Fundraising's New Synergy

For the most part, fundraisers no longer believe online marketing is competitive with offline marketing. Most understand that you need to incorporate both into your marketing strategy and that they should be coordinated in order to realize synergies. Many fundraisers, however,
struggle with determining how much to focus on and invest in online marketing, and how to drive coordination between online and offline channels.

With the exception of a few specific segments of nonprofits — disaster-relief groups, public radio stations, and heavy users of gift catalogs or
volunteer-led special events — a majority of direct-response, fundraising-driven organizations still raise less than 10 percent of funds online (although that figure’s escalating rapidly). This low percentage mistakenly leads many direct marketers to focus less on their online marketing efforts relative to traditional channels. To determine the appropriate investment allocation, fundraisers need to think through some new “integrated math.”

Case in point
In fall 2003, the Brady Campaign, a national, non-partisan, grassroots organization working to prevent gun violence, grew its e-mail list from 38,000 addresses to 175,000 addresses via a micro-site that was followed by petition campaigns focusing on urgent federal legislation. A vast majority of these constituents were non-donors. Throughout two legislative battles in 2004, the Brady Campaign sent a series of appeals that included a link to contact Congress, a “tell-a-friend” option and a strong ask for funds that often included examples of specific print or TV ads. Typical responses ranged from 0.19 percent to 0.37 percent, and average gifts ranged from $24 to $46. This compares to typical e-mail acquisition response rates of 0.1 percent. New donors to the Brady Campaign via the Internet grew from 311 in 2002 to 3,244 in 2004. It acquired these new donors at a very positive return on investment, since sending an e-mail appeal doesn’t have marginal costs once the software’s in place.

Channel integration
The Brady Campaign decided to test other channels to drive incremental conversion of these online-sourced constituents to donors. Having
collected postal mailing addresses for about 23 percent of its e-mail list, the Brady Campaign sent a direct-mail solicitation to online non-donors asking them to join. The result was a 1.26 percent response rate. This response rate was 11 percent higher than the overall mailing response rate of 1.11 percent to the group’s standard direct-mail rental lists. The average gift from e-mail constituents in response to the direct-mail appeal was $24.22 — 19 percent higher than the overall mailing average gift of $20.52. The key acquisition metric, the net cost per acquired donor for the e-mail list, was $6.22, compared with $15.71 for the overall mailing.

The Brady Campaign also contacted non-donors on the e-mail list via phone. It matched about 20,000 records of e-constituents who had taken at least one advocacy action. Telemarketing drove a 21 percent pledge rate with an average gift of $27.38.

Give credit where credit’s due
If you were determining channel performance for this organization, how would you credit the money raised? Most fundraisers would credit the revenue to the channel in which it was raised, but this approach fails to recognize the value of the original sourcing and cultivation channel — in this case, the Internet.

How would you treat future revenue raised from these donors? Most fundraisers again would credit the revenue to the channel in which it was raised, ignoring not only the contribution of the origination channel, but also the value of ongoing engagement and communications through a multi-channel approach. For example, if a donor opted to renew via mail but continued to receive and read e-mail updates and take advocacy actions online, how would you allocate the renewal dollars?

Fundraisers must begin to assess channels in aggregate and drive coordinated multi-channel donor development, solicitation and retention strategies. It’s important to measure the integrated effect not only in the context of a single campaign, such as an acquisition or renewal effort, but also to assess the factors that influence donor lifetime value. It’s
critical to understand how to best leverage each channel’s strengths and optimize their coordination.

For example, online marketing can be an extremely cost-effective way to build an engaged prospect list and subsequently to sustain engagement. E-mail also can be a very effective solicitation channel when you need to create a sense of urgency, and it has a strong ROI because of its cost efficiency. But on average, e-mail solicitation yields much lower response rates than direct-mail appeals and telemarketing. So, when it comes to online marketing, you can increase solicitation effectiveness by taking a multi-channel, coordinated approach, which yields both higher response rates and faster, less costly response.

As an industry, our sophistication in understanding how to measure and deploy integrated channel strategies is still nascent. The good news is
technology has become very sophisticated in this area and is increasingly affordable. Let the testing begin!

Vinay Bhagat is founder, chairman and chief strategy officer for Convio Inc.