levels you can use in your direct marketing and development areas.  I would be remiss if I didn’t once again recommend the original book itself, as it has examples behind what I’ve provided here.  Thanks for reading and I’d love to hear examples you have from influence in the comments section or (if you are willing) in a guest blog post – just email me at nick@directtodonor.com if you’d like to post your success story.

Influence in direct marketing: reciprocity at work

As direct marketers, we gradually become experts in why and how our donors give.  But sometimes, we can get into the weeds of control communications (“this matching gift appeal works; let’s send it again”) and forget the mechanisms by which communications work.  At least I’ve done this; your mileage may vary.

So, I’ve found it to be helpful to delve back into first principles periodically.  One of my favorite resources for this is Robert Cialdini’s Influence.  As an insight into why people do what they do, there are few better (although David McRaney’s You Are Not So Smart and You Are Now Less Dumb are great looks into cognitive biases that are a fun read and thus I will get to in other posts).

For the TL: DR version of this book, there’s an HBR summary of it here .  Cialdini articulates six principles of influence that are both core and common across cultures:

• Reciprocity
• Authority
• Social proof
• Consistency
• Liking
• Scarcity

Think of each of these as a way to make yourself more persuasive and have more influence that you can incorporate into your causes’ way of talking with your constituents.

I’ll take each of these in turn to give my thoughts on how these levers can be used in old and new ways.  And, since there are six of them, I’m going to use this as an opportunity to test writing on the weekends.  So for those avid followers of this blog (thanks, mom and dad!), I’ll be skipping Christmas and writing on Saturday and Sunday this week.  We’ll see how it goes.

I’ll start with reciprocity – the idea that doing something for someone makes them more likely to do something for you.  I’m starting here because this was the first one I encountered in spades in my first nonprofit direct marketing program.  In fact, it’s what many people think of when they think of direct marketing solicitations: premiums.  Whether it’s a front-end premium of labels, calendars, address books, pins, or whatever tchotchkes we can figure out how to flatpack in an envelope, or the back-end premiums exemplified by the donate-to-PBS-get-a-totebag model, these have become ubiquitous.

This is because they work; the principle of reciprocity is such that if we are given a gift, we feel obliged to respond in kind.  Add a well-thought out premium to an acquisition package and you will likely see a jump in your response rate.  In fact, this jump will be highly correlated with the perceived value of that premium.  While there are a thousand studies of this hidden behind all of our nonprofits’ firewalls, there’s a good published one here.  It shows a 17% increase in giving when a person is given a small gift and a 75% increase when they are given a large one.

There are cautionary notes to strike, however.  A program build on premiums – back or front – can become a one-note piano.  Ideally, you have a broad mix of communication types and influence levers with your constituents.  Some of the people you will acquire from premiums will be responsive only to those premiums and value your organization only for the things they get from you.  This can preclude effective upgrade and bridging strategies.  Additionally, the donors you get from these efforts can be attracted to other organizations by other premiums (or the same premium as you send).  As a result, they may become prolific tippers of nonprofits.

As a result, a program build on premiums and premiums alone will tend to have lower average gifts, lower retention rates, and a great challenge trying to kick the addiction they and their donors have to these gifts.  This is by no means to say premiums have no place in a nonprofit program, but that it’s best of they are one of the many things you do to attract and retain donors, rather than the sole one.

Cialdini says it well in his HBR article: “Ultimately, though, gift giving is one of the cruder applications of the rule of reciprocity.”

There are higher value forms of reciprocity to be had in your direct marketing program, beyond the labels and the notepads.  The first is that value does not have to be measured monetarily.  As I’ll talk about in the post on scarcity, exclusive information can be something of great perceived value that a person would want to reciprocate (a note here that these forms of influence almost always work better together than alone).  Similarly, a paper clip on a mail piece is an interesting signifier that human hands have touched the mail piece.  This human touch means that a mere machine didn’t just pre-digest this mail piece and spew it out to you; this signifier can be something that helps bring people to you.

It’s also important to look at reciprocity from the donors’ perspectives.  Sometimes you will get gifts that are a perceived payback from a donor, whether they were directly touched by your services or indirectly.  One key point here is to try to capture what a person’s connection is to your cause and customize to this.  It’s important that the principle of reciprocity says that this is something that something people want to do; the need to have our ledgers square is hardwired into us.  You can help these folks given back in the way they want to and thank them for it.

Thank you’s are also an important part of reciprocity.  Research shows that people give to causes not because they expect anything concrete in return.  Rather, they build up two expectations over time.  One is recognition for their gift, whether publicly or not.  This is a reciprocity that the donor will expect of you.  The other is performance – that you will use their donation to make the impact they would like to make.  If either of these comes as a surprise, please read my post on why we thank everyone for their gift.

We started with premiums and that’s the primary reciprocity lever at work in most nonprofits.  But it’s important to remember that just as we give gifts to people in the hopes they will reciprocate, they also expect that we will reciprocate when they give us a gift.