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Getting Cooperation

By Don McNamara - March 15, 2013

The Nature Conservancy has been working to get back to where it was financially before the Great Recession, making a push to expand its audience.

To that end, it has been getting more deeply involved in cooperative databases, operations by which organizations can share their lists rather than selling or simply exchanging them.

The concept stems from an idea that was started by for-profit catalog merchants during the 1990s. It worked well for merchandisers, and it is starting to work for nonprofits.

“We joined the Abacus cooperative database, which is owned by Epsilon,” said Nancy Eiring, director of membership acquisition for the Nature Conservancy in Arlington, Va.

“We did a test, as we would do with any source,” she said. “The metrics exceeded the tried and true (rental and exchange) lists we had been mailing and took off successfully.”

The Nature Conservancy is not the only organization prospering. “Co-ops are performing extremely successfully for nonprofits,” said Bruce Demaree, vice president of cooperative data services, DonorBase, a cooperative prospecting database for nonprofits and fundraisers in Armonk, N.Y. “Just the method we’re working with, we’ve got 15 million unique donors. When we leverage that to provide a list, chances are that list will perform well against average files.”

Cooperative databases are becoming more popular because they are a less expensive avenue for finding new names. And, you can see what your donors are doing with other nonprofits and perhaps adapt an offer specifically to them.

“Co-ops work. They’re affordable and they’re easy to use,” said Brent Eskew, executive vice president of Wiland Direct, of Longmont, Colo., which has been working with nonprofits since 2009. “That’s hard to beat.”

The easy-to-use part comes in the nonprofit’s need to join the co-op and provide its names. “You provide your donor file. The co-op does the heavy lifting,” Eskew said.

“The nonprofit space is mimicking the success of the catalog space from the last decade,” said Matthew Frattura, vice president, Apogee Data Solutions, a division of InfoGroup, which has its nonprofit headquarters in Washington, D.C. Apogee was formed in July 2012, bringing in Frattura, who had more than 15 years of direct marketing experience.

“Anecdotally, generally the bulk of catalog acquisition marketing now is done through the use of co-ops and far less on the traditional vertical list buy. It seems the nonprofit space is following that same arc,” Frattura said. “And, that’s because it is exceeding the traditional vertical list buy.”

For example, Tim Mooney, senior director, not-for-profit & publishing at I-Behavior in Louisville, Colo., said the model for an international relief organization focused on prospects with donor activity, as well as subscriber activity across its I-Behavior Nonprofit database. “This was meant to go deeper in our base. Response and average gift were as strong as others models, surprising me a bit,” Mooney said.

The method used by cooperatives seems quite simple, going to the basics.

“There are three things that co-ops do provide,” said Robert Reger, senior vice president of Epsilon Data Solutions. The first is “acquisition names, new donors with high lifetime value. Two is reactivation of lapsed donors. And, three is running marginal list sources through an optimization process,” he said.

Put another way, Reger said, co-ops can filter donor-nonprofit exchanges and “separate the cream from the stuff that isn’t going to work.”

A co-op can “super-segment a significantly larger pool of prospects and find larger groups more willing to donate than the traditional list buy,” Frattura said. “It can also maximize gift amounts. Generally a co-op will help an organization acquire a ‘better’ donor, one who will make more donations and more money per transaction.”

Frattura said that InfoGroup accepts co-op members regardless of organizational size. What is important is getting a close look at what donors support.

“There is a finite number of donors who are direct-mail responsive,” Frattura said. “Nonprofits can reach them, but the benefit comes in gaining all the information possible about all the transactions that a donor is involved in.

“So with one donor, Joe Smith, we can see that he supports an organization that fights cancer, but we can also see that he supports a local food bank. That’s a different kind of organization, and we can see something there.”

Frattura said that this look at how and where a donor contributes improves acquiring new donors, renewing lapsed donors and upgrading existing donors.

“We have 78 transactions per household in our database,” Reger said. “We don’t limit modeling activity to nonprofit organizations only.” He offered such items as interest in collectibles or magazine subscriptions as just a couple of examples of helpful data.

Some organizations belong to more than one co-op. “One of the best-known is Target Analytics Nonprofit Database, and we had been with Target for many years before we decided to test with Abacus,” Eiring said. Even with that success, Eiring said her organization will continue to belong to the Target co-op and is open to joining more.

The success that nonprofits are finding in cooperating is coming with a heavy reliance on donors in the $10 to $25 range. Demaree said that 19 percent of the donors in the files of DonorBase gave between $10 and $14.99 in 2012. That was followed by gifts in the range of $5 to $9.99, which came in at 16 percent. Then it was $15 to $19.99 and $20 to $24.99, each of which represented 14 percent.

It could be that nonprofits are playing it close to the vest with the higher-end donors, but that doesn’t mean that such donors are the only ones included in a cooperative database. Demaree said, for example, that it depends on the organization and that it’s a misperception that nonprofits are aiming only at donors in that range.

“Most donors in any sector give that amount (between $10 and $25),” Frattura said. “It’s not that members are not sharing their higher donors. Any co-op will have member transactions that are far in excess of $25.”

“It depends on how you want to look at it,” Eiring said of the giving range of Nature Conservancy donors. “Our average initial gift falls into that ($10-$25) range.” Eiring said in terms of sheer numbers, that $10-$25 universe will have them, but there are also donors at higher levels. “It depends what you’re going after,” she said. She also said co-ops have helped the organization reach high-end donors.

In terms of costs to the organization, Demaree, Frattura, Reger and Eskew said there is no joining cost or maintenance fee.

“Our (DonorBase) policy is no up-front fee, the mailer is only charged when they take names out,” said Demaree. “We have completed six years, and in that time we have never had setup fees.”

The expense is in list rental, which is based on cost per thousand (CPM) of names used. Reger said the rack rate at Epsilon, for example, is $85 per thousand, although there can be other fee schedules based on volume. It is the same with I-Behavior.

Demaree said that DonorBase’s base cost is also $85, commissionable to brokers and agencies, plus $50 flat for file fulfillment/shipping. DonorBase also adjusts net name arrangements based on a mailer’s results and needs.

Although there is no fee to join, there are requirements. Nonprofits must agree to share their names before they can start “sharing” the names from other members’ lists. Cooperative donor names are not rented to other lists.

Cooperative operators maintain strict confidentiality about existing members when dealing with outsiders, but they vary when dealing with one another.

Frattura said that prospective members of InfoGroup cannot be told what other organizations belong, even if they ask. Eiring said Abacus is closed, or blind, to members. Eskew said that Wiland Direct is also blind.

This confidentiality is strong across the board. Not only were the contacts at co-ops unwilling to give names of member organizations, they said those organizations would not wish to be identified or even contacted for publication.

With all of this success, is there a danger that the pond could be overfished? Demaree at DonorBase said that there have been no complaints from members and that continuing to use suppression files and other techniques can help forestall problems.

Reger at Epsilon didn’t even like using the pond analogy, saying that strict monitoring by nonprofits and cooperatives will continue to provide a rich database.

Despite cooperative database success, traditional list usage is unlikely to fade away, just as direct mail has defied predictions of its demise for years.

“Cooperative databases have been around for a while, but I’d say that well less than 5 percent of the names that are being used are coming from co-ops and that for the most part nonprofits continue to purchase and exchange lists,” said Chuck Longfield, chief scientist at Blackbaud, which offers Target Analytics Nonprofit Cooperative Database. Longfield said that the popularity of cooperatives stems from the increasing costs of direct mail acquisition during the past 20 years or so. That doesn’t mean they are going to eliminate traditional sources.

“Co-ops are part of that mix,” Longfield said. “Nonprofits use them as one more source of names in an attempt to improve a bit over other organizations.”

“Co-ops are part of the (fundraising) answer, but they’re not the whole answer,” Eskew said. “They fit within the framework of smart marketing. Most mailers would be foolish, foolish to drop all sources and go with just one.”

Regardless of the means used, Longfield said, nonprofits will need to do better at retaining the donors they have.

The bottom line is test everything. “We’re always willing to test,” said Nature Conservancy’s Eiring said. “You have to keep on testing if you want the program to be vibrant.  NPT

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