Cover Story: Gentle Persuaders

It’s a stunningly perfect, late-summer day in the nation’s capital, and Carsten Walter is doing his best Homer Simpson impression — though maybe not on purpose. The affable, animated Walter slaps the heel of his hand against his forehead, rolls his eyes and explains how certain “duh moments” play into his work as director of membership programs at D.C.’s venerable Heritage Foundation.

“You think, ‘Dammit, why haven’t we been doing [more of] this?’ “ he says of those realizations that come in a flash and are so sweet in their simplicity that it’s almost shameful they weren’t thought of before.

“It’s common sense,” he says. “If you make a $15 contribution to an organization, how do you want to be treated? First, you want to be thanked. You want to be treated with respect. You want to know where the gift is going and what impact it’ll have.

“And it is as simple as thanking a donor,” he continues. “It’s fundamental. It’s incumbent on any organization to thank a donor. But you can look at case after case of organizations that don’t do that.”

At the Heritage Foundation, those “duh moments” added up to a return to basics, but don’t be fooled by the simplicity of that oft-used phrase. Heritage re-embraced the basics and combined that with a fresh “donor as friend” philosophy. The result was a very specific plan of action that, in a head-to-head test, resulted in a nearly 30 percent cumulative increase in contributions over three years.

It all started in 2000, when two senior research associates at a Chicago ad agency offered to do some pro bono work for the Heritage Foundation and created an eight-page, 300-question survey to gather data about the conservative think tank’s members.

The survey asked not for money, but for information, and was sent to 10,000-15,000 people who cut across Heritage’s donor and potential donor segments — active, lapsed, contributors to other conservative groups, etc. — and to the general public of all political leanings. Walter says the response rate varied from 12 percent to 20 percent according to segment.

The questionnaire looked at everything from age and income, to giving patterns, to fact-based questions to see how informed respondents were, to “attitudinal questions” that addressed their opinions on various issues.

Boiled down, it led to two major findings. The first addressed the existence of what Heritage is calling “The 9 Million” — 9 million potential donors who already have the propensity to give and who fit the age range, income level and ideological orientation of people who would seem likely to give to Heritage.

“But they’re the 9 million people out there who we can’t actively reach,” Walter explains. “They aren’t on the mailing lists that we’re able to penetrate right now.”

Part of the problem is that many of “The 9 Million” don’t want to be labeled as conservative, even though they agree with the Heritage Foundation on most important issues. Reaching this huge group is an ongoing challenge, Walter says, and Heritage is “constantly testing that, looking for messages we can use.”

“And frankly we have not had great success in reaching these potential members cost effectively,” he admits.

Even more surprises
But what spurred the biggest change in Heritage’s fundraising philosophy was the survey’s second major finding: The foundation, despite decades of successfully soliciting charitable donations, had failed to build relationships with its core of regular donors.

The survey suggested that Heritage had not separated itself in donors’ minds from “just that group of people that they give to,” Walter says, adding that organizations in that position often only get money from certain donors because they are “the first ones through the mail slot when [the donor] is ready to write a check.”

As a result of the 2000 research, Heritage in 2001 chose approximately 20 percent of its donor file and reduced by four the number of solicitations those donors receive in a year. On average, donors would get 14-17 solicitations annually, which now became 10-13. In place of those four solicitations, the chosen donors received four new relationship-building contacts, in addition to other non-solicitation contacts they had been receiving, such as quarterly newsletters, thank-you letters and a variety of research publications.

The results were “pretty dramatic,” according to Walter.

“In 2001, the test group gave nearly 8 percent more than the control group,” he explains. “That being said, all these additional non-solicitation contacts were not cheap. So we essentially ended the first year at break-even among active members; there was no bottom-line net profit.”

But the results need to be looked at in relation to the lifetime value of each member.

The new non-solicitation materials took the form of additional thank-you notes and greeting cards on the Fourth of July. Though some contained “soft hits,” many would chill seasoned fundraisers to the bone because they included no reply cards or any other easy way for the donor to respond (read: send a check) should the spirit move him just then.

Also during that initial test, new donors were given the traditional thank-you letter, followed by a phone call and a welcome kit, as opposed to the old policy of sending just a thank-you letter. It was a move that tested the notion that it pays to start building positive relationships early on.

And pay it does: New donors in this test gave nearly 12 percent more than those in the control group.

“In 2002, we immediately rolled out with the welcome cycle to all new members,” Walter says, with another smack to his forehead. “Before, we were sending out just a thank-you letter, and [new donors] were just rolled into the regular solicitation cycle. That’s one of those ‘duh moments.’ If you’re a new donor to an organization, you want to find out what the organization is about.”

Bucking the trend
Despite the fact that 2001-2002 were difficult years for nonprofits, Heritage was pleased with the results of its testing. Looking back at the original control group, giving by new members was up nearly 24 percent in year two, and giving by existing donors was up by 10 percent.

By the end of 2002, the cumulative increase for existing members had risen dramatically over two years. The actual amount per donor was up just about 10 percent, but higher renewal rates, more frequent donations and larger average gift sizes brought the figure up to 30 percent.

One of the accomplishments over the three-year period from 2000-2003 that Walter finds most significant is the “normalization” of donors who had sporadic giving patterns. The tests resulted in single-digit increases among donors who already were giving on a regular basis. But among the sporadic donors, giving increased by 20 percent.

Heritage also took a look at lapsed donors. When asked why they stopped giving, 30 percent reported an economic challenge that precluded them from contributing, and 30 percent either were incapacitated, had moved to a nursing home or had died. (The foundation’s average donor age is 72.) Many among the remaining 40 percent simply didn’t realize they no longer were active members of the foundation.

Acting on the new information, Heritage used telemarketers to solicit donors who had not given for as many as 13 years. The effort to win them back currently is proceeding at a break-even pace, with the donors’ potential lifetime value in mind.

Also in 2002, the foundation was given the building next door to its 214 Massachusetts Ave. location and used the gift as a reason to solicit extra donations and upgrades in giving. The campaign, in which donors were offered various namesake options (such as having their names etched into a glass wall), resulted in 500 members — whose previous giving was in the $100 range — making gifts of $1,000 or more. And even though bricks-and-mortar campaigns are few and far between, the foundation came away with the knowledge that if you carefully nurture relationships over time, donors will come through.

“What we learned is that there are large untapped resources in our donor base,” Walter says.

Through August 2003, those numbers included a 30 percent increase over the historic norm for conversion rates of new members to multiyear members and a marginal increase, about 5 percent, in the renewal rate of multiyear members. Given the fact that the average gift also increased, the cumulative figure is up “significantly.”

“[The new numbers] changed our entire philosophy. One of the biggest changes is that we focus [more] on customer service,” Walter says.

Shaking things up
The new focus on relationship building included a restructuring of Heritage’s development office. Before the change, Walter says, non-solicitation mailings were being sent out randomly and often overlapping. Now the mailing schedule is more systematic.

Another factor in building good relationships is efficient lines of communication. To reach the foundation, all a donor or potential donor needs to do is call or visit www.heritage.org. Want to give Edwin Meese a piece of your mind? Click — it’s done. Meese, former U.S. attorney general, is chairman of Heritage’s Center for Legal and Judicial Studies. His e-mail address is on the site, along with that of everyone else who works there.

Heritage.org is fairly unique in its upfront approach. There are real snail-mail addresses and telephone numbers to be found, in addition to the e-mail addresses. Walter says the goal is for every person who contacts the foundation to get a response.

That amounts to about 350 postcards going out each week to acknowledge changes of address, mailing duplications and other details, according to Associate Director of Membership Programs Jessica Reinecker, who handles non-solicitation communications and Web efforts.

And dispatches from the foundation have changed not only in frequency but also in tone. For example, the quarterly newsletter recently was revamped to have a more personal, conversational feel. Whereas before it was mainly
a rehash of Heritage’s position papers, it now contains staff interviews, a letter from the president and information to help donors get the most from their memberships.

As donors move up the giving pyramid, they become eligible for personal visits from Heritage staffers. A $10,000 donor, for example, gets a visit from a senior staff member; $100,000 donors meet with John Von Kannon, vice president and treasurer at Heritage, and foundation president Edwin Feulner once or twice a year. There also are regional events to which donors are invited, including a twice-yearly President’s Club meeting for those on the $1,000 level. Donors don’t pay to attend the information-packed affair, which presents well-known keynote speakers — the list in the past has included Vice President Dick Cheney, conservative commentator Rush Limbaugh and former British Prime Minister Margaret Thatcher — as well as Heritage staffers discussing foundation issues.

The meetings — and, for lower-value donors, distribution of various research papers and reports — come in lieu of more tangible and traditional “premiums,” such as tote bags and baseball caps. Heritage stresses that “fulfillment” for its donors comes in the form of informational and relationship-building opportunities. For Heritage, refrigerator magnets simply aren’t an option.

Invitations to a President’s Club meeting don’t bring in many new members, but they make Heritage seem more real to those who already are on board.

“We don’t sell this event,” Walter says. “If you join, you’re invited. It sets up a different type of relationship. We’re not treating [a donor] as a walking pocketbook.”

Building relationships
Heritage’s commitment to easy access and its responsiveness to inquiries help in its mission to build better donor relationships and sometimes results in immediate gains. Walter tells the story of a woman who called the foundation looking for information about giving a stock donation.

“It was two days before the end of the year, and I happened to be around to pick up the phone call,” Walter says. “It was a donor who wanted to remain anonymous, but she said she was considering making a major stock gift. For tax reasons, she had to get it done by the end of the year. We were not her first choice; in fact, we weren’t her second choice. But she had reached me, and I had in front of me a sheet that our grants person had put together with the exact instructions on how to electronically transfer stock.

“She never gave me her name. But right after New Year’s, a five-figure gift appeared in our stock account. The first organization [she called] never responded to her, and the second organization didn’t provide her with the information she needed,” he explains.

And while all of this makes for good business, it can’t help but make for good relationships, as well. Von Kannon mentions a major donor whose funeral he had recently attended.

“I didn’t think of him as a donor, and that’s how our department operates,” he says. “Obviously, the money is important, but it’s not the only thing. It’s not just ‘join the President’s Club and come to the events.’ That’s what gets them in, but then we get to know these people ... as people.”

It takes only a few moments in the company of the easy-going Von Kannon to realize that he’s the foundation’s storyteller, the keeper of the potentially historic moments. To further underscore the importance of personal contact and nurturing relationships over the lifetime of a donor, he relates the case of the one-time $25 donor who moved quickly up the giving pyramid:

“One guy came to me — he started at $25 — at an event we had in Denver, says ‘I’m just here to kick the tires.’ Very low-key guy. He wandered back to me, and I said, ‘How’d the tires fit?’ He says, ‘Pretty good; I’m gonna go back and talk to my wife and accountant.’ Calls me back and says, ‘I’m gonna send a pretty good-sized check.’ “

The check was for $250,000. But that’s not the end of the story:

“He comes to our next event, where we were talking about gifts and pledges. He comes over and asks me, ‘What’s a pledge?’ So I told him, and he says, ‘I was gonna give this $250,000 for the next three years; if I pledge a million dollars right now, would that help you?’

“I said, ‘Yes, it sure would,’ “ Von Kannon concludes with a warm laugh, adding that he subsequently recommended a college for the donor’s son and that the donor and the president of his son’s college are now on Heritage’s board.

And it’s not just a one-way street. Nurturing relationships with donors makes them feel as though they’re part of something. They take a personal interest in the organization, celebrate its successes and, often, rally around when the road gets rocky.

Case in point: A friend of Von Kannon’s works at The Nature Conservancy, which this past spring was the target of a scathing story in The Washington Post that made accusations of fundraising impro-prieties.

“[He] was really upset,” Von Kannon says. “And I said, ‘I promise you one thing: You’re going to get a million-dollar gift from somebody you never thought was a potential million-dollar donor, because you’ve been attacked.’ And he came to me a month later and said to me, ‘You know, you were wrong; we got two of them.’”

Focus on the mission
The foundation, according to all involved, is adamant about staying true to its mission. Lack of conviction, Walter believes, is part of the reason many organizations run into fundraising difficulties. While it’s tempting to jump on issue bandwagons that surely would bring in a flood of donations — flag burning and statehood for D.C., for example — the foundation doesn’t give in.

“What it comes down to is that an organization only has its reputation to bank on,” Walter says. “And Heritage keeps that very tight to its vest. Fundraising does not drive research. Corporations cannot come in and say ‘I want you to do a paper on this.’ If we already have a paper that we’re doing, yeah, we’ll solicit a contribution from a foundation or corporation, but we will not solicit work.”

Director of Development Ann Klucsarits stresses the importance of showing donors “that they’ve made an investment in an effective organization.”

Numerous Heritage surveys indicate that people give to the foundation for two reasons: 1) They believe in the cause; and 2) they believe the organization is effective in furthering that cause, solving the problem, etc.

The first reason can be somewhat nebulous. Because Heritage produces some 200 research papers and 200 more products for the Web alone each year, supporters seldom can keep up with every issue. Hence, belief in the cause is often “self-defining,” Walter says. Members are happy so long as their perception is that the foundation continues to further its overall mission, which is to “build an America where freedom, opportunity, prosperity and civil society flourish.”

Effectiveness, however, is another story. Members want to see results.

In that respect, the Heritage Foundation has an advantage over other nonprofits. Its issues are highly public, and it has established itself as a leader on those issues. You’ll often see staff members giving interviews or testifying before Congress. It’s an advantage the foundation recognizes and plays to the max.

“We actively pursue getting our staff members, policy analysts and researchers into op-ed pieces, on talk shows, to be interviewed in newspaper articles and on television programs,” Walter says. “We have an active program to train people how to speak if they’re on CNN or Fox News or CSPAN.”

Integrated approach
Summed up into one word, Heritage’s approach seems to be “nurturing.” It’s nurturing donor relationships, as well as relationships among and within departments. A key to its success, Walter says, is that it takes an integrated approach to fundraising. Within the development department, there are three legs — direct marketing (for donations of $1-$1,000); major grants ($10,000 and more); and deferred giving (e.g., wills, legacies). Donors who give between $1,000 and $10,000 are split between the direct marketing and major gifts sectors, depending on the level of personalized attention it takes to keep them active, Walter explains.

“We look at it as three legs of the same stool,” he says. “One of the things that I think is particularly indicative of Heritage is that we really don’t have competition among those legs. Direct marketing feeds into grants; we know that, clearly, direct marketing feeds into legacy. We see it as a partnership.”

Walter explains that, because donors are continually moving up the giving pyramid, it’s important that staffers in each of the fundraising sectors understand the dynamics of the other sectors. To underscore just why that’s important, he points to the fact that, in 2002, of the 280 gifts of $10,000 or more, 150 of those contributors started out as smaller direct-marketing donors.

An even more eye-opening example came during the foundation’s two-year, 25th anniversary campaign in 1998-99. During that campaign, there were two $10 million gifts made, one $6 million gift, one $5 million gift and 20 gifts of $1 million each. Of those 20, four were $1,000 donors at the beginning of the campaign. Two of those people started at $25 and the other two at $35.

“There are times where someone starts out through direct mail, giving small amounts, but then over time they become a very significant major donor and then progress so that at the time they pass away they maybe give through the legacy program,” Klucsarits says. “At every stage where someone makes those significant gifts, we always talk about how they first joined Heritage. It re-emphasizes to everyone the importance of the direct mail program and how that all ties into our major gifts.”

It’s all part of the big picture, she explains. The integrated approach to fundraising, the intermingling of departments in the development office, even the department’s approach to personnel and morale make up Heritage’s game plan.

The plan is to “empower staffers on all levels to do their jobs.” That means “hiring well,” promoting from within, and even something as seemingly simple as proper training on office systems and software. The result, Klucsarits says, is low turnover in the development office and a general sense of camaraderie that translates into effective campaigns.

And finally ...
One final key to fundraising success that Walter talks about is, basically, keeping it fresh and not backing down from a challenge. In other words, constantly examining why and how particular strategies are implemented.

The Heritage Foundation recently underwent a “full-blown” audit of its direct marketing strategy, and Walter was anxiously awaiting the findings by L.W. Robbins Associates when he sat for this interview.

“I’ve been here 15 years. Was I thrilled at having an audit? No, because I think we have a good program,” he admits. “But then again, over the past couple of years, we’ve seen how both small and significant changes in the program have resulted in a better program.

“There’s a certain comfort zone that you get into in any job,” he adds. “You just have to be willing to have it challenged.”