The Internet is a significant fundraising tool for many nonprofit organizations. And though online donations can be a measure of success, this metric should not be the only way to define a successful strategy. The Internet’s true value is in creating and sustaining relationships with constituents and is achieved through an online “constituent relationship management” strategy.
Using a CRM approach, a nonprofit can maximize the value of its constituents by involving them, especially donors, in more than one activity so they can support the mission in multiple ways at different times. An effective CRM strategy not only raises funds online but also:
· Drives online and offline giving.
· Increases donor lifetime value.
· Reduces communication and fundraising costs.
· Supports major giving.
· Contributes to the success of other nonprofit activities such as advocacy, volunteering and outreach to new constituents and donors.
These effects in many ways can be more significant than that of online donations.
Drive online and offline giving. In the commercial sector, consumers with access to the Internet frequently research products and services online before buying. But when deciding where to make the purchase, these consumers generally follow individual preferences based on factors such as convenience, comfort with online transactions, etc.
For commercial organizations selling online and offline, research suggests that 73 percent of consumers with Internet access conduct pre-purchase research online while 59 percent of those consumers actually make their purchases online. A similar study involving direct response nonprofit donors found that 48 percent of donors with Internet access do research online but only 17 percent of those donors have given online.
Donors, like consumers, make gifts where they feel most comfortable. And for many, that still is through traditional methods such as direct mail or telephone.
But anecdotal evidence suggests that donors and consumers are researching online, communicating via e-mail and responding to online appeals and offers. One large health organization working with Convio found that many of its gifts that are characterized as online gifts actually are not online transactions, but come from donors downloading a pledge form from its Web site.
Nonprofit groups, too, are realizing that e-mail communications reinforce direct marketing efforts. Another Convio client found that donors are more apt to respond to a direct mail piece when the nonprofit sends e-mails in advance alerting them to watch for a package in the mail.
Increase donor lifetime value. The lifetime value of a donor is calculated by his average gift level, gift frequency and expected retention rate. Each of those variables, and consequently a donor’s lifetime value, depends on the quality of the relationship that the nonprofit sustains with the donor.
A nonprofit that effectively communicates with donors and involves them in advocacy, volunteering, sending messages to friends and other activities will more likely develop closer, stronger relationships that increase lifetime value.
Research by the Indiana University Center on Philanthropy (published in FRM Weekly) suggests how important this is. One thousand lapsed donors from nine charities were asked why they discontinued giving. The top 10 reasons were:
10. Charity did not inform donor how contribution was used (1.7 percent).
9. Charity asked for an inappropriate donation amount (3.1 percent).
8. Charity did not remind donor to give again (3.3 percent).
7. Charity’s communications were inappropriate (3.6 percent).
6. Death (5.2 percent).
5. Donor relocated (6.7 percent).
4. Donor supports charity by other means (6.8 percent).
3. No memory of ever supporting charity (11.4 percent).
2. No longer able to afford support (22.3 percent).
1. Feeling that other causes were more deserving (26.5 percent).
Based on these findings, many of the reasons for lapsed giving could be attributed to poor donor relationships. Traditional mass communications approaches such as direct mail and telemarketing focus on solicitation, not developing donor relationships. Newsletters, if sent at all, tend to be outdated, infrequent and untargeted. Higher-value donors often get more personalized attention and higher-quality materials, but sending more personalized paper communiqués is costly and typically reserved for a very finite pool of major contributors.
However, the Internet opens possibilities for donor relations because of the ease and lower cost of sending constituents frequent, targeted and personalized communications. Online communications increase a group’s capacity to build stronger, more personalized relationships with many people.
The American Society for the Prevention of Cruelty to Animals, a Convio client, is a case in point. In 2002 the group boosted its e-mail file from 40,000 to 175,000 addresses and established frequent communication with a much larger database of constituents through weekly e-mails.
The ASPCA also developed detailed “interest” profiles for a subset of its constituency so it can personalize and tailor content in e-mail communiqués and during Web site visits. Additionally, the ASPCA deepened donors’ involvement with the organization by promoting participation in advocacy activities.
As a result of these strategies, the ASPCA’s online renewals have yielded average gifts 28 percent higher than direct mail gifts and 20 percent higher than those generated by telemarketing. Plus, participation in advocacy has yielded additional gifts. Recently, the ASPCA received a large online gift, triggered when the donor received an advocacy alert, took action online and then made a very large financial contribution.
Support major giving. As donors grow more comfortable giving online, nonprofits are seeing larger transactions over the Internet. Recently, a Convio client received a $50,000 online gift, and one human services organization affiliated with an archdiocese reported a $100,000 gift online.
For some organizations, an easy-to-find and prominent Web site can be a catalyst for online giving. A prominent cancer organization received a $1 million gift from a new donor who found the group on the Web after his sister died. The gift itself came through e-mail. Though these types of online gifts are anomalies, they will become more the norm as donors increasingly think of the Internet as another medium through which money flows.
That said, nonprofits also should use the Internet to support major giving offline by using online communications to cultivate and steward relationships with big donors. According to nonprofit consultants, the appropriate ratio of gift officers to major gift donors and prospects is 1 to 100. Convio’s anecdotal evidence suggests 1 to 40 is more realistic.
However, the reality is that most organizations operate with much higher ratios and struggle to communicate effectively. But today’s newest online tools let nonprofits cost-effectively expand their capacity to communicate regularly in a personalized manner with large groups of major donors and prospects. This results in more marketing coverage for major gift officers.
Reduce communication and fundraising costs. Substantial paper-based communications are expensive. By moving many of these online, an organization can reduce costs without sacrificing frequency or quality. In many instances, e-mail and Web site content are a stronger alternative to paper communications. Further, groups can prevent overload by sending only relevant information to constituents based upon preferences they give through online registration and other means.
Like paper-based mail, e-mail can push content to people and encourage prospects to visit the group’s Web site for more information. Unlike direct mail, some online tools include analytics functionality that can help measure the effectiveness of e-mail communications such as determining whether prospects and donors actually open e-mails and click through to the Web site to read more. This can be used to assess constituents’ involvement and interests, and adjust marketing and communications accordingly.
KUT, a regional NPR station (www.kut.org) working with Convio, has migrated many of its print publications online, including its programming guide. Members now receive electronic guides through e-mail and are prompted to visit the station’s Web site for more information. The organization has saved about $80,000 annually.
Contribute in other areas. Donors and prospects may want to support an organization in ways other than financial. This can be just as valuable as a direct financial contribution. A nonprofit can use e-mail and Web site content to encourage constituents to participate in advocacy campaigns, volunteer, attend fundraising events and raise awareness of the organization and its mission by forwarding a marketing message to friends.
A growing number of nonprofits are realizing the strategic value of the Internet on their operations beyond online giving. Nonprofits that have not yet adopted CRM would be wise to do so.