How To Survive Donor Acquisition

June 15, 2007       Marla Nobles      

During her stint as director of development at Children’s Specialized Hospital Foundation, in Mountainside, N.J., Theresa Valentino has experienced firsthand the trials and unpredictable changes of acquiring new donors. With an annual acquisition budget of around $10,000, which entails two mailings, Valentino said there’s little room for mistake.

“We’ve used lists where we’ve mailed out 50,000 and we got 40 names,” said Valentino, who joined the foundation a little more than a year ago. Valentino recalled a separate mailing where the percentage of returned mail, due to incorrect address, deceased, undeliverable and unable-to-forward mail, was greater than the percentage of donors the organization acquired from that mailing. “It’s ridiculous for us, number one, to spend the money on the list, and to then have to spend the money on the postage as well as the printing cost.”

There are a significant amount of lists available. Said Valentino, “The challenge is finding the broker that can really work with you and make the suggestions that you need.” Valentino said another challenge, aside from sifting through the ever-expanding sea of list brokerages, is making sure you’re using a list that has been successful for a similar organization – recently.

According to Charlie Cadigan, managing director of Frontline Data Group Inc., in Vienna, Va., any nonprofit that has an active acquisition program at the national level should be in the business of acquiring new donors. And, he added, if you’re making the decision not to do acquisitions, you’re making the decision to let your file waste away. “It’s kind of the old, pay me now or pay me later,” said Cadigan. “Nonprofits that make that decision, the first thing they typically cut is an acquisition budget, which is very short sighted because you’ll have to play catch up at some point.”

Cadigan, who said nonprofits should “be in acquisition mode on a continuous basis almost,” said the list market is ripe for technological update. “I think the challenge right now is finding enough lists that work. We see list plans all the time that are falling short of their goal, especially for the large, major mailers. Their biggest challenge is they can’t get enough names to mail.” Cadigan said this leads the “major players” to supplement their lists with less desirable commercial names. “They may not have any direct response usage, or they may be vertical compiled,” Cadigan said of commercial lists, leading to lower response rates.

“It’s kind of the old adage about advertising: 49 percent of it doesn’t work – you just don’t know what 49 percent,” added Cadigan.

There are new tools available, he said, such as DPV, or delivery point validation, that can be used to apply “hygiene” to lists. Cadigan also noted the use of Target Analysis Group’s family of predictive modeling tools, Target Tags™, which he said the public broadcasting market has been using aggressively for some time.

According to John Mastrobattista, vice president of marketing at Cambridge, Mass.-based Target Analysis Group, now a division of Blackbaud, the tool “looks at a variety of data points: recency, frequency, level of gift, giving behavior towards other organizations.” Mastrobattista said the product has evolved over time, and currently “sifts through dozens if not hundreds of different variables to find which ones are relevant to an organization.”

A good business?

“Well, it’s a related business,” Cadigan said of the business of list rentals for a nonprofit, noting that the income earned can offset the rising costs of postage, paper and hygiene tools, and other direct mail costs.

“Any client that’s exchange-only, I encourage them to make their file available for rental,” said Barbara Sims, president of Carol Enters List Company, in Fairfax, Va., “and demonstrate to them the income they would earn and the money they would save in their direct mail efforts.” Sims cautioned that while list revenue can offset the rising donor acquisition costs, “it’s not the point of the list.”

A recent benchmarking study completed by Target Analysis found donor counts for 2006 were down 2.4 percent while average gift was up 2.4 percent from the same period during 2005. But according to Sims, nonprofits should look beyond donor counts and average gift before making the decision to rent or not. “We’re also looking at net per donor,” said Sims, who said her company “weights” a list’s performance based on the goals of a particular organization, which might go beyond financial. “If these donors are making $50, $100 net for a year, the investment is still well worth it. It’s a higher investment than what it used to be, but it’s still a better investment than putting your money in the bank.”

To make your list more appealing to other nonprofits, Sims recommended the three mainstays of direct mail: recency, frequency and level of giving. “But,” cautioned Sims, “you want to be careful how far you’re going into identifying people for your competition. You don’t want to give them too much information – it’s a balancing act.” Sims suggested as a rule of thumb of a full turn a week. “You don’t want to have too many names out there.”

Ultimately, Sims said she encourages exchanges. “We’d rather get names than revenue.”

Lisa Greene, president of Specialized Fundraising Services Incorporated, in Spartanburg, S.C., said she’s found recency tends to be more negotiable. “Sometimes on a reciprocal basis you can get 3- to 6-month donors from an organization,” and sometimes as low as 1-month due to lower response rates.

“We’re all looking for ways to make a list more responsive, and list owners don’t want to lose the relationship and the revenue of that relationship. So, we’re trying to work together to make each other’s lists work well.” Greene said the better selections from nonprofits are on a reciprocal or exchange basis, while commercial mailers are more flexible in general.

For those organizations with more names, having your list manager enhance it with lifestyle and demographic data would make it more saleable, added Greene. “It would bring in usage from the commercial market, as well as possible other sectors of the nonprofit market.” For instance, identify Spanish-speaking donors, or Jewish or Catholic donors, offer various dollar levels, various hotlines or recency segments. “But in order to do this, you have to have a substantially sized list of at least a couple 100,000 (names).”

Greene also suggested applying “fast forward” to lists. “It’s quick; you don’t have to run the entire NCOA file,” she said. “For instance, if a mailer’s going through merge/purge, most of our clients will use fast forward. We’re applying a fast forward of the last 12 months to make sure we’re catching any more-recent moves.” It’s also a cheaper function, said Greene.

Wondering about that service charge/shipping fee when almost 98 percent of list fulfillment is done using the Web? “Yeah, people are kind of annoyed with that,” Susan Anstrand, president and CEO of Oakland, Calif.-based Names in the News, said of the service charge, typically $50. Anstrand, who admitted the charge is “a bit high, I’d rather see it at $25,” said the service charge is in fact warranted.

“We struggle all the time,” said Anstrand. “Now that it’s not (magnetic) tapes that physically get Fed-Exed to service bureaus, but it’s email or FTP (files transfer protocol, a commonly used protocol for exchanging files over the Web), there’s always: we already sent it, or your firewall’s too big, or I got the wrong address. So there’s still sort of this quality control thing going on; it’s all about time.”  NPT