Knowledge is Power: How the Fundraising Effectiveness Project Can Help Your Organization (Part 3 of 3)

“You cannot manage what you do not measure”

Peter Drucker

This is the final installment of a three-part series of blogs focused on the Fundraising Effectiveness Project (FEP) and how it can have an impact on your nonprofit organization. We started with an introduction to FEP in Part 1. Then, we looked at how your organization can participate and benefit from the project in Part 2. Today, we will wrap up by analyzing the most recent FEP report and how to interpret the results.

In many ways, the key findings can be summed up by this statement from the Fundraising Effectiveness Survey Report: “For most organizations…taking positive steps to reduce gift and donor losses is the least expensive strategy for increasing net fundraising gains.”

On the impact of retention and lifetime value, Professor Adrian Sargeant found that “A 10% increase in donor retention can increase the lifetime value of a donor database by 200%”….   Talk about impact!  This makes total sense – in most cases, it’s the recurring, or retained donors,  that give high dollar gift(s) compared to new donors.  If this trend holds true, and you retain a higher percentage of your donors (who have proven to give more dollars), the impact to your bottom line will be much greater.  Over time, this will add up to have an incredibly large impact.

Let’s take a look at a couple of examples:

I:  RE Data analyzed utilizing the AFP’s GiG reports for 2011 – 2012 comparison

This is actual client data – names have been removed to protect the innocent:

What do you see here?  If you answered “A whole bunch of Numbers”…. Well, you are correct, and also not alone.  But a couple of things immediately jump out at me:

• The Good:
  • First off, roughly 66% of their 11,400 donors in 2012 were brand new donors!  Hats off for their acquisition channel.  They are getting lots of new donors in the door and that accounts for $1.8 Million in new money!  They recaptured 158 donors.  To the tune of $277K
  • 1,625 donors gave more in 2012 than they did in 2011.  $1 Million dollars to be exact
• The Bad:
  • For more than every single one of those 7,601 new donors we fought so hard to get, 7,842 donors that gave in 2011 lapsed (did not give) in 2012.  Not to mention the dollars lost from this.
  • 1,189 donors gave us less in 2012 than they did in 2011. Unfortunately, A LOT LESS…  $3.6 Million less.
  • They are only retaining around 31% of their donors.   This is factored by dividing the sum of our repeat donors in 2012 (from the Upgrade, Same and Downgrade lines), then dividing that total into the total number of donors in 2011.
• The Ugly:
  • Our Losses (Downgrades and Lapsed) are outpacing our Gains (New, Recaptured, Upgrades) to the tune of $3.6 Million.
  • Perhaps the biggest issue that I see is our New Donors are not staying around for year 2.  The majority (97%) of the ‘lapsed’ donors were BRAND NEW donors in 2011 – and represented over $2mm in giving that just walked away.  All the time and money they spent in acquiring them, they lost because of a lack of retention efforts.  That, my friends, is a major problem.   

Let me ask you a simple question: If you knew this information about your organization, how would it impact your strategy, resources, and decisions?  Take a minute and think about ‘the good, the bad, and the ugly’ mentioned above.  These numbers, when looked at for your organization, should move you into action.

So you might be wondering what we do now that we have some understanding of our numbers.   I would recommend that you utilize the GiG report’s “What If” tab (Example X) to start to digest the impact of making changes to your trending.    On this Tab, you can start to plug in percentages of change for gains and losses in order to understand the impact.  In working with organizations through this exercise, this became the mechanism to build a business case for investment, and something to help communicate to the development team as well as leadership the need for change and/or increase focus on certain areas.

Peer Comparison:

One of the great outcomes from the FEP study is enabling organizations to compare their performance with their peers.  Whether you are interested in a similar sector/vertical, or if you are looking at organizations within your geographic region, the report gives you comparison groups to utilize.  For example, you could see how other Human Services organizations are performing broken up into quartiles and compare your organization’s performance to where you would fall.

I encourage you to run your numbers and use the tools on the AFP website to understand your Gains in Giving. Also, having a peer group from other participating organizations is a great way to compare results and derive new thoughts or strategies on how you can improve. If you gain a solid understanding of the fundraising trends for your organization, it will help mold your strategy and future success!  Lastly, ask for help.  This type of analysis is not easy for everyone, but it is critical for all.  To help encourage you to start this process, we are launching a contest.  Run and Send your data to us, and we will draw 2 lucky winners that will get a dedicated complimentary resource from Omatic for 2  hours to review, unpack, and discuss the numbers, trending, and strategy for your organization.  All you have to do is run and send your numbers – following these steps:

II:  Examining RE Data for multi-year trending, analyzed through Omatic Software:

Here is an example of an organization’s FEP results aggregated over multiple years:

When you can further analyze your trending over a number of years, we start to truly understand what is typical based on your current fundraising practices.  This holds true for average gift size, retention rate, overall fundraising etc.  We can also see what has impacted your results; e.g. a major donation or significant grant was received, or on the flip side, maybe when that grant ended, and was not replaced.   While this is a ‘nice to see’ type feature, the importance is really in understanding the ebb and flow of the fundraising cycle for your organization, what is working, what is not, and ultimately, making changes to ensure success.

In the example above, imagine if we had the discussion in 2007 that our average retention rate dropped almost 8.5%.  If we knew that our typical retention was hovering in the mid 40’s, this would have jumped off the page.  Would this be the cause for concern?  Would you try to understand ‘WHY’ that drop happened and put specific measures in place to address? I would argue that the worst case scenario is actually not knowing, and therefore, things don’t change.  In the case of the analysis above, we ran this for the first time well after that point in time….. and it continued to drop.

Having been involved with this effort from the beginning stages, I am very passionate that it is an exercise worth doing at your organization.  Educate yourselves on your performance and trending.  Being informed allows you to make conscious decisions about your direction and encourages healthy dialogue within your organization.  Don’t forget to enter your data into the contest for some assistance from Omatic Software.

“Knowledge is power. Information is liberating. Education is the premise of progress, in every society, in every family.”

Kofi Annan 

Full findings for 2012 survey can be found at: http://www.afpnet.org/files/ContentDocuments/FEP2012Report.pdf