LONDON — Since the holiday season is almost upon us, the UK direct marketing sector is gearing up once more for some major charity fundraising campaigns.
Perhaps more than any other sector, fundraising in the UK and Europe is changing dramatically and is becoming increasingly sophisticated.
Ironically, as charities become more commercial in their approach to fundraising, certain sections of the media and the general public are becoming more concerned about the investment undertaken and the shift away from the traditional “volunteer shaking the collecting tin in the High Street” approach. Now, more than ever, charities must be more accountable about their marketing methods.
Yet the signs are that this more commercial approach is working. Less than a decade ago, it would have been unthinkable for a UK charity to run a direct response fundraising TV ad. Now most of the major charities run highly successful TV campaigns, aided in no small way by media fragmentation and the subsequent growth in niche cable and satellite channels, which allows for low-cost access to market.
As the interactive TV phenomenon gathers pace in Europe, the potential for increasingly effective fundraising TV campaigns will grow dramatically.
Add Web-based fundraising, and the routes to market opening up promise a new revolution in fundraising methods.
In the UK, the government has given charities a boost by announcing significant tax breaks. For every pound a British citizen now donates, the government contributes an additional 28p. Tax relief also now applies to any donation, and a major promotional campaign is being planned to promote giving through the payroll.
Yet despite all of the above, quite a number of charities struggle in one major respect — giving through legacy. For established charities, legacies are a major part of new funds — often the largest single source.
Yet statistics show that of 671,000 annual deaths in the UK, only 237,000 people leave a will and only 13 percent of those who do actually make a charitable bequest. Add to this factors such as longer life expectancy and an uncertain housing market, and the reality is that charities are beginning to see a downturn in legacy income.
This problem, however, is beginning to be tackled. Most significantly, a new statistical model has just been created that promises to significantly improve the effectiveness of legacy prospecting.
For some years charities have carried out legacy pledge campaigns to their donor databases. But often these are less than major successes since donors, especially regular monthly giving donors, are of the wrong age group to fulfill a legacy pledge anytime soon.
In addition, there is growing evidence from research that some donors disapprove of pledging, and analysis shows that some often do not fulfill their pledges. So measurement and evaluation of current legacy programs are difficult and suspect.
The two issues, therefore, are how to identify good legacy prospects and how to make the process accountable. Step forward the new Legacy Model, which predicts people who will die and leave a legacy within the next five years. Like all statistical models, while it is not absolutely accurate, it dramatically improves the chances of targeting correctly and begins to allow for accountability in legacy fundraising.
How good is the Legacy Model? Here we get into morbid, almost actuarial, statistics. Among the 10 percent of donors who the model predicts are most likely to leave a legacy, checks show that about 40 percent will die within five years. Only 12 percent will leave a charitable legacy.
By comparison, random mailings of a cash gift donor base will give about 10 percent to 15 percent of people dying within five years, 6 percent to 7 percent of whom will leave a charitable legacy. Comparisons with random mailings to “regular giving” donor bases are even more extreme, since regular givers are generally younger and thus less likely to die.
Why is the model not even more accurate? The main reason is that it uses data from outside of the charity industry to make predictions. This data has to be as universal as possible so that everyone is included — including those not yet on a charity donor base. And the data need to be low cost so that charities can afford to use it.
The model is designed to be used in two ways. First, it is used as an overlay on existing donor bases to enable the charity to identify donors most likely to leave a legacy. Second, it is used to help find a group of new donors who have a high likelihood of leaving a legacy. This second use is of particular interest to charities whose general fundraising uses regular giving.
Targeting alone, however, is not enough. As always, if charities want to convert prospects into donors, then special communications programs will be required. Given this prerequisite, all the signs are that this new model can dramatically improve the effectiveness of legacy prospecting.
One final note for those who might be considering entering the charitable fundraising arena in Europe. Research in key European markets has shown dramatic differences among donors. Some 90 percent of Dutch adults give to charity, but they give small amounts to several causes. In the UK, two-thirds of adults support at least one cause, while only one-third do so in France. Motivations for giving are also very different.
Once again, the message is clear. Europe cannot be taken as a single market.
• Chris Gordon is group chief executive at the WAVV Rapp Collins Group.