Fundraising, Part 3: Human services groups focus on direct response marketing

By Todd Cohen

[Note: This article is from a report written for Blackbaud, which asked me to look at fundraising strategies that nonprofits have found to be effective.]

Fundraising generally has been tough, particularly in the last five years, with the acquisition of new donors growing more competitive across all fields of interest in the nonprofit sector as a result of the weak economy, and fewer names of prospective donors being available, says Lynn Edmonds, president of L.W. Robbins, a fundraising consulting firm in Holliston, Mass.

A report in January by Target Analytics, a Blackbaud company, found that, for the most of the past five years, “declines in overall donor numbers have been driven primarily by declines in new donor acquisition.”

To address those declines, L.W. Robbins has encouraged its clients to put more emphasis on best practices, specifically by more testing of direct-response marketing strategies to acquire new donors and renew existing donors, Edmonds says.

That is important, she says, because seven of 10 first-time donors to nonprofits typically do not make a second gift.

Still, many nonprofits are reluctant to invest in testing direct-response marketing for acquisition and renewal of donors because testing is expensive, including the continually rising cost of postage, she says.

“It will probably take two-and-a-half years before new donors acquired actually will return net income, and that’s working with a professional firm that writes the copy, designs everything, and is the strategist behind it,” Edmonds says.

“What nonprofits really need to do,” she says, “is open their minds to the fact that it’s not going to get better unless you invest in testing and come up with additional ways of attracting new donors and renewing existing donors.”

The key, she says, is to “look carefully at what has worked in the past, and then test against elements of that.”

One sector that has shown success with testing direct-response marketing strategies is food banks, she says.

For 35 Feeding America food banks that are its clients, L.W. Robbins has tested variations of several direct-response “control packages” that have proved effective in acquiring new donors, she says.

Direct-response fundraising is important to food banks, she says, because it represents an important part of their fundraising revenue.

In one test, the bulk of the local prospects that the food banks were targeting in their mailings received a “control” package that included an envelope with a standard-size letter and a reply slip. A smaller test group received a mini-greeting card that was customized to each food bank’s local prospects.

That test proved more effect than the control package and now has replaced it, so future testing will try new approaches to see if they prove more effective than the new control package.

“We’re always continuing to test against the controls in all of our accounts,” Edmonds says.

Also key in direct-response fundraising is working with a list broker with experience with nonprofits, and mailing enough pieces so the test is statistically sound.

“The key is to get that first gift from acquisition,” she says. “The next challenge is making sure you’re using best practices in your renewal program to get the second gift by listening to your donors, checking comment mail, and making sure you acknowledge them immediately.”

Next: Arts and culture groups aim to diversify donor base

The series:

Fundraising, Part 1: Basics key as economy starts to recover

Fundraising, Part 2: Health care groups invest in development capacity

Fundraising, Part 3: Human services groups focus on direct response marketing

Fundraising, Part 4: Museums aim to diversify donor base

Fundraising, Part 5: Major gifts a focus of environmental group

Fundraising, Part 6: Direct marketing a key for public society benefit group

Fundraising, Part 7: International affairs group aims to show

Fundraising, Part 8: Faith-based groups count on direct mail

Fundraising, Part 9: Independent school partners with parent volunteers

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