Postage Going Up

Postage Going Up

On January 27, first class postage is going up to 55 cents, a 5-cent increase. This is the largest increase in almost 30-years. As this article states: “The Postal Service lost $3.9 billion in 2018, attributing the losses to drops in mail volume and the costs of pensions and health care. It marked the 12th year in a row the agency reported a loss despite growth in package shipping.” $3.9 billion. That’s a big number. To put this in context the USPS lost almost a half million dollars every hour, 24-hours a day. That’s just not sustainable. We have been fortunate in this country to have had such a great postal system. It has been fast, accurate and affordable. Nonprofits have been doubly blessed by the US Postal Services’ postal subsidy for nonprofit organizations. But that is changing before our eyes. Delivery of nonprofit mail is getting slower and slower and impossible to predict. Nonprofit mail is now delivered in batches. That means when your appeal does finally get delivered, it’s hitting your donors’ mailbox at the same time as every other nonprofit’s mail. This fall I received 8 appeals on the same day. So now not only are your appeals unpredictably slow on delivery, they are facing greater competition. I can’t help but think that the nonprofit postal subsidies will likely end soon. Here’s what I recommend while there is still time: Analyze the ROI of your donor segments this fall and test first class postage in top performing segments. With access to reliable nonprofit postage, first class postage is an extravagance. However, you are paying a lot...
The Exponential Importance of Second Gift Timing

The Exponential Importance of Second Gift Timing

Check this out! This graph shows the the five-year value of a donor based on how quickly an organization converts a new donor into a second gift donor. The correlation is astounding. New donors that give a second gift within the first 3-months have LTVs nearly twice as high as those who give at the 12-month mark. This demonstrates that it is worthwhile to spend money cultivating a second gift early in your relationship with a new donor. What’s also surprising is the value of donors who convert 13-24 months after their initial gift. This is encouraging. Don’t give up on a new donor than didn’t convert in their first year. However, less surprising, new donors who wait 25+ months to convert have much lower LTV rates. All this indicates the need to have strategies in place encouraging the second gift ASAP for your newest...
Bearing Down

Bearing Down

Many people that work in the numbers business, including us, have been saying for a while now that the stock market is overcooked, and a big correction is inevitable – so the major dive in the Dow Jones yesterday was not a huge surprise. No matter where we end up in the next few days, many finance gurus are still predicting a drop of 30% or more. This article by David Rosenberg, the chief economist at Gluskin Sheff, was reposted by Business Insider on January 11, 2018, explains the trends in an easy to absorb manner: http://www.businessinsider.com/markets-look-stretched-rosenberg-says-2018-1 Of course, Mr. Rosenberg is counseling private investors. At Analytical Ones, we are consulting with nonprofit organizations. And all of us that worked in fundraising through the market collapse of 2008 know that philanthropy is closely tied to market performance. So, what did we learn a decade ago that will help us prepare this time around? This is what you can expect it see: The recession of 2008 had a catastrophic effect on new donor acquisition. It has only been in the last couple of years that organizations have recovered in this area. In times of economic uncertainty, donors are unlikely to add organizations to support. Large donors dried up. Again, in times of economic uncertainty, its tougher for donors to write those big checks. Loyal donors continued to give – and they gave generously. Knowing these things, here’s what we recommend you should be doing now: Even with the drop yesterday, the market is still strong. Now is the time to be investing as much as you can in new donor...
More is Not Always More

More is Not Always More

As we Atlanta Falcons fans know, just because you’re ahead at halftime doesn’t mean that you’re going to win. More is not always more. We all know that Acquisition Strategy is important for donor long-term value and for a non-profit’s long-term income, but HOW important? I recently did some analysis for a non-profit, and the numbers were striking – especially when looking at the donor’s initial gift size and the subsequent LTV. Due to a change in Acquisition Strategy, the new donor average gift jumped 48% from $46 to $68 between FY14 and FY15. And the projected 5-year LTV for the FY15 new donors jumped 49% over the LTV for the FY14 new donors, from $159 to $237. Not surprisingly, with the new acquisition strategy, the client had a decrease in number of new donors. But, with a 10% decrease in number of new donors, there is still a significant increase in revenue over 5 years: 5,000 new donors X $159 LTV = $795,000 4,500 new donors X $237 LTV = $1,066,500 If you factor in cultivation costs at an average of $7/year per donor (and the savings from not mailing the 500 donors NOT acquired) that’s a net increase of $289,000 over 5 years. If you continue this same acquisition strategy for 5 years, that’s a net increase of $1,445,000 for those new donors. So, all told, acquiring more valuable donors to start with makes a big difference down the...
Major Donors – In the Beginning

Major Donors – In the Beginning

Recently, an organization wanted to take a look at where their $1,000+ donors originated. After a quick channel analysis, we came up with this chart. For this nonprofit, 55% of their $1,000+ donors came in through their Acquisition Mailings. Another 23% gave their first gifts online. Four percent gave their first gifts to codes categorized as “Cultivation Mail” – mostly newsletters – and 9% of the $1,000+ donors gave their gifts to “Miscellaneous” codes like White Mail. So, Acquisition Mailings are extremely important – not just for the new donors they bring on for direct mail – but also as the entry point for future major donors. Over half of new major donor come in to the organization this way. Do you treat your newly acquired direct mail donors like they are your future major...
Net Dollars Not Donors Part 2

Net Dollars Not Donors Part 2

This may sound heretical, but counting donors isn’t as important as counting dollars. Here’s why: donors are not of equal value. For far too long in fundraising, there has been this assumption that “more donors are better.” This would be true if (and only if) all donors have equal value. But they don’t. I think I know we got here. Once upon a time an analyst figured a donor’s long-term value. Let’s say that value was $225. Then the DD thought, “Hey, all I need is more new donors. The best way to get more new donors is to lower my acquisition ask string.” Then 5-years later, the analyst recalculates the LTV and finds it’s only $100. The DD is angry with the analyst. They just spent $100 acquiring these donors. So the net value after 5-years is $0. “You said each donor was worth $225!” You know how the what happened. LTV Is tied to first gift amount. Lower the ask, you lower the LTV. Yet still, I talk with Development Directors who think 1,000 donors with an AGS between $10-24.99 are better than 10 donors with an AGS of $25-49.99. But when you take both acquisition and cultivation costs into the equation, as the table below shows, that’s just not true. Acquiring 1,000 donors with an AGS between $10-24.99 will yield a negative net revenue of $24,000 after 5-years. Whereas just 10 donors with an AGS of $25-49.99 will yield $490 in positive net revenue. If you want to change the direction of your fundraising programs, you first must change what you are...