Smart Tips for Working Through a Lapsed Donor p g g pProblem

Lawrence Henze

July 21, 2011

Today’s Presenter

• Managing Director/Principal Consultant, Target Analytics• 31 years in the nonprofit industry• 31 years in the nonprofit industry• Author and frequent presenter on fundraising and nonprofit topics• B. A., Political Science, Carroll University, M.A., Public

Ad i i t ti d J D U i it f Wi i M diAdministration and J.D., University of Wisconsin-Madison

Today’s Agenda

• Fundraising Basics and Donor Development• Solving a Problem Before it Starts

• Proactive measuresAnnual Giving Analytics• Annual Giving Analytics

• Metrics, Data Mining, Predictive Modeling

• 5 Proactive Measures – Promoting Donor Retention• 5 Reactive Measures - Recapturing Lapsed Donors • Questions and Answers

Basic Discussion Points…

• “We have always done it this way” is not a statement of success• Unless, of course, the program is actually working

• Fundraising should be a long-term endeavor with both g gshort and long term outcomes• Short-term focus increases the likelihood of lapsed donors

• Donor-centered fundraising requires donor participationDonor centered fundraising requires donor participation• Perception is reality

• How does the donor view giving?• How do you communicate your needs within an

understanding of the donor’s interests?

Donor Development

Loyal donors give 60% of the time(for example, 3 of 5 years)

Loyal donors 8-9 times more likely to rise to top

Gifts of Cash – Giving ProgressionMid L l Gi i f ll b t l i i ( di t k ti ) d j i io Mid-Level Giving falls between annual giving (or direct marketing) and major giving

o Prime Upgrades are ready to move from Annual Giving into Mid-Level Givingo Transitional Donors are traveling up the pyramid to Major Giving

Annual Giving

Major GivingGiving Giving

Prime Upgrades Transitional Donors

Retention and donor loyalty makes this progression possible

Overlap area offer opportunity for different stewardship strategies

Fundraising Basics - Today’s Donor Pyramid

Gift Chart Analysis• Comparison Period – Use a meaningful period of time to measure fundraising activities

(below is unique donors that gave within the last fiscal year)• Gift Levels and Programs – Look at donor counts in your organization’s key program

levels (example below shows org focused on annual giving)

Conclusions

• Giving plateaus at the $1k and $2,500

levels

• Donors are not progressing up the

pyramidpy

• Major giving pipeline is fairly weak

.

Like the Ancient Pyramids, Gift Pyramids Provoke Thought

• From an annual giving perspective• What might this mean?g

• Acquisition v. retention?• Mid-level weaknesses?• Over solicitation?• Over-solicitation?

Giving METRICS

What Do We Need to Know to Be Successful?How We Use Information to Proactively Address RetentionHow We Use Information to Proactively Address Retention

(The Anti-Lapse Cure)

Tracking Communications (University Example)H ft t hi th t ?

January February March April

How often are you touching these prospects?

Time to get your communication stream in order!

January February March AprilDevelopmentMembershipSpecial EventsStewardshipInformationAthleticsCulturalOtherOther

Channels: Print (P); Telephone (T); Electronic (E)

Meaningful Measures - Retention

• What do you need to know to study and analyze the effectiveness of annual giving (areas for stewardship/donor relations):

First year retention• First-year retention• Multi-year retention• Overall retention

N mber (percent) of retained ith positi e trajector• Number (percent) of retained with positive trajectory• Reactivation

• By past giving historyC itt d ( i i ll f th t 6 )• Committed (given in all of the past 6 years)

• Loyal (given in 3, 4 or 5 of past 6, at least one gift in past 3 years)• Occasional (no more than 2 gifts in past 6 years, with no more than 1 in

past 3)past 3)• Lapsed (at least one gift in past 6 years, no gifts in past 3 years)• Non-donor (no gifts in past 6 years)

Meaningful Measures

Overall Index MediansYear-over-Year Change in Key Measures

2.2%

-0.1%

-4.3%

-1.1%

-2.0%

Revenue

Donors

New Donors

3.8%

1.5%

-6.2%

2.2%

-0.7%

New Donors

Rev / Donor

Overall Retention

-0.8%

0.4%

-3.2%

-0.8%

1st-Year Retention

Multi-Year Retention

-1.9%-5.0%

Reactivation

Q3 2006 YTD to Q3 2007 YTD

Q3 2007 YTD to Q3 2008 YTD

Meaningful Measures

Knowing demographic information allows you to craft specific messages and thank-yous, increase retention

Proactive and Reactive MEASURES

5 Steps To Avoid Lapsed Donor Issues4 Recapture Strategies4 Recapture Strategies

5 Proactive Measures

• Proactive Research• Lifetime Giving Potential• Stewardship• Solicitation Frequency• Testing New Renewal StrategiesTesting New Renewal Strategies

Proactive #1: Donor Profiling - Niche Clusters

• Household level clusters• http://www.equifax.com/consumer/marketing/en_us• Group people by life stages

• 26 Niches ranging from the young and wealthy "Already Affluent" Niche to the least prosperous "Zero Mobility" Niche, these clusters provide a picture of your prospects

d d d k it i t ft th ki d f t t d i ti th tand donors and make it easier to craft the kind of targeted communications that make people feel like you are talking to them individually.

• Niche A – Already Affluent Average Age: 29 Average Income: $166K• The households in this Niche are extremely upscale, both with respect to their earnings y g

and their propensity to spend. The household typically consists of two adults between the ages of 18 and 34 with no children. They own their homes with an average value of $221,000 and are more likely to have a length of residence less than 5 years. They are highly educated with most completing college or graduate school. Majority of the households are employed in professional, technical, managerial and sales/service occupations.

Donor Profiling – Append Niche Clusters and Analyze% f D b D i ti Ni h% of Donors by Descriptive Niche

Niche ANiche BNiche CNiche ENiche GNiche Hc eNiche IAll Other Niches

Predominant descriptive clusters for committed and loyal donors

Donor Profiling – Niche Cluster Analysis

• Applications of cluster data• Append cluster codes to your entire database• Segment donors and non-donors by dominant clusters

• Segment donors by level of loyalty• Analyze the distribution of codes y

• For example, 77% of donors are described by 7 of the 26 clusters

• 39% of the non-donors are also described by the same 739% of the non donors are also described by the same 7 clusters

• Concentrate on the non-donors who are included in 1 of the 7 clusters for acquisition or recaptureclusters for acquisition or recapture

Donor Profiling for RetentionDonor Profiling for Retention

• Further application of cluster data• Use descriptive components of cluster to tailor thanking strategies• Use descriptive components of cluster to tailor thanking strategies• Craft messages by cluster – improve retention• Use clusters to segment responders by channel:

• Direct mail• Telephone• Email• Personal solicitation

Other Profiling Solutions• Donor database cooperatives• Predictive modeling

• What are the common characteristics of these donors?What are the common characteristics of these donors? • You will learn who they are and how they give.

Proactive #2: Determining Lifetime Value

• Not all donors have equal value• Those with higher LTV deserve greater retention• Predictive models (i.e. major giving, target gift range) tell you which

donors, lapsed donors have greatest potential

TGR 1 2 3 TGR 4 TGR 5 TGR 6 7TGR 1,2,3$1-$250

TGR 4$251- $500

TGR 5$501-$1,000

TGR 6-7$1,000-$5000

AGL 801+Excellent 306 1817 3716 4469

AGL 601-800Very Good 4748 2799 1075 437

AGL 401-600Good 51,963 5082 1739 566

AGL 301-400Some 36,669 1791 554 198

AGL < 300Unlikely 22,057 489 116 56Unlikely

Lifetime ValueUsing likelihood and capacity scores, we identify top prospects today but also prospects to cultivate for future major gifts.

Highest scores and High likelihood scores

and mid-level target

g p y , y p p p y p p j g

Highest scores and high capacities

Further qualification and research

I di t i di id l

and mid-level target giving ranges

Implement targeted upgrade, mid-level

major and planned gift Immediate individual cultivation

Lower likelihood

major and planned gift strategies

Increase annual giving

L lik lih d scores, but high target giving ranges and

assets

Need to be sold on your

Low likelihood scores and low target giving

ranges

Minimize investmentmission

Longer term cultivation Consider reduced

resource application

Proactive #3: Stewardship

• If you know who is most likely to be retained…• And those at risk of lapsing…• You can create a proactive thanking program that concentrates only on

keeping people as continuing donors• Inform donors of the value/uses of their gift supportg pp

Proactive #4: Solicitation Frequency

• More and more analytical and anecdotal data that suggests that more frequent solicitation decreases the likelihood of retention• See, for example, Cygnus Report• http://www.cygresearch.com/publications/orderReport.php

• Once people lapse, they may be solicited even more frequently to reactivate• Counterproductive and counterintuitive

Proactive #5: Testing Strategies

• More and more pressure to use multi-channel solicitation strategies• Think of using multi-channel to thank and inform, not to solicit more• For example, evidence shows that an informative email in advance of a

direct mail solicitation lifts response rates

5 Recapture Methodologies

• Qualified lapsed donors are better prospects• Predictive modeling provides focus• Not all lapsing is bad• Memorial and honorary giving• Data hygieneData hygiene

• Keeping your file current

Recapture #1 – Better Prospects

• Recapturing lapsed donors may be a better strategy than acquiring new donors

Si l t th h i i th t• Simply put, they have given in the past

• Does your annual giving strategy reflect that likelihood?• My observation: acquisition often takes primary importance

Thi i l t d if it i hi ti t d i iti• This is only warranted if it is sophisticated acquisition

Recapture #2 – Predictive Modeling

• Identify donors who have been recaptured• Build a predictive model that identifies these characteristics• Use the model, score the lapsed population, solicit the best prospects

only• Or, through a donor database cooperative, use their lapsed donor g p p

scores

Recapture #3 – Not all lapsing is bad

• Some very loyal donors begin to limit their cash contributions post-retirement

• Fixed income is the motivator, not loss of interest• Many remain excellent planned giving prospects• Reach out to these donors through stewardship to maintain their g p

connection• $5, $10 and $25 contributors may give five, six, and seven-figure planned gifts• Bequests average $35,000 to $80,000

Recapture #4 – Memorial and Honorary Giving

• These donors typically lapse at the highest rates• Three-tier strategy

• Offer opportunity, if possible, to renew their gift support for original gift purpose

• Alternatively, compile a report on the impact of memorial and honorary i i t i tigiving to your organization• Encourage these donors to renew their support with other similar

donors• If you use modeling concentrate your best resources on the top scoring• If you use modeling, concentrate your best resources on the top scoring

memorial/honorary donors

Summary and Questions• Contact:

Lawrence.Henze@Blackbaud.com843 991 9921843-991-9921

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