Technology Alters Face of Fundraising
When you strip away all the new techniques, you arrive at the one person we all aim to motivate - the donor. And though opening mail at the kitchen table has been replaced somewhat by opening mail in the family office, we are still talking with one person, asking her to help solve a problem.
We are still trying to persuade people to give money, whether it's that increasingly challenging first gift, or a gift that renews their support and possibly increases it. To do this, we still think about the basic motivators, which are pretty much the same as they were 25 years ago: fear, greed, guilt and exclusivity.
People have new things to fear - terrorist attacks, chemical and biological warfare and SARS. But the reasons people give to charity are basically unchanged. They think their gift will diminish a problem they fear. They think they will gain something for themselves by giving. They feel guilty about the issue. Or they feel their status will be enhanced when they contribute.
Though the donor's fundamental needs haven't changed drastically in 25 years, they have been tinged by troubling emotions and by increased skepticism. I think these trends are a sign of our times in general, but they have had a measurable effect on direct mail fundraising in two main ways.
First, I think donors are simply overwhelmed. The number of appeals they receive has exploded in the past 25 years. According to industry estimates, in 1979 there were 500,000 nonprofit groups in the United States. Today, there are 1.2 million.
Not all of these nonprofits use direct mail, but enough of them do to load the donor's mailbox with 500 to 1,000 appeals a year. Add to the huge direct mail increase telemarketing, the Internet, infomercials, public service ads, cause-related marketing and other promotions, and you have a vastly more crowded world of donor communications.
The second and probably more problematic trend is cynicism. Our society is so media driven that when a major nonprofit has a problem, it's big news. The worst are scandals, like those at the United Way, American Red Cross after 9/11 and the Catholic Church.
Crises like these are few and far between. But taken together, they have had a corrosive effect on the donating public. My company commissioned a market research study a few years ago, and one of the most disturbing findings was a decline in trust. Donors, especially those older than 50 - our bread-and-butter demographic - do not hold charities in as high esteem as they used to. They are less likely to believe our letters. That can translate into lower response rates.
New Tools to Boost Response
To counter these trends, our industry has become more creative and more adept at using technological changes. Let me list some of the new tools and mechanisms that I have seen in my 30-year career in this business.
I would rank the astounding growth in the collection and use of information as No. 1. In 1979, when you rented cold acquisition names for around $35 per thousand, all you knew about the prospect was her name and address. ZIP marketing was considered a breakthrough, yet ZIP codes were created to improve the efficiency of mail delivery. They were, and still are to some extent, too large for precise targeting.
Today, you have overlays and analytic models that can tell you an incredible amount of information about prospects. It costs more to do this, but the improved results usually make the investment worthwhile. The exciting part of this information explosion is that we can do a far better job of meeting the psychological needs of our donors than we could in 1979.
For example, thanks to relational database technology we have a bird's-eye view of a donor and all the various touch points she has with a charity. We can drill into giving history, event participation, advocacy and volunteer activity. We can see donor preferences regarding communication channels, seasonality and planned giving.
Relationships have become much more "donor-centric" as opposed to "organization-centric," a trend that promises to make direct marketing more relevant and timely as the future unfolds. Some changes that enabled this shift to donor centricity involve communications tools. The first Federal Express deliveries took place in 1975. The term "overnight delivery" was just becoming part of our lexicon by 1979. Twenty-five years ago, computer letters were printed on IBM 1403 line printers.
Remember watching in fascination as the first fax machine slowly printed out "facsimile transmissions" that promptly curled up into maddening scrolls? Remember when the PC hit the scene in 1981? Look at the number of database companies the PC spawned. And what about the effect of a spreadsheet program called Excel?
Running projections for a direct mail program 25 years ago was a herculean task that took 1,200 calculations just to project out three years. And if you wanted to change one of the variables, such as response rate, you had to perform those calculations all over again.
Speaking of response rates, these past 25 years have seen a gradual but steady decline. In the late 1970s, many donor acquisition mailings produced response in the 3 percent range. Today, many organizations are happy when they get 1 percent. Some charities can sustain programs with a 0.7 percent response rate.
As response rates have shrunk, average gifts have grown. That is partly because of inflation, but it is also because of more precision in list selection and modeling. It is possible now to have some control over the size of the average gift, and many organizations have made a strategic decision to acquire only higher-dollar donors because they renew better and upgrade faster.
Another trend in acquisition is the increased use of front-end premiums, particularly name and address labels. Decades ago, few charities mailed labels, and those that did packaged them in little pads. Sheets of labels largely have replaced the little pads, and the quality has improved.
Other premiums now common are greeting cards, calendars, magnets, decals, religious medals, lapel pins and certificates. Many of these can be personalized, which increases their effectiveness.
Has the drastic increase in the use of premiums hurt our industry? Certainly premiums have raised the bar to some extent in donor acquisition. They are the accepted technique to boost response rates and build donor bases. But the golden rule of fundraising still holds: Thou shalt renew as thou dost acquire. If you acquire new donors through the use of front-end premiums, you probably need to use them somewhere in your renewal program.
I have fears that this steady evolution toward an everything-but-the-kitchen-sink premium approach has spoiled many donors to where straightforward, one-to-one communications may not have the effect they once had.
Other changes? The concept of "localization" is one of the most powerful, and welcomed, trends I've seen in the past decade. I'm not talking about the old personalization of the 1980s that inserted the reader's name into every other paragraph - a technique that was brilliantly introduced and then terribly overused by the big publishing companies. Localization is using information on file (or in your head) that reinforces the donor's desire to make a difference in her town and her neighborhood.
What Does the Future Bring?
Technology will continue to drive our ability to communicate with our constituencies. The Web is becoming more pervasive and powerful, both for donors and fundraisers. Online marketing will continue to explode as a medium, though it's likely that the kinds of approaches we see today soon will seem primitive. Look for streaming video to become more common, and online fundraising possibly will incorporate more music.
Thanks to advances in laser imaging and on-demand digital printing, direct mail will become more attractive, more personal and more colorful. "Blank-sheet creative" - the process where the entire message is imaged - will become increasingly used. Once again, the driver here is collecting and using more data to enhance our messages.
Sweepstakes mailings probably still will be around in 10 years, but because of increased legislative restrictions, they'll be less common than they were 25 years ago.
We are seeing huge improvements in what we call channel integration, or consistent messaging across all channels of fundraising. For example, many groups already do a good job of integrating direct mail and special events. Branding of special events has grown more sophisticated.
Fundraisers will be presented with other new communication opportunities such as satellite phones that let a donor in, say, Massachusetts talk with a village leader in Ethiopia who has just finished digging a well that the donor's contribution provided.
World Vision already runs spots in airplanes. Can cars and vans be far behind? As online banking replaces check writing, will gift processing and data entry also undergo a transformation? I think so. Will postage costs keep increasing? Yes. Despite our protests, though, the U.S. Postal Service is still one of the best systems in the world.
Yet while all these changes occur, human nature and human needs will remain constant. And as the Internet makes fundraising more global, there is the possibility that it will be our inherent desire to help others that brings all people closer and helps solve the pressing problems that face humankind today. I see hope.