Annual Giving: Foundation of the Donor Pyramid

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  •         We’ve tried to pull together a presentation directed at people who are responsible for annual fundraising within their organizations         We hope it will cover the basis for people who are new to these responsibilities and provide some refesher information for others who have been managing annual funds for a while         We hope you’ll take at least one significant thing away from this session which will help improve annual fund results at your organization         Some people think of direct mail an telemarketing when you mention annual fund. We’ll be covering those as a small part of the presentation but this won’t be a direct mail or telemarketing seminar         “ Annual fund” means different things in different organizations and we’ve tried to take a very broad view in this session. There is so much that could be covered in this area that we’ll be taking “a brisk walk through the basics” and allowing time at the end for more in-depth group discussion on those topics where there is special interest We’d encourage you to make note of any questions or comments so we can address them at the end. We hope to open up some discussion at the end to share specific examples and problems in your annual fund work so we can all learn a little from each others experiences
  •         Every organization has its own definition of “annual fund” even if they don’t use that terminology. If they don’t have a definition, one should be developed.         Annual Fund could be defined as-- o        Gifts that are renewable o        Gifts that are unrestricted as opposed to restricted o        Gifts solicited for current use vs. endowment o        Gifts of a certain size (non-major gifts)
  •         Annual funds might also be defined o        By who they came from           Individuals           Corporations           Foundations           Organizations o        How they were solicited
  •         Methods of annual fund solicitation could include o        Direct mail (general and special appeals) o        Telemarketing o        EPhilanthropy or online giving o        Special events o        Grants o        Telethon o        Display ads o        Donation boxes in public places o        Cause-related marketing o        Product sales o        Door-to-door solicitation o        Memberships o       Gift envelopes in publications
  • The Ladder of Effectiveness Person-to-person Personal letter with follow-up phone call Personal phone call with follow-up letter Personal letter Personal phone call Fundraising benefit Impersonal letter/direct mail Door-to-door Product sales Impersonal phone call/telemarketing Media advertising
  • Purpose: capture information and retrieve it in usable fashion to o        Maintain communications with donors o        Solicit donations o        Analyze the effectiveness of fundraising efforts
  • Tools: whatever works for your organization but plan for the long view—where you want to be 5 years from now Essential vs. desirable data to capture and retrieve
  • Essential vs. desirable data to capture and retrieve Essential           Unique identification for each individual, organization or foundation.           The absolutely, indisputably correct name.           Up-to-date and accurate address and phone.           Past financial support: date, amount, how used, how obtained.           Correct salutation for creating letters.           Recognition history—giving clubs, awards, attendance at recognition events.           Affiliations—connections to your organization           Appeal history.
  • Essential vs. desirable data to capture and retrieve Desirable           Employment information and whether that company matches gifts to your organization.           Relationships—connections to family and other areas of the community.           Contact and communication history.
  • For as complicated as it’s sometimes made out to be, there are really only three basic strategies for increasing gross revenues from your annual fund o        Increase the gift size of current donors o        Increase the number of gifts from current donors o        Increase the number of current donors
  •         Increasing the size of gifts is probably the mostly effective strategy to start with— o        Always specify an ask amount based on the donors giving history o        Offer an array of gift size options based on previous giving level (i.e. $50, $25, $100 vs. $25, $50, $100) o        Allow donors to stay at level giving level for a while before asking them to increase the level of their gift o        Offer the option of paying by credit card
  •         Increasing the numbers gift per year is the next most likely strategy. This can be accomplished through o        special appeals in addition to the annual fund           There are pros and cons of using the annual fund terminology with donors) o        Institute an monthly giving club o        Offer electronic funds transfer (EFT) payment options o        Offer e-philanthropy or online giving through your website
  •         Increasing the number of donors to your annual fund is probably the most demanding strategy of increasing annual fund results o        The number of donors can be increase either by           Actually adding new donors to your base, or           Recapturing lapsed donors o        There will always be donor attrition. This needs to be factored in to growth strategies.
  • o        Nowadays, there is almost always a “cost” or net revenue loss when to adding new donors.           You need to take the long view in acquiring new donors. Acquisition efforts can seldom be considered money makers but are critical to the ongoing stability of an organization.           The cost of acquiring new donors has to carefully evaluated against the donors long term value to the organization (i.e. it’s may be acceptable to lose $15 in acquiring a new donor if that donor will contribute $50 per year for three years o        Again, donor information management is import , i.e. for data mining which allows segmentation on which lapsed donors are most likely to renew and identifying new audiences most like your current donor file.
  • In considering upgrade and acquisition plans, it’s important to meet the donor or prospect “where they’re at.” Several models of decision and commitment processes may be helpful— o        Stage of Decision-making           Awareness—Prospect knows about organization           Interest—Prospect wants to know more           Affinity—Prospect likes organization           Action—Prospect makes donation           Feedback—Prospect gets positive reinforcement that action was correct
  • o        Categories of Potential and Actual Supporters           Suspects—Anyone who might have an interest           Prospect—Someone who is qualified as a potential support (include those who have made only one donation)           Donor—Someone who has demonstrated repeated financial support           Advocate—Someone whose commitment extends beyond donation into helping get others involved
  • o        Stages of Donor Relationships           Identification           Cultivation           Solicitation           Stewardship
  • CRM or “customer relationship management” is a buzzword in the for-profit marketing world and has a lot of relevance in fundraising         The purpose of CRM is to retain and deepen the involvement of donors with your organization         Retaining and upgrading donors is critical because the cost of acquiring a new donor can be very high and that cost can only be justified if they have long term value to the organization         In new donor acquisition, you might think that your work is done when you’ve added a new donor to your donor rolls; actually, the real work just begins when you receive that first gift         So how do you do relationship management with donors? 1.      Gift acknowledgement/Thank you’s           There’s an old saw that say’s you raise more money by thanking people than by asking for it           Thank you’s need to be timely, personal and specific—be sure there’s are policies and procedures in place to insure that they’re handled properly 2.      Welcome/new donor package           Provide immediate positive feedback to new donors that their decision to contribute was a good one.           Use the opportunity to increase understanding of organization and cultivate a long term relationship           Welcome packet might include a special letter, copy of newsletter, annual report, promotional item, a form to verify database information, etc.
  • 3.      Ongoing communications           Newsletter(s)           Annual report           Invitations to special events 4.      Be accountable           Report back either personally or through ongoing communications the value of their donations and the proper stewardship of their gift by your organization           Encourage questions, respond fully and honestly
  • 5.      Recognition opportunities           Some people like to be recognized, others don’t. Respect personal preferences           Recognition ideas include—          Honor rolls in publications          Giving clubs (current, lifetime)          Donor recognition events          Plaque, mugs, pins and other items 6.      Maintain accurate records           Be sure name and address(es) are accurate,           Keep accurate records of gifts and contacts           Record personal preferences about salutations, how and when they prefer to contacted, etc.
  •         Annual giving is the base of many organizations fundraising efforts—refer to Donor pyramid
  •         Annual giving often serves as a “feeder program” for other development activities such as major gifts, planned gifts and capital campaign         Annual fund needs to be an integrated part of overall development plans. Small shops should keep in perspective, 90/10 rule. Large shops should have a strong internal advocate for importance of annual fund.         Consider having a case statement and marketing plan for each annual fund project.         Coordinate annual fund efforts with other fundraising and donor communications activities with tools such as an organizational calendar to avoid everything hitting home at the same time. Attitudes about annual giving are changing regarding the level of personalization of appeals (Dear Friend to highly personal) as wells as professional status of annual fund staff, i.e. what used to be an entry level development position has become a specialty within the field.
  •         When we talked about growth strategies earlier, we saved one additional an for this section—One additional way to improve your annual giving bottom line is to reduce your costs in ways that will increase your net revenues         To do this you need to do a thorough analysis of annual giving revenues and expenses both on an overall program basis and on an individual project or appeal basis
  • o        Consider indirect or “soft” expenses (staff time, overhead) as well as direct expenses—worksheet o       Special events—does “net” revenue justify the expense, what is the “friend-raising” and PR value really worth o        Direct mail—does net revenue justify staff time         Don’t be afraid to question everything o         Make decision from a bottom-like business perspective—How much are we raising to carry out our mission? Continually look at what you need, how much it costs and if it’s the best way to accomplish your goal.         Think out of the box, try new things, give new ideas time work         Test new ideas before wholesale implication to reduce risk and costs
  • Annual Giving: Foundation of the Donor Pyramid

    1. 1. Annual Giving: Foundation of the Donor Pyramid Kathleen Davis University of Minnesota Foundation and Timothy Puffer Puffer & Associates
    2. 2. Introduction <ul><li>What is “Annual Giving” </li></ul><ul><li>Donor Information Management </li></ul><ul><li>Strategies for Growth </li></ul><ul><li>Donor Relations Management </li></ul><ul><li>Role in the Overall Development Plan </li></ul><ul><li>Cost Accountability </li></ul><ul><li>Open Forum </li></ul>
    3. 3. What is “Annual Giving” <ul><li>Annual Fund may be defined as— </li></ul><ul><li>Gifts that are renewable </li></ul><ul><li>Gifts that are unrestricted vs. restricted </li></ul><ul><li>Gifts solicited for current use vs. endowment </li></ul><ul><li>Gifts of a certain size (non-major gifts) </li></ul>
    4. 4. What is “Annual Giving” <ul><li>Who they came from </li></ul><ul><ul><li>Individuals </li></ul></ul><ul><ul><li>Corporations </li></ul></ul><ul><ul><li>Foundations </li></ul></ul><ul><ul><li>Organizations </li></ul></ul><ul><li>How they were solicited </li></ul>
    5. 5. What is “Annual Giving” <ul><li>Direct mail </li></ul><ul><ul><li>General appeals </li></ul></ul><ul><ul><li>Special appeals </li></ul></ul><ul><li>Telemarketing </li></ul><ul><li>E-Philanthropy or online giving </li></ul><ul><li>Special events </li></ul><ul><li>Grants </li></ul><ul><li>Telethon </li></ul><ul><li>Public donation receptacles </li></ul><ul><li>Cause-related marketing </li></ul><ul><li>Product sales </li></ul><ul><li>Door-to-door solicitation </li></ul><ul><li>Memberships </li></ul><ul><li>Gift envelopes in publications, etc. </li></ul>Methods of annual fund solicitation
    6. 6. What is “Annual Giving” <ul><li>Adapted from Henry Rosso, Achieving Excellence in Fund Raising, Jossey,Bass, 1991 </li></ul><ul><li>The Ladder of Effectiveness </li></ul>
    7. 7. Donor Information Management <ul><li>Purpose: Capture information and retrieve it </li></ul><ul><li>in usable fashion to— </li></ul><ul><li>Maintain communications with donors </li></ul><ul><li>Solicit donations </li></ul><ul><li>Analyze the effectiveness of fundraising efforts </li></ul>
    8. 8. Donor Information Management <ul><li>Essential vs. desirable data to capture/retrieve </li></ul>
    9. 9. Donor Information Management <ul><ul><li>Unique identification </li></ul></ul><ul><ul><li>Absolutely, indisputably correct name </li></ul></ul><ul><ul><li>Up-to-date and accurate address and phone </li></ul></ul><ul><ul><li>Past financial support (date, amount, purpose, appeal) </li></ul></ul><ul><ul><li>Correct salutation </li></ul></ul><ul><ul><li>Recognition history (giving clubs, awards, attendance at events) </li></ul></ul><ul><ul><li>Affiliations—connections to your organization </li></ul></ul><ul><ul><li>Appeal history </li></ul></ul>Essential
    10. 10. Donor Information Management <ul><ul><li>Employment information and whether that company matches gifts to your organization </li></ul></ul><ul><ul><li>Relationships—connections to family and other areas of the community </li></ul></ul><ul><ul><li>Contact and communication history </li></ul></ul>Desirable
    11. 11. Strategies for Growth <ul><li>Three basic strategies for increasing gross </li></ul><ul><li>revenues from your annual fund— </li></ul><ul><li>Increase the gift size of current donors </li></ul><ul><li>Increase the number of gifts from current donors </li></ul><ul><li>Increase the number of current donors </li></ul>
    12. 12. Strategies for Growth <ul><li>Strategy 1: Increase gift size </li></ul><ul><li>Probably the easiest strategy to start with </li></ul><ul><li>Always ask for a specific amount based on the donor’s giving history </li></ul><ul><li>Offer an array of gift size options </li></ul><ul><li>Allow donors to stay at same giving level for a while </li></ul><ul><li>Offer payment options (pledges, credit card, etc.) </li></ul>
    13. 13. Strategies for Growth <ul><li>Strategy 2: Increase the number of gifts </li></ul><ul><li>Special appeals in addition to the annual fund </li></ul><ul><li>Institute monthly giving club </li></ul><ul><li>Offer electronic funds transfer (EFT) payment options </li></ul><ul><li>Offer e-philanthropy or online giving through your website </li></ul>
    14. 14. Strategies for Growth <ul><li>Strategy 3: Increase the number of donors </li></ul><ul><li>Probably the most challenging strategy </li></ul><ul><li>Increase number of donors either by </li></ul><ul><ul><li>Adding new donors </li></ul></ul><ul><ul><li>Recapturing lapsed donors </li></ul></ul><ul><li>Donor attrition-- needs to be factored into growth strategies </li></ul>
    15. 15. Strategies for Growth <ul><li>There is almost always a “cost” or net revenue loss when to adding new donors </li></ul><ul><li>Need to take the long view in acquiring new donors. Acquisition efforts can seldom be considered money makers but are critical to the ongoing revenues of an organization </li></ul><ul><li>The cost of acquiring new donors has to be carefully evaluated against the donors long-term value to the organization </li></ul>
    16. 16. Strategies for Growth <ul><li>Stage of Decision-making </li></ul><ul><li>Awareness —Prospect knows about organization </li></ul><ul><li>Interest —Prospect wants to know more </li></ul><ul><li>Affinity —Prospect likes organization </li></ul><ul><li>Action —Prospect makes donation </li></ul><ul><li>Feedback —Prospect gets positive reinforcement that action was correct </li></ul>
    17. 17. Strategies for Growth <ul><li>Categories of Potential and Actual Supporters </li></ul><ul><li>Suspect —Anyone who might have an interest </li></ul><ul><li>Prospect —Someone who has qualifications of a potential supporter (including those who have made only one donation) </li></ul><ul><li>Donor —Someone who has demonstrated repeated financial support </li></ul><ul><li>Advocate —Someone whose commitment extends beyond donation into helping get others involved </li></ul>
    18. 18. Strategies for Growth <ul><li>Stages of Donor Relationships </li></ul><ul><li>Identification </li></ul><ul><li>Cultivation </li></ul><ul><li>Solicitation </li></ul><ul><li>Stewardship </li></ul>
    19. 19. Donor Relations Management <ul><li>Managing relationships with donors </li></ul><ul><li>1. Gift acknowledgement/Thank you’s </li></ul><ul><ul><li>Timely, personal and specific </li></ul></ul><ul><ul><li>Policies and procedures to insure that thank you’s are handled properly </li></ul></ul><ul><li>2. Welcome/New donor package </li></ul>
    20. 20. Donor Relations Management <ul><li>3. Ongoing communications </li></ul><ul><li>Newsletter(s) </li></ul><ul><li>Annual report </li></ul><ul><li>Invitations to special events </li></ul><ul><li>4. Be accountable </li></ul><ul><li>Report back </li></ul><ul><li>Encourage questions, respond fully and honestly </li></ul>
    21. 21. Donor Relations Management <ul><li>5. Recognition opportunities </li></ul><ul><li>Respect personal preferences </li></ul><ul><li>Ideas: Honor rolls in publications; giving clubs (current, lifetime); donor recognition events; plaque, mugs, pins and other items </li></ul><ul><li>6. Maintain accurate records </li></ul><ul><li>Accurate contact data, giving histories and personal preferences </li></ul>
    22. 22. Role in the Overall Development Plan <ul><li>Graphic credit: James M. Greenfield, Fund-Raising: Evaluating and Managing the Fund Development Process , John Wiley and Sons, 1991, p. 15 </li></ul>
    23. 23. Role in the Overall Development Plan <ul><li>Annual giving as a “feeder program” for other development activities </li></ul><ul><li>Annual fund needs to be an integrated part of overall development plans </li></ul><ul><li>Case statement and marketing plan for each annual fund project. </li></ul><ul><li>Coordinate annual fund efforts with other fundraising and donor communications activities </li></ul>
    24. 24. Cost Accountability <ul><li>Improve your annual giving bottom line by reducing costs </li></ul><ul><li>Thorough analysis of annual giving revenues and expenses </li></ul><ul><ul><li>Overall program </li></ul></ul><ul><ul><li>Individual project or appeal basis </li></ul></ul>
    25. 25. Cost Accountability <ul><li>Consider indirect or “soft” expenses as well as direct expenses </li></ul><ul><ul><li>Direct mail revenues/expense (handout) </li></ul></ul><ul><ul><li>Special events planning checklist (handout ) </li></ul></ul><ul><li>Question everything </li></ul><ul><li>Test new ideas </li></ul>
    26. 26. Open Forum <ul><li>Q & A </li></ul><ul><li>Comments </li></ul><ul><li>Examples </li></ul>
    27. 27. Closing Thoughts

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