Growing Donor Files: It's Time for a New Approach

First, a quiz. Anyone remember what we talked about in the November column? Here’s a hint: It was about baby boomers and the missed opportunities among those prospects. Ring any bells?

Allow us to refresh your memory. This population is growing — dramatically. More than 72 million people 65+ are expected by 2030 (less than 17 years from now)! That’s up from 40 million in 2010. And these prospective donors require a different type of messaging that is part of a multichannel approach.

As you may also recall, we noted that nonprofits are failing to capture boomers (especially younger ones under age 55) the way they’ve captured previous generations. Why? In today’s fast-food world of Amazon.com personalization and mobile smartphones everywhere, we, the nonprofit community, are failing to meet their expectations. Baby boomers expect to be engaged in a far more meaningful way than the generations before them. They want more information about how their donations were used. They want to be a part of your winning team and to feel a closer relationship with the charity. And they want it through the channel(s) of their choice at the time of their choosing.

So what’s a savvy nonprofit marketer to do? (That’s you, by the way …)

Time to change
It’s time for us to move beyond a one-size-fits-all, campaign-based approach to a true individual-level approach. Yes, we know, there’s lots of talk about moving to a constituent-centric approach. There is some action — just not a lot. And the potential is big; we think very big.

Imagine if the restaurant industry had only one type of restaurant (think diner targeting septuagenarians). Yeah, maybe there are some special booths with nicer cushions for “regulars” (monthly donors), and the chef comes out to visit the big-time patrons (major donors) now and then. But for most, there’s generally just one type of diner — and it’s catering to a generation that’s slowly passing on.

If a diner targeting septuagenarians was the only type of restaurant, how many people would dine out? What would revenues look like for the restaurant industry? Consider the explosion of dining options we have today — different cuisines, levels of service, atmospheres and channels (dine out, take out, order in) as restaurants take a constituent-centric approach to cater to different types of clientele at different times. No wonder the restaurant industry grew from $444 billion in 2007 to $632 billion in 2012 in spite of the Great Recession!

You may be asking, “OK, that all sounds great, but how do we actually do this for fundraising?” Admittedly, talking about donor centricity is a lot easier than practicing it. But the opportunity is too big and the stakes too high not to take action.

Some numbers
A large national health charity worked with Merkle to build demographic clusters last year based on its donor file so every donor fell into one of four clusters. (In full disclosure, Jeff Regen heads up the nonprofit group at Merkle.) The clusters were built entirely using third-party data so prospects could be placed into clusters, too. The two largest and most important clusters we’ll call Traditional Retirees (retired, high-school grads/some college, not very Internet-active, low average gift but high retention) and Affluent Professionals (professionals in their 40s and 50s, higher incomes and house values, college grads, Internet-savvy, high average gifts, lower retention).

The analysis concluded the Affluent Professionals were a lot more valuable, generating approximately 70 percent more revenue per donor each year than the Traditional Retirees. The next piece was more interesting (and more actionable): Affluent Professionals and Traditional Retirees preferred different types of solicitations. In fact, the mail pieces that the Traditional Retirees liked most compared to the other clusters, the Affluent Professionals liked least — and vice versa. The chart at right shows the gross income per name (GIPN) for Affluent Professionals and for Traditional Retirees relative to the mean for all donors. For example, for the first solicitation, Fall MD#3, Affluent Professionals were 37 percent above the mean and Traditional Retirees were 23 percent below the mean (although they still produced net revenue). As shown above, GIPN was always higher for the Affluent Professionals vs. the Traditional Retirees as they are a much more valuable cluster of donors. However, for some solicitations such as Apr Appeal and July AF#5, the Traditional Retirees performed almost as well as the Affluent Professionals — specifically, these were the two best-performing solicitations for Traditional Retirees and the two worst for Affluent Professionals compared to other clusters. For Jan AF2, by contrast, the Affluent Professionals performed far better than the Traditional Retirees. These two clusters of donors respond best to very different types of appeals!

Now for the most disturbing — and exciting — part: The nonprofit’s direct-mail acquisition control is a piece that the Traditional Retirees love and the Affluent Professionals don’t like much at all. In other words, we were turning off many younger (40s and 50s), more valuable donors before we even acquired them! The graphic at right helps illustrate the difference in the type of mail the Traditional Retirees like vs. the type that the Affluent Professionals like. And now that we know what the Affluent Professionals look like for this charity, we can grow the file by targeting them with the right messaging across channels and then continue that cultivation from there on.

Using varied messaging and packages in acquisition at the individual level provides huge opportunities for growth — targeting new mail lists and increasing response rates on existing mail lists and co-ops. This deeper understanding of what messaging appeals to whom also enables nonprofits to better target messaging to sources in other channels such as online communities like Care2 and Change.org; direct-response retargeting and, more broadly, display advertising; offline events; and most any other channel. In addition to using this knowledge for acquisition targeting, this large health charity is planning integrated online-offline messaging specifically targeting the Affluent Professionals. More complex? Yes. But also a lot more donor-centric and effective.

Stay tuned — we will be reporting more on the impact of donor clusters. In the meantime, what are you doing to message to different donor groups (perhaps we should first ask what you are doing to identify different donor groups!) in a more donor-centric way? Let us know!

Karin Kirchoff is vice president at MINDset Direct. Reach her at kkirchoff@mindsetdirect.com. Jeff Regen is general manager of the nonprofit group at Merkle. Reach him at jregen@merkleinc.com