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Online Fundrasing Report: Sorting the Tea Leaves

Chances are, if you have an email account (and if you don’t it’s hard to imagine you’re reading this) then you have received, oh, at least a couple messages from non-profits today that involve a donation request. Maybe you opened one. Perhaps, if it is a group or cause that touches your heart or just happens to have a crazy interesting pitch, you gave.

A recent New York Times article discussed a report from Target Analytics (a division of Blackbaud) that looks at online fundraising results over time in several large non-profit organizations. The report is worth a look for non-profit leaders and fundraisers.

The highlight of the report seems to be advertised as this: online donors might give more the first time around but aren’t so loyal (and seem to give via direct mail later on).

For folks that have thought about the generational differences between online and offline donors – or knows that organizations are busy sending mail to online donors but don’t know how to move mail donors online – the report might not be surprising.

But what is there that sheds light on some of the important strategic decisions that need to be made?

Non-profit organizations need money. Online and direct mail donations from individuals are typically unrestricted and keep the doors open in ways that program-specific dollars from foundations and major donors don’t.

Most organizations are pretty new to online fundraising – heck, still new to online anything. They have individual fundraising programs steeped in direct mail. They are comfortable with direct mail, even if they’re uncertain about what it will provide as they watch returns decline and costs rise.

The New York Times article would like one to believe that the main finding of the report is that new online donors aren’t loyal… they tend not to give again… and we’re even left thinking that this is a sign that direct mail is better.

As expected, the realities more complex. Below we’re going to take a look at and comment on pieces of the report.

Online donors give larger gifts and, as a result, have a higher overall long-term value than donors to more traditional giving channels like direct mail, but they are less loyal in terms of repeat giving. Higher average gifts mask the lower retention rates of online donors, which may present an opportunity for improvement at many organizations.

The problem seems to be that first-time online donors don’t renew as often as direct mail donors. Is this a question of poor relationship building/lack of ongoing communications? Or is it something more inherent in the way that online donors operate? If I am an online donor I’m probably a little younger … am I more inclined to support a cause (and seek strong results) than to simply trust that an organization is going to do the right thing?

I’m not sure the report makes as strong a case as it could that online donors don’t renew or remain loyal (and, really, direct mail renewal rates aren’t always great and it takes a lot of time and money to re-up a mail donor). But if you’ve been doing this a while you know that online donor retention is tough.

This is a critical issue for non-profits. Are they doing a poor job communicating with people after the donation? Or are online donors flighty? Or do online donors set a higher bar than direct mail donors have over the years?

I think it is some of all these but there is a higher demand for proof, results and transparency among online and/or younger donors and activists. Basically, people that spend time online tend to develop strong bullshit sensors. Don’t tell me you do good work. Prove it. Show me. Tell me about it. Engage me in a conversation about it.

The online giving channel must be an integrated part of an entire direct marketing program because although offline donors do not generally migrate to online giving, online donors do migrate to offline channels in large numbers. In addition, online donors tend to downgrade when they move offline, further evidence that online donors are not cultivated to their full potential.

It is easy to be cynical about this. Especially for me. Blackbaud and Target Analytics certainly don’t want to see their mail-intensive client organizations thinking that mail is problematic.

Ah, but setting selfish motives aside it does make sense that multi-channel communications are going to produce better responses. Online donors aren’t necessarily big fans of email pitches. They might notice them and think “oh yeah, I should do that” but move on as the message winds its way to the fifth page of the inbox.

Getting something related in the mail is a strong reminder and may help seal the deal. The problem? What about smaller groups that don’t have (or want) a mail program? What about online donors that hate getting direct mail…from anyone? What about the environmental impacts of mail in general?

Test, test, test. Of course. It would be great to see some data from smaller groups that have been able to tie together mail and online communications. Part of the problem here is that the sample set is composed of large organizations with a long direct mail history. They get direct mail. In many cases, they are aggressively mailing online donors.

My guess is that most of them aren’t having much luck, if they’re trying, in moving direct mail folks to online channels.

Now for something unsurprising…

Even with this growth, online giving is still dwarfed by direct mail.

Online giving continues to make up a relatively small percentage of overall donors and revenue for most organizations. For the twelve organizations participating in the most recent forum in January 2009, a median 9% of all donors gave online in 2008 (see Figure 2).

Online commerce in general has been around a decade or so. Online fundraising less. Direct mail… forever. The question for many is “will online giving replace direct mail? What if we didn’t do direct mail at all?”

We’re in the midst of a transition. With a lot of uncertainty. If you’ve built a file/donor base with direct mail you can’t stop that – even if you want to stop. If you’re new to the game, should you have a mail component?

Online donors are disproportionately new to the organization’s file. For the typical
non-profit in this analysis, about half of all online donors are new each year. A much smaller proportion of offline donors are new (see Figure 7).

Online donors join at much higher acquisition giving levels and give much larger gifts when they renew or reactivate in subsequent years than donors giving through other channels.

This is exciting. These are long-established organizations with aging memberships. New donors/supporters/activists are needed. Might some of the retention problem, though, be that groups are attracting new, younger people with one sort of message (high impact, donate now!) and not following up with a similar messaging style?

Over the past three years of analysis, online donors have consistently renewed at rates slightly lower than traditional donors. This is more pronounced for new donors; as loyalty to the organization increases, renewal rate differences diminish.

It would seem that organizations are doing well to keep online renewals anywhere near offline rates.

Donors at higher giving levels, in turn, tend to have higher retention rates than donors at lower giving levels. The greater proportion of online donors at better-retaining higher giving levels partially compensates for their tendency to be less loyal – resulting in deceptively similar overall retention rates, as shown in Figure 10.

If I give more I am more likely to give again. This makes sense. I’m more invested. More interested. More likely to be paying attention to you and have natural affinity for the goals of the organization.

I am interested in if or how this relates to new donors attracted through social media and/or various “chip-in” type quick and dirty campaigns. A donor says “sure, I don’t know who you are but I’ll give you 10 or 15 bucks because this is pretty cool.”

My sense is that these campaigns aren’t being factored into the Target research as most of these organizations aren’t doing much of this. But I don’t know.  In general, though, how are these sorts of donors being worked into messaging streams by groups large and small? Be it social media, email and/or direct mail, a lot of new people are finding causes through these widgetized campaigns. Are they sticking around?

Most online donors continue to give online in successive years and the percentages of both first-year and multi-year online donors who renew and reactivate online have been growing steadily since 2004.

This seems to be good news – that contradicts the “online donors don’t renew” message. Is offline/multi-channel messaging playing a role here? Are online supporters becoming more loyal?

In direct mail, if you get a donor to renew once you’re very likely to keep them renewing. That first renewal is the biggest challenge. This seems to be the case online as well.

They make point that direct mail donors rarely migrate to to online giving. No surprise, really. I would like to see numbers that break that down by age but I imagine that most direct mail donors are not young when acquired – unless they’ve been on the file for 10 or more years. It would also be interesting to see if newer offline donors are more likely to move online than folks that have been on the direct mail file for three, four or more years.

Online donors typically have an email address on file with the organization and most offline donors do not. For both online and offline donors, younger donors are disproportionately more likely to have an email address on file than older donors.

Offline donors who have an email address on file, and who have no record of giving online, give far more per year and retain and reactivate at higher rates than those who do not have an email address on file (see Figures 25-27).

Makes sense… Finding a message through multiple channels makes it easier to hear and be responsive when called.

One of the more interesting little nuggets, perhaps, came when looking at regional differences.

Most organizations’ donors live along the Atlantic and Pacific coasts and in the rust belt states of the Midwest. Southern states and the mountain regions account for the fewest donors. This correlates strongly with population centers.

Donors in southwestern and mountain states are disproportionately more likely to give online. Donors in mid-Atlantic and upper Midwest states are generally disproportionately less likely to give online. This correlates strongly with age; states with younger populations are disproportionately more likely to give
online.

It seems that age plays a role again. Younger people are more likely to be online and give online (though, really, what is younger, exactly?). But is this also because the mountain west and southwest are more “high tech” in terms of occupation?

Like most everything related to online communications and fundraising there are plenty of unanswered questions. Compared to direct mail, online fundraising is still a wee baby. What we need to remember is that this kid is growing up different and won’t wear the same lousy bell-bottoms and polyester shirts as its parents. The kid can learn but might not want to imitate. To carry the metaphor a bit far, it seems that most groups are going to need to go through a lot of wardrobe changes to find the right fit.

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