happy donors

I hadn’t realized how much A/B testing was being done online by ALL KINDS of organizations and enterprises until seeing this article in a recent Wired Magazine.   Read it.  Won’t take long.

You probably can’t do this kind of testing yourself.   Not enough tech resources.  Plus most organizations have lists too small to do A/B testing that generates statistically significant results … a big reason I started this blog, hoping the share tests done by big orgs with small.

The Wired article discusses web organizations that are driven by A/B testing in effective — and sometime radical — ways.   When you DO have the resources, you can put up parallel web pages and deliver them randomly to users, and read the results instantly.  A lot quick than mail programs, for sure.

Fundraising, for the ’08 Obama campaign and others, can fine-tune aspects of their sites to get more email addresses or donations.   Consumer outfits can boost sales.  Google used A/B to shape their search mechanisms and they way they deliver results to users.

A couple of lessons that all fundraising organizations should learn about testing:

– The risk is making only tiny improvements.    If you’re investing in testing, don’t fine-tune when you can transform.

– Data makes the call.   The statistical winner wins.  Not the head of the organization.   The Wired article notes that “A/B tends to shift the whole operating philosophy — even the power structure — of companies that adopt it.”  Decisions start being made based on what works.  Not what you like.

One theme throughout:   Testing proves the truth of the unexpected.  What works is not what you expect to work.

Why does some design or technique or copy approach outperform others?

Doesn’t matter.  Just be glad you know what works and use it.

Warning:  Today’s post is for stats geeks.

The potential lifetime value of our donors drives many of our fundraising decisions, quite rightly.  Perhaps, though, we too often overlook a downside … the actual lifetime cost of maintaining each donor.

Acquisition is expensive.   A $50 cost for a $25 first-time gift is not uncommon.  Mileage may vary.

Most organizations then spend more on that new donor in the form of a welcome kit and a newsletter or two.  Then …

More than half of first-time donors never give again.  Ouch … a significant net loss.

That’s a lot of bad news, so what’s the useful thought out of all this?

First, lifetime value calculated across all donors — one-timers and multis — is a fair measure of the health of your fundraising program.

But maybe it’s worth staring at the new-donors expenses for two reasons.

First:  Make sure that your communications to first-time donors is as effective as possible.   Get a second gift moves them into a whole new realm of potential value, so go for it.

Second:  When going to lapsed donors, consider more than the recency of the last gift.   A lapsed multi is pretty much always worth the effort.  (By that I mean someone who has giving multiple years in a row, but not made a gift in the last 48 months, or whatever your “active” measure might be.)   Even long-lapsed multis have proven their potential lifetime value.

But you might want to segment a long-lapsed small-gift one time donor separately.  These people lost you money when you first acquired them.  They never really demonstrated value … only expense.

I’m not suggesting that you don’t mail this latter group.   Just that you segment them and measure the response results separately from other lapsed donors.   And track their subsequent giving behavior.

They are different.  It may cost less to RE-acquire these people than to acquire wholly new donors.  But they may once again have LESS LIFETIME VALUE on average than those newly acquired donors.

Only one number really counts in rationalizing the cost of a fundraising renewal:   Your cost of acquisition of a new donor.

Is it worth doing a second renewal mailing? … or a third?

Do the math.   Keep sending renewals until the cost of renewing a donor exceeds the cost of acquiring a new donor.

You can rationalize an even greater expense to renew any donor for the first time, of course.   The statistical lifetime value of each first-year renewal is immense.   Here you might  compare the value of someone who doesn’t renew, which is about, uh, nothing.

Acquisition costs are high, with no decline in sight.   Do the math when considering any investment in retention, particularly first-year retention.

Oh, and let’s not forget that similar math comes into play when considering welcome kits and other types of acknowledgment.(

In consumer direct mail marketing, the rule is “always start with the reply form.”   That’s often the first thing recipients look at, since you must there lay out your proposition.

Ok, a clear proposition is a good place to start.   And I always want to know if I’m using a survey, petition, or other reply technique.   But I can’t really get traction until I get pretty deep into a letter, especially a 4 or more page letter, my usual task.   Then I write seven pages or so, to lay out the broader proposition in full conversational mode.  Only then do I write the full reply.  Before going back to edit the letter.

In any case, the “write the reply first” rule needs further consideration.  And I really like the following expression of this matter, a quote from Pauline Lockier on writing the UK’s first Salvation Army prospect letter, recently published in the Sofii Showcase of Fundraising Innovation and Inspiration.

B: How do you begin?

PL: Many people say you should start with a donation form, because it sums up what you want people to do. I can’t ever do that because I have no voice, no music in my head, I have no voice that this appeal is going to take, it’s just an instruction. So I need to find a voice: I like lyricism and rhythm and phrasing in copy, I don’t like ugly copy. So I tend to write the first three paragraphs over and over and over again until I find a voice that I’m happy with – a voice that resonates with the organisation that I’m writing for and resonaties with this reader, in my head.  So it’s got to match those two things and only when that goes clang do I carry on.

A couple of recent posts in The Agitator have touched on the issue of whether reason or emotion drives donations.  Good material, take a look, and subscribe to The Agitator.

The one distinction that might be clearer in that debate is:  Donation under what circumstances?

For me and my clients, the only situation that matters is the moment when a prospect or donor is opening your letter, while she’s standing over her trash can, sorting her mail.

For many people, most generally, making monetary gifts may be well considered.

For our mail or email recipient, we’re counting on a “decision” in a heartbeat … not really a decision so much as a reaction.

And that would be an emotional reaction, for all the reasons you know and also well cited in the Agitator posts and comments.

For a bit of backing of that idea, check out Thinking, Fast and Slow by Daniel Kahneman.   Get the book, but for now you can get the gist by reading his article in the New York Review of Books.

Thinking Fast — System One per Kahneman — is an early evolutionary asset, reactive, based on limited information, largely driven by emotion.   The mind first “reasons” by bouncing things off memories, and the strongest memories have rich emotional content.

System Two is Thinking Slow, and we don’t get around to it much.   This is conscious thinking, critical examination, the deliberative process that would have people looking up your organization’s supposed percentage spent on programs etc.   Important for some, and in some instances, and for gifts of some size … but I’ll argue it really doesn’t come into play for our dear, beloved donor standing over her waste basket.

We are of course narrowing down “donation” to response to fundraising marketing.  But that’s our point here at happydonors.

As someone who writes direct marketing fundraising letters, I can boast that more people have read my scintillating writing than the words of most published authors.

Little solace, however, when acknowledging how many people have received this compelling prose, but not bothered to open the envelope, let alone finish the letter.

The envelope has a story of its own.  And I care little if 98% of recipients never get to the last line as long as 2% cut a check to my client.   And I care not if those 2% read a word, for that matter.

Numbers are the game in direct marketing, and you don’t need much readership when you’re sending the right messaging to the right audience.   Let’s say you have that, and a decent envelope teaser.

What could then go wrong?  A few possibilities …

1) You open the letter talking about yourself.    Sadly (or perhaps not) our readers care more about themselves than any of our organizations.   If you don’t engage me with something about ME and MY PARTICULAR INTERESTS in the first you lines, you risk losing my readership.

If your list is good, the readers’ particular interest will be your mission.  Or those you help.  But in any case, you should start off by immediately engaging me with the fact that I can be a hero.  Or I’ve been a hero and can repeat that.  Or some poor soul is deeply grateful.  And counting on me.

About me, in any case.

2)  Your letter doesn’t look and “feel” personal.   Generally speaking, the more a fundraising communication looks and reads like PERSONAL CORRESPONDENCE, the more likely potential donors are to read it.

We’re not fooling anybody.  They know it’s a mass produced missive.  But the engage with a letter personally when it looks and feels personal.  That means indented first lines of paragraphs and typewriter fonts.

3)  The letter reads like it’s written.

Fundraising letters are not really a written medium.  They are auditory.  They work best when they read like the spoken word.  They should sound like a friend talking to you.

4)  I can’t easily scan your letter and/or when I scan, nothing grabs my attention and buys my readership.

People don’t pick up a letter and start reading from the beginning.  First the scope the P.S., then the opening (oops, did you lose ‘em there?), then flip the pages around a bit.  That’s why good writers have short paragraphs, block indents, underscoring, boldface, and other visual cues that get folks to pause and read a phrase or two.

Not scannable = not as likely read.  So make sure your letters are well “designed” to maximize engagement.  A first step:  is the type big enough and paragraphs short enough to be EASY TO READ?

There are many more reasons people don’t read your fundraising letters.  The biggest is that they’re just too busy at THAT MOMENT when they pick up your mail.   More on all this later.  Meanwhile — my friend Otis Maxwell has written a book about direct marketing that worth you time.  Here’s a free chapter on “How to Keep Readers on the Hook” that has more useful thoughts about getting people to read letters of all kinds.

I can’t answer this question, nor do I expect to be able to in this lifetime.   But I can’t help but wonder and speculate, since it’s at the very heart of the fundraising endeavor.

Past posts explore some angles of this, usually around the idea that people share your mission and the idea that religion is central to a “culture of philanthropy.”  But neither is adequate, not deep enough

David Brooks recently wrote a column in the NY Times called The Limits of Empathy, talking about political action far more than giving your money away to a nonprofit organizations. Many of his points are relevant, of course.

People do give out motivated by some blend of empathy and sympathy.   I can imagine what it would be like to be a victim of that flood or hurricane, that political persecution or refugee situation.  I’m sorry for those people, I know this organization will help them, so I give.

This fits disease cures.  A little more a stretch for animal welfare-type causes.

Brooks posits that empathy isn’t enough, saying: “Empathy orients you toward moral action, but it doesn’t seem to help much when that action comes at a personal cost. You may feel a pang for the homeless guy on the other side of the street, but the odds are that you are not going to cross the street to give him a dollar.” Later adding that:

“People who actually perform pro-social action don’t only feel for those who are suffering, they feel compelled to act by a sense of duty. Their lives are structured by sacred codes. …. Think of anybody you admire. They probably have some talent for fellow-feeling, but it is overshadowed by their sense of obligation to some religious, military, social or philosophic code. They would feel a sense of shame or guilt if they didn’t live up to the code.”

Good rationale for morale action.  His closing, though, strikes closer to home for me as a fundraiser:  “The code isn’t just a set of rules. It’s a source of identity. It’s pursued with joy. It arouses the strongest emotions and attachments.”

Giving your money away is not a rational act.  It’s an “emotional act.”

And it is pursued with joy.

Your donors are HAPPY to give you their money.

This is still not an adequate explanation of the psychological and ethical underpinnings for donating to causes.

Some causes don’t fit.   Most political action fundraising is based on anger, somewhat distant from empathy though still, I’ll assume associated with joy.

One dynamic I’ve been considering lately is “gratitude.”

Most of us are deeply grateful for our situation, especially when we consider refugees or victims of persecution and natural disaster or disease.

Even those of us who don’t say “Thank God”– expressing gratitude to a higher being — are deeply grateful.   The emotion is there quite independent of religion or even, perhaps, the “Code” that Brooks elaborates.

Gratitude can be a powerful emotional motivator for helping others.   And gratitude is something different from a “sense of obligation to some religious, military, social or philosophic code.”

We’re overflowing with a strong emotion of gratitude, almost looking for a meaningful way to channel it.  Maybe that’s a prime mover for donation.

I clearly haven’t thought this all the way through, but put the ideas out there for your own consideration.

Still, after 4+ years, more people come to this site after searching “welcome kit” than via any other means.

And I can still offer no better way to improve donor retention (see last post) that with a strong “Thank You” Welcome Kit with a letter that drives completion and return of a Survey.  Key elements:

– Thank your donor profusely.

– Talk to her in “participation” language. (Probably one reason why so many organizations address donors as “members”!)  They haven’t just given you something.  They’ve joined your mission.  They share your goals so much they’ve given away some of their money.  Give them a “return on their investment” — a welcome hug, a verbal joining embrace.

– Tell them how their money is being used.  Few are asking for designated gifts, so you can say “like” a lot.  Or “enough to” accomplish several very concrete things.

– Many organizations can attribute much of the expense of welcome kits to education, so feel free to include a brochure, info on daily-life ways to live the mission, info on local affiliates, whatever you have.  But not so much as to distract from …

– Ask them to take another step — to engage in another way, besides giving more money.

Tell them you want their opinion, flattering and engaging participation. — a proven technique is a Survey.

“We’re so glad to have you with us, and as a supporter and participant, we want you advice on how we set our priorities in the coming year.”

The survey can ask donors to rank order different aspects of your mission.  No wrong answers.  We’re going to do all of these things no matter what really, and the letter lets us tell you about these things we do.  The Survey asks donors to then provide direct input to the organization about their priorities.  Your priorities, dear donor.

New people like to be polled.  This adds to their sense of participation.  By asking for their advice, you’re expressing interest in them.  All good.

– The entire sheet is personalized including a donation slip at the bottom, with an appropriate ask string based on that first gift.  Some groups ask hard, some soft.  Test for your Goldilocks “Just Right” weight of ask.

– For a harder ask, consider asking donors to check which items on the survey they want you to pursue, then ask them to give you some dollar amount for each item they check.   “When you ask us to do three things, please consider donating $XX”.  They fund what they ask you to do.  They match the commitment they’re asking for by funding your action.

– Test to find what works best for you, but most organizations I’ve seen test get a better response with a courtesy reply envelope (not postage-paid).

Direct response fundraisers want to measure everything.  Our decisions are based on statistics, really.   Counting and accountability can’t be separated.   Recognizing that, I invite you to consider a few things regarding “lapses” and “loyalty” …

Attrition is a key stat, of course, but …

– Look first at attrition after a first gift.   After first-year attrition, subsequent attrition and giving generally follows the same pattern.  A low first-year retention means lower revenue for decades.   Good first-year retention pays off with dramatically higher revenue from that acquisition year.  All reasons to spend more to get a second gift and keep first-year attrition as low as possible.  Always try to beat last year!

– Don’t look at first-year attrition as a percentage, but instead as the number of donors you have lost.   That’s the number of new donors you now have to acquire to get back to your baseline.

– For attrition after first year, look at stats within the context of the above mentioned decline.   Expected.  Not as dramatic.  And loss for one year is not a total loss.  Someone who gives 3 out of 5 years is pretty loyal, eh?

– Break down attrition by bracketed giving behavior.   With huge mail programs, this isn’t often examined.  With smaller organizations, discovering a big drop-off among, say, $100+ donors might be reason enough to get on the phone and try to recapture.

– Beyond our statistics, “loyalty” means “having an continuing emotional connection” with a cause.  Not “repeated giving.”  When giving drops off, consider what you’re doing to maintain emotional connection.  Look to your letters, your stories your overarching narrative.

– A slightly more cognitive driver of emotional loyalty is confidence that you are accomplishing what donors want you to accomplish.  That you are making progress on THEIR mission.  Again, look to your communications.  Ask if your donors are hearing from you often enough.   Every week they hear from many other organizations.

– Consider that when people lapse as donors to your organization, they probably didn’t go away.  They went somewhere else.  Most organizations are each one among similar causes, particularly in animal welfare and environmental fields.   Some other group had a better offer, a better letter, or a more intensive communications strategy.   Find out what they’re up to and adapt your own fundraising accordingly.

– Especially in a competitive situation, consider the donors perception of the risks of nonsupport.   If I stop sponsoring a child, that child’s situation gets worse fast.  If I stop giving to your organization, what happens?  Can I afford to stop, given my investment in our shared mission?  They won’t lapse (or ‘they’ll be more loyal”?) when they know something concrete that they care about will be lost.

These ideas grew out of reading a few chapters on giving behavior in Fundraising:  Principles and Practices — a book written largely as a college textbook that’s well worth adding to your professional library.  A lot of topics you won’t care about.  But rich in material on the dynamics of philanthropy that are well worth your consideration.

My last post bemoaning the demise of Mal Warwick’s electronic newsletter was, I’m happy to report, incorrect.   I recieved a newsletter on June 22, chock full o’ good info.

You can subscribe here.

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