It is said that people are “creatures of habit” who tend to do the same things over and over. That’s certainly the case in fundraising. Donors tend to repeat previous behaviors, including responding to the types of appeals they previously found compelling. Getting donors to repeat their previous actions is critical to donor retention and revenue.
When donors take a foursome at your golf outing or buy a table at your black-tie gala, you invite them back the next year. Inside your direct response program, each unique appeal is like its own mini-event. There are donors who gravitate to specific appeal types and are more likely to respond to them.
The fundamental predictors of direct response behavior are RFM – Recency, Frequency and Monetary. The more recently and more frequently a donor has given, the more likely the person is to respond to an upcoming appeal. And the amount of their previous gifts – Monetary – will be close to their next gift, on average.
Direct response fundraisers use RFM as a tool for selecting donor segments to include in renewal appeals. Some are also using predictive modeling, working with experienced statistical analysts to build segmentation for renewals. But even in sophisticated models, RFM remains a key element.
A predictive tool that is often overlooked is package affinity. While donor response is sometimes quixotic, it’s a reliable truth that donors tend to respond to mailing packages – and other appeals in other media – to which they have previously responded.
The first objective in donor renewal is to always keep the highest number of donors in the active category, which is best measured as the most recent 0-12 month period (or the current fiscal year or calendar year if you prefer). That means job one is getting a gift in the current period.
The next priority is to get the highest possible percentage of donors to make an additional gift in the same period. Most organizations get 1.3 to 2 gifts per donor per year, on average. To get that annual gift and second or third gifts, it’s critical to give donors the types of appeals they want.
The mailings you use in your annual renewal cycle often have unique qualities such as the fund or mission being promoted, membership renewal, or seasonal themes. Often the premium distinguishes the appeal — cards, calendars, name labels, etc.
Most often the highest responding segment of donors in any renewal appeal is the group that responded to the same appeal the year before. Donors who gave to the same appeal last year can produce double the response rate of all other donors in the mailing this year. It makes sense. People tend to do what they’ve done in the past.
You can use package affinity as a “first cut” segmentation tool, adding RFM to refine it. Select everyone who gave to the same appeal last year, perhaps with a monetary floor like $10 as a second selection. (Who to renew by gift level is another conversation.) Next, go back to those donors who responded to the same appeal two years ago, maybe increasing the dollar level and frequency — let’s say $15 and two gifts in record.
Package affinity also lets you qualify individuals who might not have responded to this mailing last year, but who have given to very similar packages by theme, premium or other factors that link the appeals in your program. Maybe you have unique mission areas that get promoted in a few packages each year, or you mail holiday cards and also greeting cards. Donors who respond to similar appeals are likely strong responders to packages with similar qualities.
Today, most organizations (though not all) include some kind of premium in acquisition packages. The most powerful tool you have to gain a second gift is to use a renewal package which includes the same general type of premium. For example, if you acquire with holiday cards, send all occasion cards and more holiday cards to renew.
If your acquisition package focuses on a specific aspect of your mission, be sure you focus on that mission program in your second-contribution efforts. If you acquire using a theme of helping the poor in urban America, and your renewals focus on international relief, you will have a conversion problem.
One way to really hurt your new donor conversion/retention is to acquire with one type of package and not use that package style in your conversion program. The real response killer is to acquire with a premium, then only mail non-premium packages to renew. If you have a goal to weed out donors you perceive as less loyal and just “premium” donors, that’s the way to get rid of them.
Another risky practice is developing a “track” approach, where response to one package moves donors into another package style altogether, in the hopes of moving them “up” in loyalty or value. Sometimes this approach calls for sending a donor the new “high value” track packages for a year, then dumps the donor back in the old track if they haven’t responded. The good news is you are giving them back the appeals they like to receive. The bad news is you let them lapse for a considerable length of time. The result is guaranteed lower response and retention.
Speaking of lapsed donors, you can also use package affinity effectively in lapsed donor reactivation. Lapsed donors are most likely to reactivate with a package they have given to before, or a very similar package type. Just as in renewing active donors, select lapsed donors for inclusion in an appeal based on the appeals that worked with them in the past.
In your new donor acquisition program, package affinity is a powerful tool to maximize the impact of your investment. The old direct mail adage says: “Renew As You Acquire.” And, that’s the first rule of package affinity: to increase conversion to second gift and overall retention, give donors more of the same packages to which they first responded.
So, how does package testing fit into this principle? Sometimes a package comes along that has a history of high response in the market and you’re tempted to test it in your program. But, there’s the concern that donors will get used to this new high response technique and not respond to your standard appeals anymore. Or, if it’s an acquisition package you’ll be acquiring donors you can’t renew.
Before you reject the new package idea, consider how you might also be able to include the same or similar concept in your conversion and renewal efforts. It usually makes sense to test any new packages in more than one track. Test it for acquisition, renewal and lapsed reactivation simultaneously. You’ll get a quick read on where the package can be beneficial.
We are indeed creatures of habit. Fundraisers can benefit from observing the habits of individual donors and creating a renewal strategy that respects the donor’s choice of how and when they like to respond.
Stephanie Ceruolo is vice president and general manager of Infogroup Nonprofit Solutions. Her email is Stephanie.Ceruolo@infogroup.com. Larry May is senior vice president of strategic development for Infogroup Nonprofit Solutions. His email is Larry.May@infogroup.com