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January 2011

Fundraising Challenge: Acquisition -- Evolutionary vs. Revolutionary Thinking

Recently in one of our meetings, or perhaps in the daily back-and-forth strategic debates, dialogues, and brainstorming “events” that we engage in with Greg Fox, our Chief Strategy Officer here at Merkle, he challenged us to be curious and think differently, out of which a few interesting points of view rose to the surface.  

So I figured I would, perhaps on a monthly basis, post one of them for you, gentle readers, to consider, poke holes in, and generally comment back about.  To be clear, there are no right or wrong answers here, which is the beauty of such an academic exercise as this, and admittedly our strategic team is not absolute in our opinions on most of these items one way or the other – so you won’t be hurting anyone’s feelings. 

The Challenge –  What is the “Real" Cost to Acquire 

So, to get back on point, the premise around this topic, in simple terms, is that we all know how we calculate the cost to acquire or the cost per dollar raised on our acquisition campaigns, at the campaign level.   We also all know that the single biggest challenge facing our industry is our ability to acquire new donors in a cost-effective way. 

So what are we doing about?  What are you doing about it gentle readers?  What dramatically new, innovative, earth-shattering progress has been made?  Greg would say, with regards to acquisition, none.  We still approach acquisition the same way today, as we did 5 years, even 20 years, ago as an industry. 

The thinking around this is as follow:

If I have a $0.30 cost per piece

DPB - 2

And a 1.00% Response Rate, 

DPB - 3 

I have a $30 cost to acquire. 

But are we really exposing “all” of the cost for these new donors?  All of the investment? 

This is where the incremental cost to acquire debate begins.  

If a prospect is on a “great” list, a list you maybe mail every month, and have mailed every month for several years, the very real possibility exists that this prospect has been touched 12, 24, 36, maybe even 48 times over the last few years.  Each touch, assume again $0.30 cost per piece, adds up in the absence of a response.  So this new donor you just acquired last month in your acquisition campaign may have $3.60, or more, “incremental acquisition cost” associated with them. All your previous efforts are now sunk costs in this individual name.  

So are all new donors equal then?  The data would suggest no.  Furthermore, are there donors on list sources that are probably not making the cut for your acquisition mail plan who, when incremental cost to acquire is factored in, might be far more advantageous for your organization to pursue from a Net Investment and LTV perspective?  Almost undoubtedly.

DPB - Pic

If Donor A was touched once lifetime in Acquisition, $0.30 cost per piece, and responded with a gift of $15, that new donor is going to be roughly a $15.00 investment.   If Donor B was touched 48 times over 5 years before responding and responds with a gift of $15, you are already starting in the hole with $14.40 of sunk cost..  In this case it becomes a $29.40 investment in this individual. 

The trajectory of Donor B’s LTV is almost decided in advance of your first cultivation touch, as now you need to get at least 3 more gifts from this donor to get to net positive, because they were twice the investment of Donor A.  To make matters worse, on the surface, you never might have realized that fact.  Doesn’t it just make you wonder if there isn’t a smarter way you could be doing things? 

The net revenue chase is on.  

 -Stephen Ferrando

Stephen is a Strategy Director at Merkle with a combined 12 years of expertise in both commercial  and nonprofit marketing, strategy, and analytics.  In his free time Stephen is working on becoming a ninja, as well as focusing on his life-long dream of completing the last side on his Rubix Cube.

Boomers are invading the internet--and the AARP made a video about it

How many of you have sat in meetings discussing those elusive baby boomers? How many debates have you had about whether the 65+ crowd is ever going to get on the web and if so, how do we go after them? Will grandma ever use a credit card instead of writing checks? Should I bother sending the 57-year-old "still young" supporter a DM piece if they spend most of their free time reconnecting with old classmates and friends on Facebook?

At a conference this week, we saw this video from the AARP: the basic argument--our members are on the web, going digital, and they are here to stay.  Some of the numbers confirm what many of us already know. Others might be surprising. Others yet, like the phenomenal growth rates depicted are a function of the realities of the web: if everyone under 25 is ALREADY there, of course their growth rate is going to pale in comparison to that of age groups who are finally getting with it.

Regardless, an interesting video that is certainly to lead to even more fundraising debates, and hopefully, lots of testing to find out what "boomers+" really want!

(can't see the video? Click here to view it)

-DonorPower Blog

 

Social Signature - What does your brand say?

Communicate, Communicate, Communicate...

I recently met a fella who maps CEO’s speeches to evaluate communication competency.  He calls it Executive Social Signatures, and I found it fascinating. 

His scientific model is based on a communication exchange that requires audience understanding and emotional engagement, and results in social action.  

His point is that many CEOs, once they reach that position, communicate poorly by staying primarily within their corporate role and failing to engage audiences at an individual level.  His belief is that branding is becoming more personal due to social media and it requires personal relationships in order to build trust, credibility and loyalty.

His goal is to help speakers communicate more effectively because people that engage audiences can drive action. (To learn more, check out Larry Petcovic’s blog.)

So what does this is have to do with donors and fundraising? Frankly, a lot, because much of what is mailed within our industry it is about the organization and not the donor and can’t ever be described as truly compelling; e.g., Our Annual Fund appeal is the most important campaign of the year.

Our job is to get donors to take personal action and to influence others.

Connect the dots so they can understand what their money can accomplish because they chose your organization as a change agent.

 

Make it personal. “What began as a promise to my dying sister has become…."

 

Make it authentic. “Sometimes the best way to get something done is to go out there and stand up for what you believe in…."

 

Make it credible. “The key to our ability to act independently in response to a crisis is our independent funding…”

 

Make it important. “Your gifts of prayer and financial support are an investment -- an investment that will be repaid many times over by the thousands of lives changed each day…"

 

Make it compelling. “We need nets. Not hoop nets, soccer nets or lacrosse nets. Not New Jersey Nets or dot-nets or clarinets. Mosquito nets." (Rick Reilly, SI) …. “With a $10 contribution, anyone – from CEOs to youth, professional athletes to faith leaders – can join the global fight against malaria by sending a net and saving a life…"

 

Remember, everything you do is part of your brand’s footprint.

 

-Becky Graninger

 

P.S. Can you identify the organizations? (Komen, Greenpeace, Doctors Without Borders, The Salvation Army, Nothing But Nets Campaign)       

What is this blog all about?

If you're serious about raising money from donors, you need to get serious about donors. More than ever before, donors are insisting that you share power with them, not treating them like passive ATMs. This blog is about the ways you can do that -- and the rewards that await you and your donors when you do.

About the Blogger

DonorPower Blog is penned by Merkle's Power Blogging Team, led by Greg Fox, our senior vice president of strategy. Working with Greg is a police line-up of guest "artists", fundraising pros all, who like to pose as blogatorialists when the sun goes down. You can reach this blog, and any of our regular contributors, at
donorpowerblog [at] merkleinc [dot] com. See this blog's policies.


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