Jan/Feb 2006

Online Fundraising Jumps in 2005 and Integrated Marketing Shows Results; Some Organizations May Raise More Than 50 Percent of Funds Online in 2006

by Vinay Bhagat, Founder and Chief Strategy Officer, Convio

In 2005, online fundraising continued to grow at an accelerating rate. Just like the late 2004 Asian tsunami, Hurricane Katrina illustrated not only that Americans are philanthropic in times of need, but they also increasingly prefer to give online. For example, the American Red Cross raised 22 percent of funds online during the tsunami and 45 percent of funds online following Hurricane Katrina.

But it was not just relief agencies that experienced a surge in online fundraising during 2005. Across Convio's diverse client base, factoring out the impact of Katrina, there was more than a 100 percent increase in funds generated through the Internet. The number of online constituents (email addresses) for Convio clients collectively grew from 8.8 million to 15.6 million, emails sent rose from 140 million to 270 million and the total dollars coming in over the Internet (including Katrina) jumped from $66 million to $250 million.

The integrated marketing effect

In 2005, several leading organizations presented successful integrated marketing tests illustrating synergy across different channels like mail, TV, telephone and Internet. For example, in August 2005, the Brady Campaign to Prevent Gun Violence presented test results demonstrating that constituents recruited and engaged online could be converted to donors not only through email appeals, but also via direct mail and telephone. In the fall of 2003, the Brady Campaign grew its email list from 38,000 to 175,000 advocates via a micro-site that was followed by petition campaigns focusing on urgent federal legislation. Having collected postal mailing addresses via the online petition drive 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 — 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 responding to the direct mail appeal was 19 percent higher ($24.22 compared with the group's overall mailing average gift of $20.52). 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, driving a 21 percent pledge rate with an average gift of $27.38.

Smaller groups in 2005

It was not just large national groups that experienced strong success online in 2005. Regional organizations such as the SPCA of Texas that, for several years, have taken a strategic approach to the Web continued to see significant gains. For example, from 2004 to 2005, the SPCA of Texas grew online fundraising by 71 percent to over $300,000 (not factoring Katrina related fundraising). This represented about 15 percent of total unrestricted annual giving (direct mail, major gifts, miscellaneous, but not bequests and legacies).

The eCRM trend

As proof points for online marketing success continued to roll in during 2005, more nonprofits began deploying commercial Online Constituent Relationship Management (eCRM) solutions. Furthermore, several large organizations including the American Red Cross, which previously had developed much of its online fundraising technology in-house, opted to outsource to eCRM vendors in 2005.

On the horizon for 2006

Looking ahead, online fundraising will continue to grow in 2006 at least at the same pace as last year. On average, the percentage of funds raised online by organizations using the Internet strategically will probably double. For certain nonprofit segments with unique attributes, online marketing will become the primary fundraising channel. For example, international relief agencies, organizations heavily reliant on volunteer-led special events, groups with established gift catalog programs and public radio stations have the potential to raise more than 50 percent of funds online. Other mass-marketing centric organizations adopting progressive Web strategies will raise 5-20 percent of funds online.

More organizations will implement online monthly sustainer giving programs, driving higher average contributions and stronger donor loyalty. Watch, too, for significant progress in integrated marketing as nonprofits and agencies focus more on developing and testing strategies. Leading groups will increasingly measure online marketing return-on-investment not only in terms of online contributions, but also in terms of its impact across fundraising channels and on mission fulfillment.

More groups also will adopt commercial eCRM solutions. Organizations and segments that previously have not taken the leap will invest in both tools and people to utilize them. As online transaction volumes grow and more organizations run integrated marketing programs, effective data sharing between eCRM and donor management systems will become even more important. Because most organizations prefer "best of breed" solution combinations versus single vendor approaches for donor management and eCRM, vendors will need to develop effective database integration approaches, spawning partnerships between vendors.

A changing paradigm

One of the biggest remaining challenges the sector has to address in 2006 is cultivating nonprofit professionals who understand online marketing practices and tools. Although technology may be generally easy to use, online marketing is a newer discipline so there is a learning curve. During 2006, the nonprofit sector should emphasize education to build an industry of trained online marketing professionals, just as there are skilled fundraisers for major gifts and direct mail. Fundraisers increasingly should take accountability for or, at minimum, play a strong role in their organizations' Web marketing strategies.

In addition, nonprofits should begin selecting online partners based on how well the vendors support, train and educate their personnel to not only use their tools, but also to apply them effectively. Organizations should turn more often to vendors to help them plan and execute their Internet marketing programs. In some cases, existing partner agencies will provide those services, and in other cases, nonprofits will tap their technology partners for assistance that their agency partners are unable to provide.

These are exciting times because there is a paradigm shift underway in how nonprofit organizations conduct marketing programs. Nonprofits that embrace this emerging paradigm most effectively — focusing on growing their email files, sending regular communications, maintaining compelling content on their Web sites and issuing engaging email appeals — will generate the strongest results this year and for years to come.