Fundraising ratios and other deceptions

mal-book-designConventional wisdom holds that the best way to measure a nonprofit’s efficiency is to look at the percentage of income spent on overhead and fundraising. The popular press, the charitable “watchdog” agencies, and our own ingrown instinct all tell us this is the right way to determine whether you’re doing a good job of running your organization. As the argument goes, if you spend more than 10 or 20 cents to raise a dollar – a “fundraising ratio” of 10 to 20 percent – then there must be something wrong with you. Well, that’s bunk. The fundraising ratio is a meaningful measurement for America’s biggest charities: the Red Cross, the Salvation Army, UNICEF, Goodwill Industries, CARE, the American Cancer Society. All these groups are decades old, command instant name recognition, and have large development departments with the talent and the resources to use every conceivable means to raise money and can make the most of every dollar spent on fundraising. Each of them raises more than $300 million a year. But applying the same simplistic criteria to young public-interest groups with budgets a hundredth or a thousandth the size usually makes no sense at all. In exceptional cases, where fraud or flagrant mismanagement is suspected, an extremely high fundraising ratio may be an early warning signal. An organization that is spending 95 cents to raise every dollar after three or four years of extensive direct mail promotion is clearly not worthy of donors’ support. A closer look may reveal that the organization is promising a miraculous cancer cure and working out of a third-floor walkup and a post office box, and that the organization’s founder and $90,000-a-year executive director is the brother-in-law and former employee of its direct mail consultant. Bur while fraudulent charities have existed since a charitable impulse moved some far-sighted noble to give away the first shekel, they are uncommon today. It’s a tragic mistake to hobble thousands of sincere and effective public-interest organizations with rules designed to inhibit a few bad actors. Moreover, where fraud is likely, an unusually high fundraising ratio is probably just one of many grave and obvious problems. If charitable donors were to limit their gifts to the handful of the nation’s nearly one million nonprofit, tax-exempt organizations that meet these conventional criteria for nonprofit performance, charities would be few and far between. Groups springing up to meet new needs – or simply to keep the old agencies honest – would die as quickly as they were born. Only an organization with a truly secure funding base can fulfill these extravagant regulatory fantasies. When a few phone calls and a lunch meeting with a wealthy donor can produce a multi-million dollar gift or bequest, fundraising costs are minimal when expressed as a percentage of the proceeds. Much the same goes for an organization with a large, loyal following of donors who can be counted on to renew their support year after year. In either case, the fundraising ratio is likely to be low. But a small, less well-established group – or one just starting out to address a newly emerging need – is unlikely to be in a position to achieve the same results with such little effort. It may take several years of repeat giving and continuous cultivation before it can count on getting gifts from a donor. Fundraising is hard work and – for most nonprofits – it’s expensive, especially at the beginning. Partly because so many so-called “authorities” keep beating the drum for the most restrictive definitions of acceptable fundraising practices, relatively few donors will give more than token sums to any but the best established, blue-ribbon charities. To smaller and newer organizations, gifts are typically much less generous. And obtaining them can take a great deal of time and money. People tend not to trust what they don’t know. But funds contributed to even the oldest and best-known charity might just be going down the drain on misguided or irrelevant projects, getting socked away in fatter and fatter “reserve” funds, or used to keep a passel of unimaginative people at work in featherbedding jobs. After all, an old organization could just as easily have misbegotten priorities or incompetent staff as a new one. The real measure of a nonprofit’s effectiveness is the results it achieves. By that yardstick, many nonprofits with enviable fundraising ratios are singularly ineffective compared with some of the scrappy, innovative, grassroots groups with which I’m familiar – ventures that are rarely able to raise a dollar for less than 35 or 40 cents. Nonprofits spring into existence to fill unmet needs, to challenge old concepts, and to espouse new ideas. It’s no accident that many public-interest groups have such a tough time raising funds; what they advocate is downright unpopular. But even those organizations that meet universally acknowledged needs and avoid controversy altogether are likely to face an uphill battle getting their fundraising programs up to a level of efficiency that allows for a consistently low fundraising ratio and still provides for necessary growth. To do so takes time. After people, issues, and money, time is the fourth dimension of fundraising. It’s often unseen and rarely appreciated. But no fundraising program may be fairly evaluated without a full understanding of this most precious of commodities. Mal Warwick is founder and chairman of Mal Warwick | Donordigital and the author of twenty books on fundraising. His most recent book is The Business Solution to Poverty with Paul Polak.

12 ways to combine Direct Mail and Telephone fundraising

telephone-dial250_2501. Thank-you phone calls. Use the phone to thank new (or renewing, or upgrading) donors as soon as possible after you receive their gifts. Time after time, tests demonstrate that organizations with the foresight to invest in kid-glove treatment of their donors are likely to receive big dividends for years to come: higher renewal rates, larger gifts, and higher rates of donor retention. 2. High-Dollar lead letter plus phone call. Send a “lead letter” – one that doesn’t ask for money; the lead letter states the case and promises a phone call. Or you might promise donors you won’t call if you receive a gift before a certain date. (In a small-donor variation, you might send a postcard instead of a letter.) Most of the time, these and other combinations of phone and mail fundraising efforts yield greater net revenue than the sum of isolated direct mail and telephone fundraising campaigns targeting the same donors. 3. Pre-call in advance of a High-Dollar mailing. The advance call is not to ask for money but to thank donors for past support and to ask them to watch for letters on the way. Here’s one more form of donor cultivation; it’s been known to work wonders, especially when the message delivered in the pre-call includes important or interesting news. 4. Phone followup to a mailing. Within two weeks of a mailing, a phone call can be used to discuss the issues raised by the letter and to urge that donors send gifts without delay. Phone follow-up typically doubles mailing response; if you expect high enough response and a large enough average gift without phone followup, this can be the route to greatly increased net revenue. 5. Telephone effort in a renewal series. Phone members (or subscribers) to ask them to renew, either early in a renewal series – to maximize early response and speed up cashflow – or late in the series – to cut telephone costs and maximize response from marginal members. If there is any single best application of telemarketing in the fundraising process, this is probably it. Using the telephone, you can reach people who have proven highly resistant to direct mail appeals. A strong telephone fundraising program can break even – or even raise net dollars – from a group of direct mail-acquired members or subscribers on whom you’ve long since given up. 6. Telephone recruitment for a monthly sustainer program. With or without a direct mail lead letter, you can call new (or newly renewed) members or donors to ask that they join a monthly pledge or sustainer program. (In these efforts, an Electronic Funds Transfer (EFT) option may also be smoothly introduced.) Using the telephone to recruit monthly sustainers may well triple or even quadruple the conversion rate – and the economics of monthly sustainer programs are extremely favorable for the organizations with the wit and the wherewithal to set them up. If you assume an average monthly gift anywhere between $10 and $20 – it’s around $17 in all the programs with which I’m personally familiar – a little simple multiplication will show that you can raise really big bucks with a relatively small investment in telemarketing. 7. High-Dollar giving club telephone recruitment. With or without a direct mail lead letter, you can call High-Dollar prospects – generally, donors who have contributed at least $100 on at least one occasion – to offer membership in an annual giving club at the $250, $500, or $1000 level. While prospects can, indeed, be persuaded to send such high gifts in response to very special High-Dollar direct mail packages, the response rate is typically even higher in a well-run telephone fundraising program. (And a combination of a High-Dollar lead letter and a High-Dollar follow-up call can be even more productive!) 8. Announce a special fundraising campaign by telephone. Once leadership gifts have been pledged, you can call your next-best donors or prospects to announce the launching of a capital, endowment, or other special fundraising campaign. The next step is to follow up by mailing materials tailored to donors’ gift levels. If necessary, you can phone again to solidify or confirm pledges – and to thank donors for their support. The special, personalized attention you’re able to give donors through a telephone call – which is, after all, genuine person-to-person fundraising – is the next best thing to a personal visit. And I can think of situations in which a call is even better than a visit. (So can many donors!) 9. Use a mail-phone-mail sequence in place of two or three special appeals. To launch a short-term fundraising campaign among your membership and achieve maximum impact and the highest possible response rate, you can announce the campaign with a mailing, follow up by phone 7-10 days later, and mail a second time one month afterward – an appeal to those who haven’t responded, and a thank-you to those who have. (And don’t forget the people for whom you can’t get phone numbers, or can’t reach by phone – or who refuse to pledge by telephone: mail them a special version of your follow-up letter.) In many situations, this may be the optimal combination of mail and phone fundraising techniques. It’s the sort of carefully planned and coordinated effort that the very best direct marketers use to sell high-ticket consumer products or business services – but it’s all too rare in the fundraising field. Why can’t we learn a lesson from our peers in the commercial world? 10. Dedicate a telephone line for fundraising inquiries. In thank-you letters – or in an insider’s newsletter for a monthly sustainer program or a giving club – you can tell donors they may call a special inside line in your office to discuss their concerns or ask questions. National organizations may wish to offer toll-free numbers to High-Dollar donors. This is another form of kid-glove donor cultivation. In the long run, it can pay off in a very big way! 11. Phone new members early to ask for additional support. Within 60-90 days of receipt of a new member’s first gift – and after the welcome package and first newsletter have been mailed – you might phone to introduce an important, broadly appealing program and to solicit immediate support. The very best time to approach a donor for a new (and bigger) gift is just after you’ve received the last one! Far fewer than you might imagine will resent the request. 12. Survey top donors by phone. A few weeks in advance of a major appeal, you can phone your top 50 or top 500 donors. In a conversational but entirely consistent way, ask as many of them as are willing to cooperate to answer a series of pre-determined questions about the work of your organization, its image, your fundraising plans and programs. Ask for suggestions about how to improve your operations; don’t ask for money. The information you receive about your donors’ perceptions of you and your work may prove to be important; far more important, however, is the information you get about your individual donors’ attitudes and preferences. And don’t be surprised if a survey of this sort actually proves extraordinarily lucrative: many donors will either send unsolicited gifts after you’ve talked to them – or respond more generously to your next appeal. Mal Warwick is founder and chairman of Mal Warwick | Donordigital and the author of twenty books on fundraising. His most recent book is The Business Solution to Poverty with Paul Polak.

11 cardinal rules of Direct Mail copywriting (and how to break them)

  1. brady-4Use “I” and “you” (but mostly “you”). In fact, “you” may be the most frequently used word in your direct mail letters. Your appeal is a letter from one individual to another individual. You’re not writing a press release, a position paper, or a brochure. Abolish the plural “you” from your vocabulary (as in “Dear Friends” for example), and try to avoid the royal “we.” RULE-BREAKERS: You may write a letter in the first person plural if – but only if – for example, the letter is to be signed by a married couple, or your organization’s two venerable co-founders, or a famous Republican and a famous Democrat. Otherwise, stick to one signatory.
  2. Appeal on the basis of benefits, not needs. Donors give money because they get something in return (if only good feelings). To tap their generosity, describe what they’ll receive in return for their money – such benefits as lives saved, or human dignity gained, or larger causes served. Don’t be shy about emphasizing tangible benefits, too. Donors may tell you they give money for nobler reasons, but premiums often make a difference. (Remember: most donors read your letters in the privacy of their own homes.) RULE-BREAKER: If you’re sending a genuine emergency appeal, you’d be a fool not to write about your organization’s needs – and graphically so! But if it’s not a real emergency – and you’re really in trouble if you habitually cry wolf – then write about benefits, not needs. You’ll raise a lot more money that way.
  3. Ask for money, not for “support.” The purpose of a direct mail fundraising letter is to ask for financial help. Be sure you do so – clearly, explicitly and repeatedly. The “Ask” should not be an afterthought, tacked onto the end of a letter: it’s your reason for writing. Repeat the Ask several times in the body of the letter as well as on the reply device. It may even be appropriate to lead your letter with the Ask. RULE-BREAKERS: Many direct mail packages are structured not as appeals for funds but as membership invitations. Others feature surveys or other donor involvement devices. In these cases, you might be well-advised to de-emphasize the financial commitment, and highlight membership benefits, or write about the impact of completing a survey or mailing a postcard you’ve enclosed.
  4. Write a package, not a letter. Your fundraising letter is arguably the single most important element in the mailing package. But it’s only one of several items that must fit smoothly together and work as a whole. At a minimum, your package will probably include an outer (or carrier) envelope, a reply envelope, and a reply device in addition to the letter.When you sit down to write, think about how each of these components will help persuade donors to send money now. Make sure the same themes, symbols, colors, and typefaces are used on all elements, so that the package is as accessible as possible to donors. And be certain that every element in the package relates directly to the Big Idea, or marketing concept, that gives the appeal its unity. RULE-BREAKER: Sometimes it pays to spend a little extra money on a package insert that doesn’t directly relate to the marketing concept: for example, a premium offer presented on a “buckslip,” but mentioned nowhere else in the package. Often, in fact, such buckslips work best if they don’t use the same color and design as other package elements. (That way, they stand out more clearly.)
  5. Write in American English (if you’re writing to Americans!). Use compact, powerful words and short, punchy sentences. Favor words that convey emotions over those that communicate thoughts. Avoid foreign phrases or big words. Minimize your use of adjectives and adverbs. Don’t use abbreviations or acronyms; spell out names, even if their repetition looks a little silly to you. Repeat (and underline) key words and phrases. Make sure that even an imbecile could understand your marketing concept. RULE-BREAKER: A letter that could have been written by a twelve-year-old might not look right over the signature of a college president or a U.S. Senator, so follow this rule judiciously. (But don’t make the mistake of confusing big words, complex sentences and complicated thoughts with intelligent communication: even a literate fundraising letter needs to be clear and straightforward.)
  6. Format your letter for easy reading. Be conscious of the white space you’re leaving around your copy; the eye needs rest. Indent every paragraph. Avoid paragraphs more than 7 lines long, but vary the size of your paragraphs. Use bullets and indented paragraphs. In long letters, try subheads that are centered and underlined. Underline sparingly but consistently throughout your letter: enough to call attention to key words and phrases, but not so much as to distract the eye from your message. RULE-BREAKERS: Don’t mechanically follow the rule above. Some special formats, such as telegrams or handwritten notes, have formatting rules of their own. Don’t ignore them.
  7. Give your readers a reason to send money NOW. Creating a sense of urgency is one of your biggest copywriting challenges. Try to find a genuine reason why gifts are needed right away: for example, a deadline for a matching grant or an approaching election date. Or tie your fund request to an arbitrary budgetary deadline so you can argue why gifts are needed within the next 15 days. There is always a reason to send a gift now. And the argument for the urgency of your appeal bears repeating – ideally, not just in the text of your letter, but also in a P.S. and on the reply device as well. RULE-BREAKERS: Be very careful about fixed deadlines if you’re mailing via bulk rate. (Instead of citing a date, use a phrase like “within the next two weeks.”) Don’t overuse the same arguments for urgency, lest your credibility suffer. And try not to depend on deadlines based on actual dates in your acquisition packages: the value of those packages will be greater if you can continue to use them over time.
  8. Write as long a letter as you need to make the case for your offer. Though everyone won’t read every word you write, some recipients will do so, and others will scan your copy for the information that most interests them. To be certain you push their hot buttons, use every strong argument you can devise for your readers to send you money now. To spell out every argument may mean writing a long letter; it may also mean repeating what you’ve written to the same donors many times in the past. But don’t worry about boring your readers by restating your case: studies show that even the most active direct mail donors remember very little about the organizations they support. RULE-BREAKER: Not every organization – and not every appeal – calls for a long letter. Not by a long shot! A well-known organization with a readily identifiable purpose might be able to make its case with only a sentence or two. And in writing to your proven donors, you can sometimes state the argument for a straightforward membership renewal or special appeal in few words. And remember these three additional rules of copywriting – rules that are NOT to be broken:
  9. You – the signer – are an individual human being, with hopes, fears, convictions, and experiences. Write about them.
  10. You are writing to one person – the addressee – who has hopes, fears, convictions, and experiences. Write about them.
  11. Your organization addresses human needs on many levels, intangible as well as concrete, emotional as well as practical. Write about them.
Mal Warwick is founder and chairman of Mal Warwick | Donordigital and the author of twenty books on fundraising. His most recent book is The Business Solution to Poverty with Paul Polak.