May/June 2006

Fundraising’s New Synergy: Success Lies in Striking a Balance Between Old and New

by Vinay Bhagat, Founder and Chief Strategy Officer, Convio

For the most part, fundraisers no longer believe that online marketing is competitive with offline marketing. Most understand that you need to incorporate both into your marketing strategy and they should be coordinated in order to realize synergies. Many fundraisers, however, struggle with determining how much to focus on and invest in online marketing and how to drive the coordination between online and offline channels.

With the exception of a few specific segments of nonprofit organizations like disaster relief groups, public radio stations and heavy users of gift catalogs or volunteer-led special events, a majority of direct response fundraising-driven organizations still raise less than 10 percent of funds online (although this figure is escalating rapidly). This low percentage mistakenly leads many direct marketers to focus less on their online marketing efforts relative to traditional channels. To determine the appropriate investment allocation, fundraisers need to think through some new "integrated math." Consider the following example.

In the fall of 2003, the Brady Campaign grew its email list from an original 38,000 to 175,000 via an innovative micro-site that was followed by petition campaigns that focused on urgent federal legislation. A vast majority of these constituents were non-donors. Throughout two legislative battles in 2004, the Brady Campaign sent a series of appeals that included a link to contact Congress, a "tell-a-friend" option and a strong ask for funds that often included examples of specific print or TV ads. Typical responses ranged from 0.19 - 0.37 percent and average gifts ranged from $24 to $46. This compares to typical email acquisition response rates of 0.1 percent. New donors via the Internet grew from 311 in 2002 to 3,244 in 2004. The Brady Campaign acquired these new donors at a very positive ROI since sending an email appeal does not have any marginal costs once the software is in place.

The organization decided to test other channels to drive incremental conversion of these online sourced constituents to donors. Having collected postal mailing addresses for about 23 percent of its email list, the Brady Campaign sent a direct mail solicitation to online non-donors asking them to join. The result was a 1.26 percent response rate. This response rate was 11 percent higher than the overall mailing response rate of 1.11 percent to the group's standard direct mail rental lists. The average gift from email constituents in response to the direct mail appeal was 19 percent higher, $24.22 compared to their overall mailing average gift of $20.52. The key acquisition metric, the net cost per acquired donor for the email list, was $6.22 compared with $15.71 for the overall mailing.

The Brady Campaign also contacted non-donors on the email list via phone. It matched about 20,000 records of e-constituents who had taken at least one advocacy action. Telemarketing drove a 21 percent pledge rate with an average gift of $27.38.

If you were determining channel performance for this organization, how would you credit the money raised? Most fundraisers would credit the revenue to the channel in which it was raised, but this approach fails to recognize the value of the original sourcing and engagement channel — in this case, the Internet. How would you treat future revenue raised from these donors? Most fundraisers again would credit the revenue to the channel in which it was raised, ignoring not only the contribution of the origination channel, but also the value of ongoing engagement and communications through a multi-channel approach. For example, if a donor opted to renew via the mail, but continued to receive and read email updates and take advocacy actions online, how would you allocate the renewal dollars?

Fundraisers must begin to assess channels in aggregate and drive coordinated multi-channel donor development, solicitation and retention strategies. It is important to measure the integrated effect not only in the context of a single campaign, like an acquisition or renewal effort, but also to assess the factors which influence donor lifetime value. It is critical to understand how to best leverage each channel's strengths and how to optimize their coordination.

For example, online marketing can be an extremely cost effective way to build an engaged prospect list and subsequently to sustain engagement. Email also can be a very effective solicitation channel when you need to create a sense of urgency, and it has a strong return on investment (ROI) because of its cost efficiency. But on average, email solicitation yields much lower response rates than direct mail appeals and telemarketing. So, when it comes to online marketing, you can increase solicitation effectiveness by taking a multi-channel, coordinated approach, which yields both higher response rates and earlier, less costly response.

As an industry, our sophistication in understanding both how to measure and deploy integrated channel strategies is still nascent. The good news is that technology has become very sophisticated in this area, is increasingly affordable and early results look very encouraging. Let the testing begin!

This article first appeared in the March 2006 issue of FundRaising Success magazine, http://www.fundraisingsuccessmag.com/.