4 Keys to Justifying Donor Acquisition to Your CFO/CEO/Board

If your nonprofit has any hope of survival in the long run, it must invest in donor acquisition. But with tight budgets, acquisition often is one of the first things nominated for the chopping block.

“Acquisition is a long-term investment, but we tend to be measured in the short term,” said Becky Graninger, account supervisor at relationship-marketing agency Merkle, during a presentation at the DMA Nonprofit Federation’s 2011 Washington Nonprofit Conference.

Graninger moderated the session “Asking Up: Making the Acquisition Justification to Your CFO/CEO/Board.” During the presentation, speakers Chris Griffin, managing director of the Arthritis Foundation’s direct-marketing program; Kay Keenan, founder of ConversationOnNetworking.com; Emily McManus, manager of new market channels at Catholic Relief Services (CRS); and Jim Rowley, deputy finance director of the Republican National Committee (RNC), provided ways to justify the investment in donor acquisition.

Give your CFO (or CEO or board) a break
Keenan said that when she was hired at Big Brothers Big Sisters as the chief marketing officer, there was very little respect for the marketing team. So she found out very quickly that she should get close to her CFO.

“The CFO always delivers the bad news,” Keenan said. “I made it a point to stop and say good things to him. I made it my path to stop by his office, ask for lunch, develop a relationship. And I always tried to make sure he had a good sense of what marketing was doing — made him understand what we did on the marketing side was all so that our organization could serve children.”

Developing that relationship with her CFO really helped him understand and appreciate why marketing did what it did and how it helped Big Brothers Big Sisters carry out its mission.

Keenan also said that you should be a teacher. At first, when her peers asked her questions about marketing activities, she became defensive. Then she realized people weren’t questioning her because they were unsure of her abilities; they questioned her because they wanted to understand.

“I flipped it and became a teacher, and they began to understand and trust me,” she said.

“Explain all your numbers. Walk them through how you build up to what you’re saying,” she added. “We understand how these spreadsheets work. Find out if they do, and encourage them to be part of it. Point is to get buy-in by completely being transparent.”

You can overcome the hurdles of objections such as, “It doesn’t work in the first year,” by showing them case studies of how acquisition works tremendously over time, more than paying for itself in the long run. The more your CFO, CEO and board understand the impact, the more likely they are to buy in.

Keenan also suggested that you get your CFO to present with you to the CEO and board.

“The more you can collaborate, the better off you’ll be,” she said.

“Bring them into the tent so they’re inside with you,” Graninger added.

An audience member also agreed: “Your board likes metrics. When you can show them ROI, they like that.”

Show acquisition plus ROI
Being a political fundraiser, Rowley deals with a slightly different animal than fundraisers in other nonprofit disciplines. He admitted that getting acquisition dollars for the RNC hasn’t been a huge issue, but there are challenges to justify direct-mail acquisition versus moving everything toward the Internet.

Due to the wild success of President Barack Obama’s online fundraising in 2008, Rowley has incurred the questions of why not just “move everything to the Internet because it’s free and Obama did it,” he said. “So we try to explain why that was a phenomenon and not the norm.”

The way he does that is by providing all the data to the higher-ups: the cost per new donor ($6-$23), how many RNC brings in each year, how quickly they become multiple-time donors, lifetime value (over 10 years they’re worth about $300 on average), etc.

“To explain that you can’t force somebody to give online, be armed with all the data, facts, figures and the amount of money you raise with direct mail versus the Internet,” Rowley said. “Put it in numbers and they get it.”

Rowley shared a simple chart (see above) showing the all the numbers from acquisition cost to net revenue to renewals to total ROI that you should present to your board. He emphasized to always show the long view.

“If you come with lots of visuals, charts, graphs and talk to your CFO a lot, they get a better understanding,” he said. “Tell them why you do what you do, and show them what results from that.”

Meet with your CFO monthly
Griffin built on Keenan’s point of building a relationship with your CFO. He suggested meeting at least monthly.

“Building a relationship with your CFO is key,” he said. “Meet proactively to educate about direct marketing and update the numbers. If you’re in front monthly, he’s up to speed on your program, and it builds you up compared to your peers.”

Griffin suggested showing different perspectives of what acquisition means to your organization. Show a history of acquisition over a long period of time, say 90 years (if your organization has been around that long), and what that means to your organization today. Show that, for instance, $10 million dollars is coming from donors you acquired 10, 15, 20 years ago.

“Put it in front of your CFO. He’ll see it as a long-term investment and understand the impact that if you cut this year, it affects future years,” Griffin said.

Explain how acquisition affects other areas such as planned giving and major gifts as well, Griffin said. For example, he showed his CFO that direct mail drives 42 percent of the Arthritis Foundation’s revenue.

“Donors we brought in gave $16 million and then another $26 million,” he said. “We tied them back to our direct-mail donors, showing how they went on to make major gifts, planned gifts, etc.”

Questions may still arise from the top, so make sure you explain how you gathered those numbers, Griffin said.

Ask for additional funding
Catholic Relief Services received an increased acquisition marketing budget for 2010-11 through 2015. The way the marketing department did that was by continually asking.

“Timing is everything,” McManus said. “Keep asking so that when the time is right for a budget increase and luck is on your side, you’ll get it. We asked for additional funding in 2010-11 and got it, and got additional funding through 2015.”

The next step after you do finally get the go-ahead for donor acquisition is to manage expectations. To do that, McManus said, it’s vital to agree on what the reasonable expectations are from the beginning because “you can only manage what’s already been agreed to.”

This can be a challenging step, McManus admitted. Traditionally, CRS’ acquisition program has aimed for $30-$40 average donors. In order to responsibly manage the increased budget and accomplish the goal of bringing in more donors, CRS probably needs to bend its criteria and be more flexible with the type of donors it brings in. So it may look to bring in $15 donors and then cultivate them into higher-value donors.

It’s all about education and management. Continuously educate the board and develop a strategy that can be adapted and enhanced over time.