Monday, March 28, 2011

The Wired Wealthy

There’s an attitude out there that Online fundraising hasn’t quite arrived yet in Canada. Almost every non-profit does it, but most just don’t devote much in the way of time or resources to it. And I have met many traditional fundraisers who belittle online. Many of these people are from the major gifts school of thinking and for them the real money is in cultivating large gifts. Online, to them, is mostly about giving donors information between asks. To them, online fundraising is not much to sneeze at.

But times are changing. A US study clearly shows that there is a shift taking place among wealthy donors – more and more of them are going online to connect with charities.

The study, The Wired Wealthy, was released in 2008 by Convio, Sea Change Strategies and Edge Research. It looked at nearly 3,500 donors who had given more than $1,000 to one of 23 major US non-profit organizations in the same 18-month period through any channel (online or offline). Most of these donors were in the 50s (Boomers) and the average gift was about $10,000.

The study segmented the wired wealthy into three groups. Relationship Seekers were the smallest group at 29%, but they were the second highest donors. This group is characterized by a strong personal connection to the non-profit and its work. They spend more time online than the others and are most likely to watch online videos. Relationship Seekers are multi-channel donors, but more than half say they expect their online giving to grow in the coming years.

The second group was called All Business. They were the highest donors and the second largest group. Their name says exactly how they view a non-profit. They predominantly visit charity web sites to donate – period. They want a smooth and simple donation process, and a tax receipt at the end of the year. “After that, they pretty much want to be left alone,” the report says.

The third group was called the Casual Connectors. At 41 percent, they were the largest group, but they gave the least. The study describes them as the “inbetween” between the Relationship Seekers and the All Business.

Web plays a role
The study found that non-profit websites play a significant role in decision-making resource for the wired wealthy. Sixty-six percent said say they visit the web site of a cause or charity before donating for the first time.

At the same time, the report found that the wired wealthy were underwhelmed by non-profit websites and emails. Only about a third said they found websites very useful. Only eight per cent said they agreed very strongly that non-profit websites were inspiring and seven percent agreed very strongly said the websites make them feel personally connected to their cause or Mission. When asked whether the charity website makes it easy to get information on how to decide to give, only 11 per cent agreed very strongly.

Wired wealthy use multiple giving channels for donating. Most have given online and by mail. A slight majority prefer online. However, 46 per cent said they will likely to be making more of their donations online using the Internet in five years.

Most wired wealthy donors are not frequent web site visitors. They mostly visit before they give and then infrequently through the year.

Wired wealthy believe they get too much email from non-profits. Seventy-three percent said they read “about half” or less of each charity email they receive. Twenty-seven percent say they read “hardly any.” However, the study found that the wired wealthy are receptive to email solicitations, especially renewal notices. Tactics most likely to please wired wealthy donors are action alerts, success stories, tax receipt at year-end, and reports back on how money was spent.

The study also asked non-profit organizations what they think. There was widespread recognition that high value donors are engaging – and giving – online. Sixty-four percent said they believe that high dollar donors are visiting their web site and subscribing to their emails.

The Bottom Line

Clearly, the wealthy donor segment is moving more and more online. The days when we could say that “our donors are old, they don’t give online” are passing before our eyes. Online fundraising is here to stay and non-profits need to start taking their online marketing more seriously.

There is also online “fatigue” – too many emails and too little at non-profit websites to keep them coming back again and again. This is likely a symptom of a lack of an effective engagement strategy. The right message will cut through all of this.

Monday, March 21, 2011

Benchmark study shows Online’s strength

Web-based fundraising is coming of age. That’s the conclusion of the 2011Convio Online Marketing Nonprofit Benchmark Index Study, which evaluated the results of nearly 600 Convio non-profit organizations.

The study, which was released in early March, found that Online is the fastest growing fundraising channel for non-profits. In 2010, Convio’s clients raised more than $1.3 billion online, up 40 percent from 2009. The median growth rate in online giving was 20 percent. This compares to a median growth rate of 14 percent in 2009. Still, while the majority saw growth, a significant minority saw decreases – some 21 per cent.

They found that online giving is growing fastest for small organizations. Organizations with fewer than 10,000 email addresses saw a 26 percent increase in online giving.

Overall, numbers of gifts and the median donation size increased (to $91.94 US in 2010).

Also growing are email lists. The report found that the median total email file grew 22 percent to 48,700 constituents.

Certainly, this is good news for those who have embraced online fundraising. Many Canadian charities have very basic online marketing capabilities. For example, a large number don’t have email systems, and many of those who do fail to use it for fundraising. They have been reluctant to put more resources into online until it proves itself. Now, that proof is here.

Some negatives
On the less than positive side, web traffic rates grew very slowly. Only half of all respondents saw their website traffic increase from 2009 to 2010. Overall web traffic growth in 2010 was just 2 percent, the second consecutive year that the growth rate has been in single digits.

As well, website registration rates continue to decline. The rate at which the non-profits converted website visitors to their email file in 2010 was 2.0 percent — a decrease from 2.2 percent in 2009.

Open rates continued to decline. Open rates for fundraising appeals were down from 18.5 percent in 2009 to 17.6 percent in 2010; and newsletter open rates declined from 20.4 percent in 2009 to 19.2 percent in 2010.

What does all this mean?

First, you need to realize that this is a large US study from a company that deals with medium-to-large non-profits. Here in Canada, non-profits tend to be smaller and less sophisticated. Likely, that means that these numbers cannot easily be transferrable to our non-profits. In fact, we are most likely behind the US on a number of these measurements.

Second, this does point the way to the future. While things may not be as rosy online here as in the US this study shows clearly where fundraising is going. The recent 2010 Non-Profit Year-in-review study comes to the same conclusion.

Third, some of the negatives listed above appear to be symptoms of a lack of a valid online marketing strategy. It is one thing to start sending fundraising emails, it is another to make it compelling. That might be the missing link here.

Overall, the study shows the need for flexibility in fundraising marketing, especially when it comes to online marketing. If the world is going online to give, Canadian non-profits should be there to help.

Monday, March 14, 2011

Is Direct Mail Dead?

Direct mailers hard at work
In this day and age of all things online can the humble mailer still meet your fundraising needs? If you listen to the Web 2.0 gurus the answer is that direct mail is dead and should have been dead much earlier. They say the last advance in direct mail was the Guttenberg Press 500 years ago and it’s been all downhill since then.

Direct mailers point to the According to the 2010 Direct Mail Association Statistical Fact Book 79% of households either read or skim junk mail advertising sent to their home. Another study, done by International Communications Research for postal automation giant Pitney Bowes in 2007, found that 73 percent of consumers prefer mail for receiving new product announcements or offers from companies they do business with, as compared to 18 percent for e-mail. Mail was also preferred by 70 percent of respondents for receiving unsolicited information on products and services from companies with which they are not currently doing business.

So where does that leave your charity? I think the answer is that dumb direct mail is dead. It is true that the world has changed because of the online revolution, and it continues to change. Sending direct mail the way you used to ten or even five years ago is not a good idea. What email and social media has taught us is that personalized and interactive communications that promote relationships work. Not only that, but because they are online they are more measurable and they connect donors to charities faster and more cost effectively. But, flipping the argument, it has also taught us that dumb email isn’t the solution either. Taking your mailer and making it into an email won’t solve all your fundraising problems.

The takeaway is that you need to integrate your communications, be it by mail or email, into one strategy that can talk directly to your donors and connect them to you quickly and efficiently. The relationship is the most important thing.

An example is Rapid Donor Cultivation from Common Knowledge in San Francisco. It is admittedly an email product, but it’s claim to fame is its integration. Basically, it takes new e-supporters and sends them a series of clever information pieces over a short period of time that educate supporters about a key issue. That’s right. They break the golden rule not to bombard inboxes with emails by sending something like five emails in 10 weeks. They are personalized, customized and well written. Their conversion rate for donors was six times higher than average.

The debate over direct mail and direct email then is not about which platform is better but how all direct marketing needs to be smarter.

Monday, March 7, 2011

One big mess

The state of marketing spending at Canadian non-profits is even more clouded than first thought.

In the 2010 Non-Profit Marketing Year-in-Review painted a challenging picture of spending in our sector. It concluded that non-profit marketing is consistently underfunded. In Canada, there are few statistics on spending, but in the US a 2008 study by the American Marketing Association and Lipman Hearne found overall marketing budgets were typically 2% to 3% of the organization’s overall operating budget. More importantly, it showed that spending across the sector varied wildly, showing that there are few rules of thumb on marketing spending at all.

Now, a review of a US study shows that the picture of marketing spending is even more clouded.

Nonprofit Overhead Costs, a study conducted in 2008 by the Bridgespan Group in the US, concluded that marketing costs were often hidden from plain view, even in tax returns.

“…nowhere in its definition of program, management and general, and fundraising expenses does the IRS explicitly address how to account for marketing and communications activities. As a result, many organizations allocate all marketing and communications expenses to programs when, in most cases, these expenses would more accurately be reflected as administrative or fundraising overhead,” the study said.

While tax policy in Canada is different, the problem of how marketing spending is accounted for in taxes remains. The Canada Revenue Agency is perhaps a little clearer in getting charities to disclose marketing costs. Usually, these are considered fundraising expenses. But again, marketing spending is spread out across many activities. Line 4800 of the T3010 charity tax return asks specifically about advertising and promotion. A review by Imagine Canada in a 2009 study called Perspectives on Fundraising showed that 18% of charities with budgets under $30,000 a year used advertising and promotion, while 21% charities in the $100,000 range did. The rate was 39% for charities making more than $10 million or more. That’s helpful data.

However, marketing spending is also likely to be part of bingos, lotteries, fundraising dinners and mail campaigns, each of which has a separate reporting line on the T3010. So, the true cost of marketing is hard to figure out.

Where does that leave Canadian non-profits? Likely, confused. There are no benchmarks for marketing spending and no easy way to draw out answers even from tax data. Once again, marketing at non-profits is clear as mud.