3 Top Analytics Techniques Every Fundraiser Should Know, Part 3

[Editor’s note: This is the third and final part of a three-part series based on a session, “Analytics in Plain English: 3 Top Techniques Every Fundraiser Should Know,” presented by Don Austin, director of analytics at Infogroup | Nonprofit, Lawrence Henze, managing director of Blackbaud’s Target Analytics, and Bryan Terpstra, vice president of client services at LW Robbins, at the 2010 New York Nonprofit Conference held Aug. 24-25. View part 1 here and part 2 here.]

Lapsed donors
Terpstra wrapped up the session by discussing ways to motivate and engage lapsed donors, as well as how to use data and analytics to improve lapsed reactivation rates. He began by telling the audience to ask themselves three questions:

• Who is lapsed?
• How long have they been gone?
• Why did they leave? “If you can answer why they left,” Terpstra said, “you can figure out how to get them back.”

There are three big groups of lapsed donors, Terpstra said:

• Pre-lapsed — 10-12 months with no gift
• Lapsed — last gift was within 13-24 and 25-36 months
• Long lapsed — last gift was 37+ months ago: “Don’t give up on long lapsed donors,” Terpstra said.

It’s not news that reactivating lapsed donors is less expensive than acquiring new ones, but did you also know that reactivated lapsed donors typically have a much higher long-term value? To illustrate that point, Terpstra provided a case study example of an organization he worked with that analyzed its reactivated lapsed donors versus new donors. The reactivated donors had a higher annual renewal rate and a much higher average gift, resulting in a lifetime value after five years that was more than double that of new donors.

Exploring lapsed donors vs. new donors even more, Terpstra cited a recent study of more than 20 direct-mail charities by Brickmill Marketing Services that showed acquiring new donors is getting even harder. According to the study:

• Acquisition median cost per dollar raised has increased each of the last four years
• Total number of new donors acquired is down almost 18 percent in 2009 vs. 2008 (June to July)
• Biggest concern for nonprofits in the study was a decrease in new donors and converting these new donors into loyal donors

With all this in mind, increasing lapsed reactivation rates is critical, Terpstra said. So how do you do that? Terpstra laid out the typical treatment strategies he’s observed over the years when it comes to lapsed donors:

• Pre-lapsed donors are put in the regular donor-renewal stream.
• Lapsed donors may get fewer renewal mailings and not get any special messaging or packages.
• Long-lapsed donors may not get mailed at all by some organizations, and most fundraisers put certain long-lapsed donor segments into acquisition.

“You probably shouldn’t be doing typical treatment strategies,” Terpstra said, because they often don’t work. He then offered strategies that do work, suggesting fundraisers test ways to motivate lapsed donors to give again, looking at:

• Seasonality — history of giving once or twice a year in the same time frame? Then test again in that time frame.
• First appeal — what prospect appeal did they respond to in the first place? Send them a similar appeal to remind/reactivate them.
• Affinity — can you call them “members”? Do they like supporter cards or decals? Make them feel like part of a group.
• Premiums — testing name labels, note pads, tokens, etc., may increase response, especially if they have a history of responding to premiums.
• Community — do they interact with you in other ways, i.e., volunteer, attend special events, give memorial gifts? Reference these connections to your organization when you communicate with them.
• Urgency/emergency — special programs that need immediate help usually work; use deadlines.
• More personal contact — write handwritten notes to lapsed donors; send year-end thank-yous or holiday cards.

“There’s something you can do with all lapsed donors,” Terpstra said, telling the audience to ask these questions and consider the following ideas:

• Have you given them your best offers? Matching gift, year-end holiday, supporter card, emergency mailings, etc., may work.
• Do they know that they have not given in a while? Show them when they last gave and what they last gave — works especially well with pre-lapsed, Terpstra said.
• Do they remember your organization and what you do? “We’re all bombarded with messages, so they may not remember you. Remind them,” Terpstra said. Test packages that could remind them who you are.
• Do you have a signature event or milestone event that is coming up? Like any donor, lapsed donors may react well to something big and special that is coming up for your organization.

The best way to decide on the proper reactivation strategies to employ is by using analytics. One technique is to used lapsed segmentation, testing and measuring results by:

• Six-month time increments
• All different dollar ranges
• Frequency, single vs. two-plus gifts or two and three-plus gifts
• Lifetime worth
• Source of getting on your file

However, Terpstra said the best approach is either lapsed modeling or employing a "hits" strategy.

Cooperative model
The cooperative model is very effective for lapsed donors. There are several large co-op databases in the industry, such as Target Analytics, Wiland Direct, Abacus, etc. Each database is typically a huge transactional database built from information from many participating organizations. Some are nonprofits-only, while some are nonprofits plus other participants. They have tons of information about consumer or donor behavior across many organizations.

Using this data, you build statistical models to predict who will reactivate. Your lapsed donors are ranked and given scores. Typically, the top 10 percent to 15 percent with the highest scores are identified as key prospects for lapsed initiatives/mailings. Combining what you know and what you gather from the co-op, you can get a more advanced look at who your lapsed donors are. For example, you might know that a lapsed donor has given you three donations over five years, donates $25 on average and has given a high gift of $40. To supplement that, the co-op lets you know that that lapsed donor has an income of $60,000, donates to five different organizations each year, has given six gifts this year, has purchased twice from a clothes catalog and once from a garden catalog in the past year, and subscribes to a quilting magazine.

Based on that information, you can pinpoint if that donor is appropriate to try to reactivate, and also to target the proper messages to that donor. One client Terpstra worked with increased its reactivation response rate by 50 percent using a co-op model.

Regression model
Regression models can be effective for long -apsed donors. They are typically not as robust as co-op models because they basically originate solely from your own historical data on your file. The leading indicators for the right long-lapsed prospects to target tend to be transactional — number of past gifts, largest gift, etc. — and some demographic overlays can help improve the model, Terpstra said.

Hits strategy
“If you can’t afford a lapsed model, try a ‘hits’ strategy in your acquisition program,” Terpstra said. Do this by including long-lapsed segments in your acquisition merge process. Then flag your long-lapsed donor lists that hit against outside files. These are donors who lapsed on your file, but for some reason are currently giving to one or more of your “competitors” — other organizations.

Mail just these lapsed-donor lists — the response rate is typically well above what you would expect, Terpstra said. It is essentially running a simple model.

Once you’ve targeted the proper lapsed donors for reactivation, use the basic principles of direct-response best practices in your communications. When asked by an audience member what to use to drive the ask string, Terpstra said, “Use their last gift or something around there for your ask. We’ve had lots of success with lower asks as well. Don’t be shy about downgrading from their last gift to encourage reactivation.”

The key, he said, is to remind your donors who you are and why they gave to you in the first place.