Conference Roundup: Every Dollar Counts

Fundraisers seem to have plenty of reasons why they don’t do such a great job when it comes to engaging low-dollar donors. Among them:

* They aren’t loyal.
* They lower a nonprofit’s average gift.
* They don’t have a strong return on investment.

But those generalizations simply aren’t true, according to Craig Zeltsar, vice president of client services at Lexington, Mass.-based direct-response agency Thompson Habib Denison, who spoke during the session “Low Dollar Donors: The Myths, The Realities and The Value” at the 2008 New York Nonprofit Conference earlier this month.

According to Zeltsar, low-dollar donors:

* can give more frequently over the course of a fiscal year, translating to higher renewal rates;

* according to testing, respond in the same way to the same message/package as high dollar donors;

* have higher response rates, which helps offset smaller gift amount size;

* have a higher lifetime value due to more frequent giving.

It’s to an organization’s advantage to have a plan to go after low-dollar donors, Zeltsar said, offering these strategies:

* The No. 1 rule is to mail the audience. “You have spent money and time acquiring donors, why are you not mailing them?” Zeltsar stressed.

* Devise cost-efficient strategies for low-dollar donors — but don’t change the strategy of how you acquired them. “Too many times organizations will devalue the renewal stream to these donors, yet the donor was responsive to a certain offer in acquisition,” he said.

* Be cautious on how aggressively you try to upgrade the donor. Be content gaining a strong return on investment through frequent smaller gifts and not going for the big gift from someone who hasn’t given you one.

* Balance response and net revenue. Don’t just mail all low-dollar donors; target them through more refined segmentation and modeling.

* Weigh the results against acquisition and deep reactivation efforts. “Low-dollar donors may prove an efficient way of offsetting attrition,” Zeltsar added.

For those fundraisers and development directors who still don’t buy into the importance of small-time donors, Zeltsar advised considering a few more facts.

Low-dollar donors make good prospects for planned gifts, and they help build a strong base of renewable donors who demonstrate higher renewal rates and more frequent giving.

They also help an organization build a larger file of donors, Zeltsar said, which gives it the opportunity to spread awareness to a broader group of people.

Strategies and plans aside, Kacey McGowan, associate director of marketing and development with Paralyzed Veterans of America and session co-presenter, said that fundraisers must realize that times have changed.

“It’s an unfortunate reality, but the economy is weighing heavily on all of us,” McGowan said. “Nonprofits need to understand the challenges and what they’re asking of donors and what they’re dealing with in their lives.”

She pointed out that pocketbooks are much lighter than they were eight years ago and that donors are forced to stretch their dollars a little more for everyday necessities like gas, which has risen $2.44 per gallon since 2000, and milk, which has gone up at least $1 per gallon since 2000. “That money could have gone for extra things, donations,” McGowan added.

Fundraisers need to recognize that donors may be sacrificing to give what they can. Just because their donations are small doesn’t mean their value is, she added.

PVA recognized the importance of small gifts, did some testing and found a cost-effective way to mail to all donors, even low-dollar ones.

In the test, the organization sent address labels to $5 donors; smaller cards to those who gave more than $5 but less than $10; upsized cards to donors who gave more than $10 but less than $15; and upsized cards with embossing and die cut to those who contributed $15 or more.

The tests showed that PVA lost 9 cents per piece by mailing a larger card package. It also showed that low-dollar donors who received smaller cards or labels netted 13 cents and 7 cents, respectively.

Though the increase in response and average gift wasn’t enough to balance the increased costs of a larger package, PVA found it can afford to mail to all donors without losing net revenue if it varies the premiums.

And fundraisers should remember that today’s small donors can be tomorrow’s big spenders.

McGowan told the story of a couple that was making $5 donations to PVA. The organization continued to engage them and nurture a relationship with them, and the couple ended up leaving the organization $3 million in their will. “Every coin, penny, dollar counts,” McGowan said. “One dollar is a dollar. Keep them giving. We have to view these people more holistically.”