REDEFINING ACQUISITION
REDEFINING ACQUISITION by Curt Swindoll, Executive Vice President, Strategy
Line up 100 Chief Development Officers and ask them what their top three development needs are and you will find “acquisition” on 90% or more of their lists. Solving an organization’s top line revenue challenge begins at the starting point of the donor relationship process. In fact, no amount of cultivation or stewardship can overcome a persistent acquisition problem. And because donors rarely maximize their giving until the third or subsequent year, inadequate investments in acquisition aren’t felt for years.
DALLAS I CHICAGO I NEW YORK I DC I 214-866-7700 I pursuant.com
Three things make acquisition, and especially broadbase (general or annual fund) acquisition, a challenge: 1) 2) 3)
finding prospective donors and attracting them to the work of the nonprofit, and encouraging them to make their first gift; the initial cost of acquisition, which is rarely lower than $50 per acquired donor, often closer to $100-150, and can approach or exceed $250; and the return on investment (ROI) of acquisition. If a donor costs an average of $100 to acquire, and gives an average of $75 in the first year and $125 in the second year, the ROI is achieved effectively over 12 months…and that’s if 100% of acquired donors give in the second year! Many organizations report 18-24 month ROI on acquisition investments.
No wonder acquisition is a challenge. Even if a source of donors can be found (rented lists, direct response TV and other forms of media-based acquisition, artist programs, community events, etc.) no one likes to wait a year and a half just to break even. Creative Acquisition Pursuant has been helping its clients solve these problems using creative approaches. Some of our solutions, such as creative gameification/edutainment campaigns, have helped. Organizations with at least 25,000 email addresses are able to sufficiently seed these games, and have doubled the number of email addresses on file while providing a 90-120 day ROI. Others use direct response TV ads which provide an ROI under one year, but require a significant investment in media, not to mention visual elements that compel donors to make an initial investment of $250 or more. At last count, out of 1 million organizations in the United States, less than a dozen were actively running DRTV campaigns. (Pursuant has been experimenting with a DRTV model that substantially changes those requirements, but that’s another story.) This is an important problem to solve. General/annual fund donors provide a more consistent source of revenue that bridges the episodic gifts of major donors. Additionally, our analytics have routinely shown that organizations with a strong broadbased program find that 40-60% of their major donors began their relationship with a broadbase-level gift. Strong acquisition not only augments consistent giving, it eventually fills and grows major gift officer portfolios.
DALLAS I CHICAGO I NEW YORK I DC I 214-866-7700 I pursuant.com
Solving this problem requires a better understanding of the broadbase cultivation process. See if this looks familiar to you.
Intentional Passive
Cultivation
Understanding the Cultivation Problem
Acq
Major Mid- Level Cultivation Time
The process of acquisition begins with a very intentional process. Once a donor is acquired, the relationship slips into a passive cultivation process that, according to our analysis, usually takes 3-5 years or more before a donor decides to make a mid-level gift. At that point, some organizations begin a more intentional process of reaching out to the donor. That personalized communication eventually encourages the donor to make an even larger major gift, at which point they are added to a gift officer’s portfolio for a highly intentional process of cultivation and stewardship. Cultivation is an important part of the process. Donors are educated. Stories of impact are shared. Retention relies on consistent communication, as does the frequency of a donor’s gifts. The problem is that it is entirely driven through a passive process. Many organizations fail to even employ a more intentional mid-level cultivation process, which further delays the time it takes for a donor to mature to a major level of giving. Please don’t misunderstand. Calling the broadbase acquisition process “passive” doesn’t mean there isn’t significant effort that goes into direct response campaigns, or that those efforts are not strategically driven. They often are. But they depend on the donor to make the first move before anything changes in the way the organization actively engages and woos them. My experience with clients has shown it is this passive cultivation process that drives them crazy! It is an expensive, long-term process that delays mid-level and major-gifts. Subconsciously, I think they are also frustrated by the fact that all other aspects of their donor development process possess a measure of intentionality, yet cultivation seems relegated to a multi-yearlong marathon.
DALLAS I CHICAGO I NEW YORK I DC I 214-866-7700 I pursuant.com
I’ve asked a number of development officers if money were no object, would they visit every donor on their file—not just the major donors. Each officer has said they would. But money is an object, and it simply hasn’t been cost effective to cultivate broadbased donors any other way. But what if there was another way—one that could actively drive results forward, even from newly acquired donors. An Alternative Approach Pursuant has been testing for over 12 years and nearly 20,000 face-to-face visits, a model that actively engages donors in a face-to-face meeting, culminating in an invitation to make a three-year giving commitment. This program, called Charitable Partners, has traditionally focused on actively cultivating mid-level donors. Increasingly, it is also being used to source prospective major gift officers, train them in the work of being an effective fundraising officer, and improve their metrics and results. This program has produced remarkable results. Nearly half of all visits have resulted in an annual commitment of 2-5 times donors’ annual giving. Some organizations have seen successful close rates of 65%.
Intentional Passive
Cultivation
The difference lies in a combination of engagement and stewardship elements, combined with gift officer efficiency and effectiveness metrics that have produced millions of dollars in fundraising revenue, not to mention far greater gift officer productivity improvements. If this same process, or one very similar, were to be applied to early cultivation efforts, the metrics typically associated with acquisition could be substantially revised. First, here is how this process would substantially revise the cultivation process
Acq
Cultiva-
MidLevel
Major
Ongoing Communication Time
DALLAS I CHICAGO I NEW YORK I DC I 214-866-7700 I pursuant.com
How would this process work? The secret lies in the effective use of data to efficiently drive the process. Three things need to happen. First, organizations take their newly acquired donors and obtain wealth overlay data that lets them know who among their new donors have the capacity to make a mid-level or major giving commitment—approximately $85 per month or more. In our experience, that group represents about 50% of their newly acquired donors. Second, they need to visit them face-to-face to communicate the mission and vision of their organization, show them the impact the organization is having, and ask them for a commitment. Third, they need to ensure an ongoing stewardship process is in place to keep the donor emotionally and intellectually connected to the work of the organization—something they likely are already doing. If these three components are in place, the numbers associated with acquisition change dramatically. A Look at the Numbers Let’s build two simple scenarios based on the following assumptions:
Donors Acquired: 1000 Cost Per Donor Acquired: $100 First Year Passive Giving: $75 New Donor Retention Rate*: 25.0% New Donors with Capacity: 50% New Donors Who Agree to Meet: 12% Face-to-Face Close Rate**: 50% Average Intentional Commitment: $4,000 over year for 3 years Time to Complete F2F Mtgs: 1 month(s) Annual Compensation of Gift Officer: $60,000 Second Year Passive Giving: $150 * The percentage of new donors who will give in the second year ** The percentage of people who agree to make a commitment after meeting
Based on the assumptions above, here is what giving looks like after the first and second years, along with the ROI and break even points associated with each scenario:
DALLAS I CHICAGO I NEW YORK I DC I 214-866-7700 I pursuant.com
Cost of Acquisition Campaign: Cost of Gift Officer: 1st Year Passive Gifts: Total Intentional Commitments: 1st Year Intentional Gifts: 2nd Year Passive Donors: 2nd Year Intentional Donors: 2nd Year Passive Gifts: 2nd Year Intentional Gifts: Total 1st Year Giving: Total 2nd Year Giving: Total 2-Year Giving: Percent Improvement: 1 Year Total ROI: 2 Year Total ROI: Break-Even Point:
Traditional Acquisition
Intentional Acquisition
$100,000 N/A $75,000 $0 $0 250 $0 $37,500 $0 $75,000 $37,500 $112,500 N/A 0.75 1.13 21.3 months
$100,000 $5,000 $75,000 $120,000 $40,000 220 30 $33,000 $40,000 $115,000 $73,000 $188,000 40% 1.10 1.79 12 months
As can be seen above, the traditional approach to acquisition produces an ROI well into the second year (21+ months), while following up the acquisition process with an intentional, face-to-face meeting with some of the newly acquired donors provides a break-even point by the end of the first year.
This analysis doesn’t include the third year of giving by intentionally developed donors, much less the cumulative impact that would occur by incorporating an intentional follow up process through subsequent acquisition efforts. Furthermore, our experience with the Charitable Partners process has also shown that 80% of donors who make an initial multiyear commitment are willing to make second (and subsequent) multi-year commitments if they are stewarded properly during the commitment period. That kind of retention is hardly assured purely through passive cultivation efforts. We have also discovered that donors who are cultivated this way not only become mid-level donors years earlier than they traditionally would have (and in higher numbers), they become major donors sooner as well. In fact, we have not accounted for the fact that some of these acquired donors will immediately become major donors, providing an even higher level of return than accounted for in this simple analysis.
DALLAS I CHICAGO I NEW YORK I DC I 214-866-7700 I pursuant.com
While we have compared this new approach to traditional acquisition campaign metrics, there’s no reason it can’t be used to augment cost-effective acquisition programs where positive ROI occurs much faster. Adding an intentional follow up process will only make cost-effective acquisition campaigns that much more financially powerful. Finally, it deserves noting that this process—using data mining to prioritize and drive face-to-face donor visits—can be used to enhance mid-level and major donor segments. While the weighting of RFM data, behavioral engagement data, and wealth scores would need to be adjusted, this process absolutely enhances mid-level, major donor, and planned giving programs. Pursuant has developed a far more robust model that shows the complete impact of this engagement process across the entire donor pyramid. Contact us if you would like a picture of how this process could impact your acquisition and/or mid/major development efforts. Closing Today’s nonprofit organizations are struggling to find ways to cost-effectively grow their donor bases and build major donor portfolios. Key to this process is finding new ways to acquire and cultivate broadbased donors. By incorporating data-driven strategies with thoughtful approaches to engagement and stewardship, the returns associated with traditional acquisition campaigns can be revolutionized. And that’s something every nonprofit can appreciate. ———————— For more information on applying Pursuant’s intentional fundraising program to revolutionize your acquisition and overall development efforts, contact us today.
DALLAS I CHICAGO I NEW YORK I DC I 214-866-7700 I pursuant.com
Line up 100 Chief Development Officers and ask them what their top three development needs are and you will find “acquisition” on 90% or more of their lists. Solving an organization’s top line revenue challenge begins at the starting point of the donor relationship process. In fact, no amount of cultivation or stewardship can overcome a persistent acquisition problem. And because donors rarely maximize their giving until the third or subsequent year, inadequate investments in acquisition aren’t felt for years.
DALLAS I CHICAGO I NEW YORK I DC I 214-866-7700 I pursuant.com
Three things make acquisition, and especially broadbase (general or annual fund) acquisition, a challenge: 1) 2) 3)
finding prospective donors and attracting them to the work of the nonprofit, and encouraging them to make their first gift; the initial cost of acquisition, which is rarely lower than $50 per acquired donor, often closer to $100-150, and can approach or exceed $250; and the return on investment (ROI) of acquisition. If a donor costs an average of $100 to acquire, and gives an average of $75 in the first year and $125 in the second year, the ROI is achieved effectively over 12 months…and that’s if 100% of acquired donors give in the second year! Many organizations report 18-24 month ROI on acquisition investments.
No wonder acquisition is a challenge. Even if a source of donors can be found (rented lists, direct response TV and other forms of media-based acquisition, artist programs, community events, etc.) no one likes to wait a year and a half just to break even. Creative Acquisition Pursuant has been helping its clients solve these problems using creative approaches. Some of our solutions, such as creative gameification/edutainment campaigns, have helped. Organizations with at least 25,000 email addresses are able to sufficiently seed these games, and have doubled the number of email addresses on file while providing a 90-120 day ROI. Others use direct response TV ads which provide an ROI under one year, but require a significant investment in media, not to mention visual elements that compel donors to make an initial investment of $250 or more. At last count, out of 1 million organizations in the United States, less than a dozen were actively running DRTV campaigns. (Pursuant has been experimenting with a DRTV model that substantially changes those requirements, but that’s another story.) This is an important problem to solve. General/annual fund donors provide a more consistent source of revenue that bridges the episodic gifts of major donors. Additionally, our analytics have routinely shown that organizations with a strong broadbased program find that 40-60% of their major donors began their relationship with a broadbase-level gift. Strong acquisition not only augments consistent giving, it eventually fills and grows major gift officer portfolios.
DALLAS I CHICAGO I NEW YORK I DC I 214-866-7700 I pursuant.com
Solving this problem requires a better understanding of the broadbase cultivation process. See if this looks familiar to you.
Intentional Passive
Cultivation
Understanding the Cultivation Problem
Acq
Major Mid- Level Cultivation Time
The process of acquisition begins with a very intentional process. Once a donor is acquired, the relationship slips into a passive cultivation process that, according to our analysis, usually takes 3-5 years or more before a donor decides to make a mid-level gift. At that point, some organizations begin a more intentional process of reaching out to the donor. That personalized communication eventually encourages the donor to make an even larger major gift, at which point they are added to a gift officer’s portfolio for a highly intentional process of cultivation and stewardship. Cultivation is an important part of the process. Donors are educated. Stories of impact are shared. Retention relies on consistent communication, as does the frequency of a donor’s gifts. The problem is that it is entirely driven through a passive process. Many organizations fail to even employ a more intentional mid-level cultivation process, which further delays the time it takes for a donor to mature to a major level of giving. Please don’t misunderstand. Calling the broadbase acquisition process “passive” doesn’t mean there isn’t significant effort that goes into direct response campaigns, or that those efforts are not strategically driven. They often are. But they depend on the donor to make the first move before anything changes in the way the organization actively engages and woos them. My experience with clients has shown it is this passive cultivation process that drives them crazy! It is an expensive, long-term process that delays mid-level and major-gifts. Subconsciously, I think they are also frustrated by the fact that all other aspects of their donor development process possess a measure of intentionality, yet cultivation seems relegated to a multi-yearlong marathon.
DALLAS I CHICAGO I NEW YORK I DC I 214-866-7700 I pursuant.com
I’ve asked a number of development officers if money were no object, would they visit every donor on their file—not just the major donors. Each officer has said they would. But money is an object, and it simply hasn’t been cost effective to cultivate broadbased donors any other way. But what if there was another way—one that could actively drive results forward, even from newly acquired donors. An Alternative Approach Pursuant has been testing for over 12 years and nearly 20,000 face-to-face visits, a model that actively engages donors in a face-to-face meeting, culminating in an invitation to make a three-year giving commitment. This program, called Charitable Partners, has traditionally focused on actively cultivating mid-level donors. Increasingly, it is also being used to source prospective major gift officers, train them in the work of being an effective fundraising officer, and improve their metrics and results. This program has produced remarkable results. Nearly half of all visits have resulted in an annual commitment of 2-5 times donors’ annual giving. Some organizations have seen successful close rates of 65%.
Intentional Passive
Cultivation
The difference lies in a combination of engagement and stewardship elements, combined with gift officer efficiency and effectiveness metrics that have produced millions of dollars in fundraising revenue, not to mention far greater gift officer productivity improvements. If this same process, or one very similar, were to be applied to early cultivation efforts, the metrics typically associated with acquisition could be substantially revised. First, here is how this process would substantially revise the cultivation process
Acq
Cultiva-
MidLevel
Major
Ongoing Communication Time
DALLAS I CHICAGO I NEW YORK I DC I 214-866-7700 I pursuant.com
How would this process work? The secret lies in the effective use of data to efficiently drive the process. Three things need to happen. First, organizations take their newly acquired donors and obtain wealth overlay data that lets them know who among their new donors have the capacity to make a mid-level or major giving commitment—approximately $85 per month or more. In our experience, that group represents about 50% of their newly acquired donors. Second, they need to visit them face-to-face to communicate the mission and vision of their organization, show them the impact the organization is having, and ask them for a commitment. Third, they need to ensure an ongoing stewardship process is in place to keep the donor emotionally and intellectually connected to the work of the organization—something they likely are already doing. If these three components are in place, the numbers associated with acquisition change dramatically. A Look at the Numbers Let’s build two simple scenarios based on the following assumptions:
Donors Acquired: 1000 Cost Per Donor Acquired: $100 First Year Passive Giving: $75 New Donor Retention Rate*: 25.0% New Donors with Capacity: 50% New Donors Who Agree to Meet: 12% Face-to-Face Close Rate**: 50% Average Intentional Commitment: $4,000 over year for 3 years Time to Complete F2F Mtgs: 1 month(s) Annual Compensation of Gift Officer: $60,000 Second Year Passive Giving: $150 * The percentage of new donors who will give in the second year ** The percentage of people who agree to make a commitment after meeting
Based on the assumptions above, here is what giving looks like after the first and second years, along with the ROI and break even points associated with each scenario:
DALLAS I CHICAGO I NEW YORK I DC I 214-866-7700 I pursuant.com
Cost of Acquisition Campaign: Cost of Gift Officer: 1st Year Passive Gifts: Total Intentional Commitments: 1st Year Intentional Gifts: 2nd Year Passive Donors: 2nd Year Intentional Donors: 2nd Year Passive Gifts: 2nd Year Intentional Gifts: Total 1st Year Giving: Total 2nd Year Giving: Total 2-Year Giving: Percent Improvement: 1 Year Total ROI: 2 Year Total ROI: Break-Even Point:
Traditional Acquisition
Intentional Acquisition
$100,000 N/A $75,000 $0 $0 250 $0 $37,500 $0 $75,000 $37,500 $112,500 N/A 0.75 1.13 21.3 months
$100,000 $5,000 $75,000 $120,000 $40,000 220 30 $33,000 $40,000 $115,000 $73,000 $188,000 40% 1.10 1.79 12 months
As can be seen above, the traditional approach to acquisition produces an ROI well into the second year (21+ months), while following up the acquisition process with an intentional, face-to-face meeting with some of the newly acquired donors provides a break-even point by the end of the first year.
This analysis doesn’t include the third year of giving by intentionally developed donors, much less the cumulative impact that would occur by incorporating an intentional follow up process through subsequent acquisition efforts. Furthermore, our experience with the Charitable Partners process has also shown that 80% of donors who make an initial multiyear commitment are willing to make second (and subsequent) multi-year commitments if they are stewarded properly during the commitment period. That kind of retention is hardly assured purely through passive cultivation efforts. We have also discovered that donors who are cultivated this way not only become mid-level donors years earlier than they traditionally would have (and in higher numbers), they become major donors sooner as well. In fact, we have not accounted for the fact that some of these acquired donors will immediately become major donors, providing an even higher level of return than accounted for in this simple analysis.
DALLAS I CHICAGO I NEW YORK I DC I 214-866-7700 I pursuant.com
While we have compared this new approach to traditional acquisition campaign metrics, there’s no reason it can’t be used to augment cost-effective acquisition programs where positive ROI occurs much faster. Adding an intentional follow up process will only make cost-effective acquisition campaigns that much more financially powerful. Finally, it deserves noting that this process—using data mining to prioritize and drive face-to-face donor visits—can be used to enhance mid-level and major donor segments. While the weighting of RFM data, behavioral engagement data, and wealth scores would need to be adjusted, this process absolutely enhances mid-level, major donor, and planned giving programs. Pursuant has developed a far more robust model that shows the complete impact of this engagement process across the entire donor pyramid. Contact us if you would like a picture of how this process could impact your acquisition and/or mid/major development efforts. Closing Today’s nonprofit organizations are struggling to find ways to cost-effectively grow their donor bases and build major donor portfolios. Key to this process is finding new ways to acquire and cultivate broadbased donors. By incorporating data-driven strategies with thoughtful approaches to engagement and stewardship, the returns associated with traditional acquisition campaigns can be revolutionized. And that’s something every nonprofit can appreciate. ———————— For more information on applying Pursuant’s intentional fundraising program to revolutionize your acquisition and overall development efforts, contact us today.
DALLAS I CHICAGO I NEW YORK I DC I 214-866-7700 I pursuant.com
