A Skill Needed to Scale

Growth.

I was talking the other day with a smaller nonprofit who really wants to grow.

They have a few hundred donors, and are doing good work, but they want to increase their impact.

They currently do one main event a year, do a couple of mailings, and a handful of emails.  They’re thinking about doing “vision meetings” to meet new people, and community events to increase awareness of their organization. 

I told them that both of those things are good, but neither are likely to help them grow at the rate they want to grow.

That’s because all of the ways this organization currently fundraises and wants to grow require personal interaction with a potential donor. 

But a leader or nonprofit can only have so many personal interactions.  Say you meet 10 new people a day for every day of a month, including weekends.  That’s 300 people, which is a lot.

But that’s dwarfed by purchasing a mailing list of 20,000 people in your community.  Or doing a targeted online campaign to 10,000 people who care about what your organization is working on.

The organization I was speaking to needs to go through a transition that all larger organizations have gone through at some point: moving from most donor acquisition being through personal interaction to a system that acquires a meaningful number of donors solely through communications

You can only meet so many people.

Yet there are thousands, or tens of thousands of people out there who would love to support what you’re doing who you’ll never be able to meet.  That’s a larger market.  And it requires a different set of skills to tap into and fundraise from.

This is why every large nonprofit has a thriving direct mail and email fundraising department.  They know that there are millions to be raised from people that they will never meet in person.  (And as an added benefit, the mail and email will keep the organization in better touch with the donors that they know in person, too.  You know that an event donor’s average lifetime value goes up when they give to the mail or email too, right?)

So just remember: there are more donors out there than you can meet in person.  If you want to grow to your potential, you need to learn the skills to be able to “meet” thousands of potential donors.

You’ve learned scads of other skills along your journey.  I’m sure you can learn this one, too.

More Unsubscribes

Unsubscribe.

I’ve talked before about how you want a regular flow of unsubscribes to your email list.  This is what we see from organizations with growing email fundraising revenue.

So I was thrilled to find out that there’s a name for this phenomenon: The newsletter paradox.

Here’s the paradox:

  • When you offer your e-newsletter (or any email signup, really) people will join.  Your list grows.
  • As soon as you send something to your list, you get unsubscribes and your list shrinks a little.

Put even more simply: your list grows when you do nothing; your list shrinks when you send things.

The result is what’s called a “sawtooth growth pattern” that looks like this:

This happens because when you send a fundraising email, some people on the list will look at it and think, “Oh, I don’t want to get these any longer” or “You know, I don’t care about this anymore.”  And so they unsubscribe.

These unsubscribes often cause people to panic.  However, they are a natural part of list building.

And if you only build your list but never ask anything of it, then you’re maximizing the wrong outcome: you’re optimizing “list size” instead of “money raised.”

The lesson here is that unsubscribes when you send out an e-appeal are natural.

They Didn’t Believe It

Yes you can.

I’ve written many times about how an organization’s beliefs about fundraising play a major role in how much money they can raise. 

Case in point:

“The ‘stories an organization tells itself’ about fundraising have a greater effect on how much money they raise than the stories they tell their donors.”

Well, I have a new one for you.

I just returned from the fantastic Elevate conference, which is focused on helping nonprofits use their events to raise more money and cause more connections. 

While at the conference, I had a conversation with a group of nonprofits who were extremely skeptical that they could raise money using the mail and email.  It was clear that these smaller, event-driven organizations did not believe that it was possible to communicate powerfully enough in a letter or email to inspire a person to give.

Here was my advice to them.  Don’t worry about the power of a letter or email to communicate your work.  Instead, believe in the power of how much a donor cares about what your organization is trying to accomplish. 

The donor’s desire to do something to help is so strong that a letter or email is all many donors need to send in a gift.

In the mail and email, you don’t need to convince donors.  You need to believe that they already care, then give them a timely invitation to help fund compelling work that’s happening soon.

Scary Data Frankensteins

Frankenstein.

When you are reviewing fundraising data, beware any time the data contains information from two different media channels or two different audiences. 

Here’s a simple example…

Say we recently completed a campaign that included one appeal letter to current donors and two e-appeals.  Here are the results:

  • 11,000 sent
  • 124 gifts
  • 1.4% response rate.

With those numbers, we can get a vague sense of whether the campaign was successful.  But I would say that the data above hides more than it illuminates because when we go to run the campaign next year we don’t know how to improve the campaign because we don’t know which parts of the campaign worked, and which parts didn’t.

But look at what happens when we can see the results for each piece of the campaign…

Direct mail appeal letter to current donors

  • 1,000 sent
  • 83 gifts
  • 8.3% response

E-appeal #1

  • 5,000 sent
  • 31 gifts
  • .62% response

E-Appeal #2

  • 5,000 sent
  • 10 gifts
  • .20% response

OK, now we’re talking.  Look at what we know now:

  • The appeal letter is a tremendous success.  An 8.3% response in direct mail is fantastic.
  • E-appeal #1 is also a success – a .62% response in email is also a success.
  • E-appeal #2 is not a success – a .2% response is too low.

Compare that to the combined data, which gave us an average response rate of 1.4%.  That number didn’t tell us anything.

But looking at the performance data for each piece enables us to do something powerful: learn that the messaging used in the appeal letter and e-appeal #1 worked great, and then apply those the next time we do this campaign and to all our future fundraising.

Additionally, by breaking out the results for each piece, over time you’ll learn your benchmarks for each audience and each channel.  This is very powerful because it helps you identify the pieces of fundraising that are effective, and those that aren’t.

But if you keep everything together, you just get a Frankenstein.

Direct mail and… Kale?

Kale.

Direct mail is like kale – nobody likes it the first time they try it.

Kale is a tough, leafy vegetable that tastes like a hedge.

But over time, a person can come to see the benefits of eating kale.  You start to appreciate kale.  And with the right prep and dressings, even enjoy it.

Direct mail is a tough, counter-intuitive, expensive way to raise money.

But over time, an organization can come to see the revenue that direct mail brings in and the relationship it builds.  You start to appreciate direct mail.  And with the right approach and understanding, even enjoy it.

Kale will never be as enjoyable as a cheeseburger.  Direct mail will never be as enjoyable as a great conversation with a major donor, or the emotional high of a beneficiary’s story at an event.

You might not like direct mail or kale.  But both of them are still good for you.

This post was originally published on February 6, 2024.

Fundraising Portfolio

Diversification.

When investing, one of the first principles is to have a diversified portfolio. 

  • You want to have some bonds because they are incredibly stable, which insulates you from risk if something bad happens in the stock market.
  • You want to have some stocks so that if the economy takes off, you can make serious money.
  • You want to have some international investments so that, if things go sideways in your country, you’re insulated.

You get the idea.

Now, have you ever thought that your fundraising program is essentially your “fundraising portfolio”?  Because the same principle is true in fundraising – you want to be diversified:

  • You want to have a good in-person relationships with major donors because that’s where most of the money is.
  • You also want to be good at direct response fundraising (mail, email and phone) because not every major donor will want to meet with you, and because you can inexpensively talk to lots of donors at the same time. 
  • You want to be good at events because there are some donors who will only go to events.

So, now that you’re thinking of your fundraising program as your “fundraising portfolio,” I have three questions for you today:

  1. What’s in your fundraising portfolio?
  2. Is your portfolio diversified?  Does it both insulate you from risk and give you a great chance at growth?
  3. Is your portfolio appropriate for your size?  (For instance, spending money on “awareness” is appropriate for a $25m organization, but ill-advised for a $1m organization.)

Two Quick Stories

Here are two real-life examples of how a lack of diversification can be harmful…

Example #1 — Five months into the pandemic, a large national organization called us.  They were already $20,000,000 behind budget for the year because they primarily raised money at events… but couldn’t do events because of the pandemic.  Their organization didn’t know how to raise money through the mail and email, and were hair-on-fire-scrambling to learn how.    

Example #2 — Up in Canada right now, because of the Canadian Post strike, it’s tough for nonprofits who rely on the mail because they can’t send letters to their donors!  So the organizations who don’t have strong relationships with individual major donors, and/or strong email fundraising, are in real trouble. 

Now, if you’re a smaller nonprofit, most of us don’t have large enough budgets to just say “Let’s diversify our revenue streams” and go do it the next year.  Diversifications takes both time and money. 

But as you plot your growth, diversification of revenue streams should absolutely be a goal.

Sample Direct Mail Process

Design process.

What’s your process like for creating direct mail fundraising?  Does your process help or hinder your organization?

To (perhaps torturously) borrow from the famous first line from Anna Karenina,

“All organizations that have a successful process for creating direct mail are alike; each organization that has an unsuccessful process for creating direct mail is unsuccessful in its own way.”

After helping a couple organizations improve their process recently, I thought I’d share the process that I’ve seen be the most successful in case it’s helpful to you. 

  • Creative Meeting: this is where the goals of the project are confirmed, the offer and audience decided, the creative approach is determined, and which story to tell is decided.  The more details thought through at this stage, the better.
  • Creative Brief: all the details for the project are written down in the Creative Brief.  The Brief then becomes the roadmap for the project.
  • Copywriting: the copywriter follows the Creative Brief and writes the copy.  The resulting “copy package” includes everything needed to design the package, including suggested art direction as well as copy for things like the outer envelope and reply card.
  • Copy editing: the copy package is circulated, to as small a group as possible, for edits and feedback.  One designated person makes the edits and resolves conflicting opinions.  Additional rounds of edits are done only when necessary.   
  • Copy approval: the Project Lead gives final approval on the copy and it is sent to be designed.
  • Design: the Designer designs the package, following the Creative Brief and the copy package.
  • Design Review: the package is circulated for edits and feedback.  Again, one designated person decides which edits will be made.  The Designer makes the changes.
  • Design approval: the Project Lead gives final approval on the design.

Then you’re off to the races…

Of course, there are all sorts of tweaks and changes that can be made.  For instance, smaller organizations tend to have one person doing most or all of the steps, and the steps sometimes get combined.  Larger organizations tend to have teams of specialists doing just one or two steps each.

But the most successful processes tend to follow the same principles:

  • Think it all the way through at the beginning
  • Follow the plan
  • Keep approval teams small
  • Empower one person (ideally someone who has experience with direct response fundraising) to make all final decisions, because decisions made by committees result in fundraising that doesn’t work well.

I hope this helps with your process.  If you have any advice to share, or improvements to this process, mention them in a comment.

In my next post, I’ll show you the power of having a Creative Brief, and include a sample brief you can download.

Net Revenue Available to Program

Revenue.

Here’s a counter-intuitive truth to tuck away:

As a nonprofit’s donor file shrinks, their response rates for direct mail and email will tend to increase.

Wait, you might say… if a nonprofit is losing donors every year, why would their response rates be going up?

Response rates go up as an organization’s donor file is shrinking because the first donors to leave are the donors who are least engaged.  This means that the remaining donors are more engaged – and are more likely to respond to a piece of fundraising.

I saw this earlier today when I noticed that the year-end letter for one of our customers was sent to 18,000 donors this year, versus 23,000 donors last year. 

I thought to myself, “Well, at least their response rate probably went up.”

Lo and behold, their response rate went from 4.1% to 4.7%.

Their ROI went up, too: from 6.7:1 to 7.1:1

Hooray… right?

Nope.  They raised $20,000 LESS in net revenue.  (Remember, they sent the letter to 5,000 fewer donors.)

This is one of those times when two metrics that matter – ROI and Percent Response – went up.  But the metric that really matters – Net Revenue – went down.

The organization’s Board is happy that their ROI went up.  Weirdly, they are more proud of the increased ROI than they are worried about raising less money. 

Listen, I love to maximize ROI.  Probably more than the next guy.  But what matters most is Net Revenue.

I used to serve a brilliant fundraiser that always used the term “Net Revenue Available to Program.”  He’d never shorten it to “Net Revenue.” 

His insistence on using “Net Revenue Available to Program” was an outward sign of an inward focus that I took to heart: our primary job as Fundraisers is to end the year with as much money as possible to send to the programs in the field. 

Because you can maximize ROI and Response Rate all you want, but Net Revenue is the only thing you can send to the field.

Direct mail and… Kale?

Kale.

Direct mail is like kale – nobody likes it the first time they try it.

Kale is a tough, leafy vegetable that tastes like a hedge.

But over time, a person can come to see the benefits of eating kale.  You start to appreciate kale.  And with the right prep and dressings, even enjoy it.

Direct mail is a tough, counter-intuitive, expensive way to raise money.

But over time, an organization can come to see the revenue that direct mail brings in and the relationship it builds.  You start to appreciate direct mail.  And with the right approach and understanding, even enjoy it.

Kale will never be as enjoyable as a cheeseburger.  Direct mail will never be as enjoyable as a great conversation with a major donor, or the emotional high of a beneficiary’s story at an event.

You might not like direct mail or kale.  But both of them are still good for you.