Episode 229: The Strategic Importance for 3 to 5 Year Metrics in Annual Giving
Welcome to another edition of Around with Randall, your weekly podcast for making your nonprofit more effective for your community. And here is your host, the CEO and founder of Hallett Philanthropy, Randall Hallett.
Thank you so much for your time today. And joining me, Randall, on this edition of Around with Randall. The data shows it. We've talked a lot about it. There is a declining number of people in the United States, households making any type of charitable gift, one gift to any nonprofit. The numbers that I heard from my dear friend Nathan Chappelle, he's talked about this for a number of years.
He wrote the book The Generosity Crisis. It's a crisis. We're now probably below 46% of the households making a gift. What this is doing is putting immense pressure not only on nonprofits, but really on our subject today about annual giving. What are we to do with it? How do we make it viable? How do we increase what has been traditionally one of the pipelines for major gift opportunities?
And what I want to focus on today is not technical aspects, as that's not my expertise, but something that I believe in and have believed for 25 plus years. How do you make the metrics of annual giving work to your advantage? And what this is all about is using a multi-year process 3 to 5 years windows to better understand your annual giving process results, and what that means for overall giving.
So we want to move today beyond the simple annual revenue goals that really underscore transactional conversations, transactional asks even in the annual giving level and really elevate them into more understanding of donor behavior. The people that are connected to us, we also want to be better at strategic forecasting, which we'll talk a little bit about from a budgetary perspective.
And if we do this correctly, we want to elevate more people into major gift platforms. I don't deviate from the numbers that say that 95% of our dollars are coming from 5% of our donors. The question becomes pipeline development. And we'll get into that as well. If you're interested in the giving USA numbers, I'm very fortunate to be a member of the Giving Institute, part of the of the organization, in partnership with the New School Philanthropy.
Membership only or an invitation only that produces these reports. Great team of people that do this. You can check out episodes 163. You can look in the giving USA reports for high level information. You can get Ahold of me at Podcast Health. I need to be. I'm glad to walk you through some of the details. If you want to talk about mid-level IEEE calls and how you choose who you get into, the details of calling once or twice versus just mailing, you can go back and look at episode 122 of Around with Randall, and we get into that.
If you're looking for stewardship and personalization recommendations, that's episode 171. The reason I bring those up is we're not going to talk about them very much, but their collateral are connected to what we are talking about here.
So let's get into as we start always with the theoretical, the philosophical. Then we'll move into the tactical in our 20 minutes together today. Let's start with the rationale for why this is important. We are trying to make enormous decisions, particularly as we've seen increases in expenses, postage, maybe most importantly. But printing other things, data. And when we do so, it's much better to do so with more, more accurate data.
That brings us to why this 3 to 5 years is in the first of the five different things that I kind of think philosophically are rationales for this strategic decision making. I don't know how you can make decisions based on single data sets, and that's what a year is. I've been very lucky to have way too much education, but statistical analysis that I love those classes, both in my MBA program for finance, in my doctoral program for doctoral research.
That data sampling size is critical. The N, as they say, if you aren't using a multiyear process to look at data and you're using individual years, your data is too narrow. So it eliminates the ability to look at what I would call trends, what I would look at analysis, what I would look at, all kinds of things, which we'll get into in a moment.
But all those things lead to strategic decisions. How much money are we going to put into this? Examples. How much money should we put into digital outreach versus snail mail U.S. Postal Service. How much should we be emphasizing monthly giving, reoccurring giving versus one time gifts? How do we know how many times we mail to potential new donors, and whether that list or names or wherever that whatever group you're trying to get to?
Where do they come from? Strategic decisions are all about making better decisions based on great data. And the more data and you can't just sit and wait. If all you have is one year, you got to get the best you can. But most organizations have multiple years of data to look at. We'll talk about the data and what to go look at, why that's so important at the very end.
The other thing is, is that organizations that depend on annual giving. So I talked about the 95 five model, 5% of our donors making 95% of our dollars. There are exceptions to that rule. I think about a place like Boystown here in Omaha, Nebraska, at Saint Jude's in Memphis. They live, you could you could deal with, like, an AC.
ASPCA where you see their course, Red cross. They're living in a different world than most nonprofits. They're doing this data analysis, and they're using the data to make strategic decisions. The other thing we can get from a strategic analysis perspective is lifetime donor value. There's actually a mathematical equation for this to figure out which are the people that we need to invest the most in from a stewardship and relationship perspective, either personal or electronic stewardship connection to continue their gifts or elevate them.
So there are five things I'm going to spend 70% of time on strategic decisions, because at the end of the day, that's we're trying to get to how do we make the best decisions. What goes into those strategic decisions? Well, one of them is trend analysis. If all you have is a single year data point, you can't see what trends are.
And sometimes things happen. Things like somebody added a major gift matching opportunity in a particular year for a particular mini campaign or year end campaign, or there was issues in the economy. Hello. Kind of we're right now. And that mitigates what might be seen in normal quote unquote, years. Trend analysis is important because it gives us a sense of matching criteria or non-matching criteria and reduces their effect on the numbers.
And so the first is trend analysis. The second is pipeline health. If we look at it more longitudinally, we begin to see where the people are coming from. How many new people how do we evaluate them? What did we do different that year than this year? But you have multiple years to pull from. You begin to see more information.
And by the way, you begin to see trends of. And I've had a couple of clients going through this. You pull their numbers and you say you look at your new donors year over year over year over a five year trend, and you can see a line going down into the basement on a line graph. Well, that means some.
And then oh, we stop mailing. That's trend analysis. Strategic decision of what are we going to do about it. The fourth is it builds internally leading into this idea of strategic decision making, good strategic decision making. The idea of institutional accountability. What is our investment? What's our ROI? I've said before that if you're not completely dependent, Saint Jude's, is an example I mentioned a few minutes ago.
Boys town, you have a you most your money's coming from a major gift platform, and this is a pipeline and different ways of looking at it. I believe that the ROI on annual giving just of dollars doesn't have to be very much if they're elevating people, which we're going to talk about here in a moment. Elevating people into major gift conversations.
The last is, is that this allows when you do when you do it over the course of time, 3 to 5 years for appropriate cultural shifts, not only the shifts in the community or in the economics or in the, the, the various, leadership opportunities or communications and choices. And we'll get into segmentation in a moment. What this does is begin to focus us on this elevation conversation.
I did a special episode or a single episode, episode 164 on the importance of elevations in annual giving. I would always tell my teams that the most annual fun in giving up even special events teams. The most important thing you deliver me is not dollars will take them, but it's who are the ten, 20, 50 people? Whatever the number depends on your organization and how many people you have that we can move up into higher levels.
Conversations going from 1000 to 5000, hopefully into ten and 25, or going from 25, 525,000. Who are the people that might have attributes characterize sticks that allow us to think about that? So the four things that build us into the most important trend analysis donor pipeline health, evaluate of accountability and what budgeting and allocation we're going to have.
And then into the cultural shift, which we want of elevations more people into higher level conversations. And by the way, I should add, because I tend to and I forgot that includes plan giving on the elevations. I don't distinguish major gifts is different than planned gifts. A planned gift is a major gift. It's just a different way people choose to give to it.
These four things lead us into the big one in terms of rationale, and that's the strategic decision making process. You do smarter, wiser, more effective things in the decision making process. If you do 3 to 5 years based on the four things we've talked about. So that gets us into moving into the tactical, what should you be looking at?
What data over 3 to 5 years is really important. And I look at this in six different Oracle categories, and I am not an annual fund mailing expert. Written enough I'm good with a letter. Certainly can advise on a kind of a an ad hoc basis. But I know that annual giving, while we have to be smart, is still a viable way for pipeline develop both annual giving and into major gifts.
So what are these areas? Well, the first and most important to me, as we talked about a moment ago, is donor retention. If you're not looking at trends over 3 to 5 years of donor retention, how many live consignment, how many people did we keep from last year? How many people did we reinvigorate? Over 2 to 3 to over 2 to 5 year assignment some year, but not a but unfortunately not this.
Why but why last year? But unfortunately not this. What's our multi year donation retention rate or donor retention rate? How many over three years. State. What's our lapsed donor. This begins to tell us who and why and how often we bring in and lose donors. We all know that it takes I mean the rule of thumb is seven touches to bring in a new donor.
I'm not sure it's a great number. We use it. That's expensive. So just from a pure economic standpoint, if you're just letting donors go, what you're getting is a lot more expense and not a retention. Second thing is, is where do our elevations come from? Long term standing donors. So the retention three year patterns, four year patterns five year patterns are critical.
How are you communicating with that group that maybe you should communicate differently once they get to 2 or 3 years because you're like, I can't afford to lose them. Strategic decision making that comes from a longer period of time of data. The second in the idea of what metrics is dealing with acquisitions. So there's no question that we always want new donors.
I do have knowledge of organizations that are putting metrics on hard metrics on. You need to find a thousand new donors. I'm not saying that's good or bad, but it begs other questions to me, and particularly over 3 to 5 years from where are those donors coming from? If you have a health care organization, a hospital, grateful patients provide you an immense opportunity because you have huge numbers of people to do this with.
If you're a nonprofit who's been social service, doing incredible work in the community, and all of a sudden you're being asked to do this or you're getting mailing lists, we know that doesn't work. Long term trend analysis, new donor acquisition costs, conversion rates of how many people we mailed to. And this gets us into the conversation of should we be doing digital or doing snail?
What's our age of our particular constituencies we're trying to get to? How do they respond? All of this, there was podcast, probably about a year and a half ago I did that was all about the effect of what we think of as, the collections or the, the help someone online, which aren't philanthropic from a legal perspective, but our love of mankind, you know, hey, we're trying to raise $25 for Sam over here.
How is that affecting things? All this is to say is that acquisition metrics matter, and you're going to know more if it's if it's just well, last year we just did this last year, the year before a five year trend tells us we're seeing a decrease in increase. What did we do differently in those years. The third is the value of the, what I think of as the donors gifts.
So what's the average size gets to? What's the medium sized gift? How many are upgrading? How many you're downgrading. So it's getting into what are the reasons or the rationale as to why this might be important. The other thing I comment on is, is that these revenue metrics, which gets us into our fourth, also talk about the core of the program as a whole.
And it goes back to what I said earlier. I'm always interested in pipeline, but if you are more dependent on this idea of annual giving as a major revenue stream, this becomes even more important. How much did we spend versus how much was brought in? And that's an enormous difference. Your ROI on this, the more heavily you're dependent on annual giving as a revenue stream, the more important this is.
It's the equivalent in a, let's say, an economic milk center. University of the major gift pipeline platform. Number five is kind of the engagement channels and effectiveness. So this gets into more of the bifurcation of how we do this. So electronically this is we send emails giving Tuesdays and other things like that. How many open how many click through when we do some level stewardship or communication.
How many open, how many click through if we're doing it more from, face to face, it's a little less digital. How many conversions were there from maybe, you know, Giving Tuesday? Hey, could you recommend ten people that we could send this to? And we could say it's from you and you would say that how many of those converted into donors?
Or maybe you've got an event. How many of those turned into donors? All those. All this to say is, is that those 3 to 5 year trends are really important, because if they're growing, you know what activity to do. You know what to mail. If they're declining, do you adjust? And then the last one is the idea of what I think of as mid-level pipeline development.
And I did an episode on this, and I talked about earlier on how you build out a mid-level program. I'm helping a client do that right now on the course. They have a ton of donors between 1000 and 5000, and they know that they need to spend more time with them. What is the importance of creating this? To maintain and elevate certain people?
I would argue that a part of this overall recommendation of metrics is a process or a series of process. So our first part was the theoretical. The second is the data. The third is what do you need to do this. The first is you need a strong data infrastructure. You need to ensure your CRM and donor database can track data longitudinally.
You're putting in attributes and, and, and, solicitation codes and mailing, dates and all these things that the experts look at. Opera. Hello, I thank you. This is why part of the reason they're really good at what they do can code the data either in mailings or gifts in time together. So we get accurate data. The other thing is you got to standardize things.
I'm helping a client build out a standardization manual management manual because they're kind of beginning their philanthropy at a higher level. And they're beginning to realize this is really important. They realized it, but they're realizing the implications of it if they don't. So number one is data infrastructure. Number two is you have to have enough bandwidth to do segmentation.
Can you do something different with this group versus another to see what the results might be? That's going to help you longitudinally over 3 to 5 years to know. The third is, is you need some type of goal setting. We shouldn't do anything with that goals, but it should be realistic. I did not come in to Nebraska medicine University Braska medical and say, I want 5000 elevations in the first year.
I mean, that was ridiculous. They weren't ready for that. We weren't ready for that. It was let's start small. Let's build what's the right number so we get the right people. What a right numbers is, is a 2% growth realistic. Is it staying steady. Is it seeing increases? Are we going to concentrate more on people than our traditional givers.
See if we can increase their giving? What are the reasonable goals that are appropriate and not too many of them at any one time?
Forth. What you need is an integrated process. Elevations are the best example. If you're not creating a process that makes it easy for the annual fund team to hand people over to the major gift team. And by the way, the major gift team, if someone's not a major gift, hand them down or over or into the annual giving platform.
What is the integration process for this? And then I would say for a. We did a podcast here just recently, 225 on creating a systematic feedback loop. I believe that creating this feedback loop, particularly in annual giving, to get people to let you know how they feel engaged, disengaged, like the information, don't like the information. We are so afraid to find out what people want.
And what I keep saying is if we just ask, they'll tell us we get better. So part of this integration, it's into stewardship and creating feedback loops. And in particular the act of giving can be digitalized. You don't have to do this by hand once or twice, three times a year or 90 days after a gift. Hey, we have a survey.
It's automated. We're looking for information about what we did, how we did. You like it? You might be stunned what you learn and how that can make you better. The last thing that you need, number five, is some type of what I call dashboard or reporting dashboards, an overly used word. And you see some people do dashboards and you're like that is the coolest thing I've ever seen.
And then the next sentence is, I can't do that. It can be reporting, but some type of data that indicates all of these things over 3 to 5 years. It's not an annual process. Using metrics for improvement in annual giving over 3 to 5 years is going to help you with strategy, is going to create more realistic staff accountability and metrics.
And if you've got someone really good, it creates a sense of. Expectation for you and for them. When it comes to performance, you're on the same page. It's not unrealistic. You keep people longer, which, by the way, is a good thing if they're doing their job well. The last thing is, is it helps us from a forecasting perspective, which can help us with many campaigns, can help us with our or our CFO trying to figure out how much money we're going to have next year.
If we look at it more longitudinally over 3 to 5 years, this is essential. If you want to do this well, if you're looking at the end, the sample, the data as one year and not over multiple years, particularly in annual giving, what you're going to do is you're going to short change your strategic decisions. You're not going to help your culture.
You're going to make your people unhappy. You're not going to have good data to make decisions. And at the end of the day, you're not going to make the connections with your donors that might elevate people into higher level giving at the levels you should 3 to 5 years. That's that important piece. And by the way, for leaders, my last point, this state, this takes some backbone staying power because everybody's in it for the transactional gift.
What are we in it for now we got to get the money now. You got to fight for this. There are times where we have to stand up and say, this is not what we want to do. If we're only analyzing one data piece one year at a time, that's tough, but it will make the difference in you getting stronger, more vibrant, knowing who to mail to, knowing who to forget, how to elevate, what's our patterns?
How do we communicate? If you look at it over 3 to 5 years. Doing that trend analysis, getting that donor pipeline health note, creating an accountability that everyone can believe in, and creating a cultural shift that will help with more transformational giving into planned giving in, especially with annual giving donors over the long term. Don't forget to check out the pot or the bugs.
Excuse me and how it plays to become two per week. 90-second reads. Things I see, feel, experience, connect them to either leadership or life or philanthropy. How often it's become two per week, you know, read, write to you and if you'd like to, you can reach out to me, a podcast listening to me.com. We have fewer and fewer people giving as households.
We've talked about this at the top. And what we know is, is that what we do is never been more important, which creates a cognitive dissonance. I understand it, but I don't like it. I want to be effective. You are effective. You're doing good things. This podcast and the 20-minute education classroom that I talk about is built to help you be more effective, to feel better about what you do.
I do the tactical pieces so that there are things you can say, we can do that. If I just sizable and scale or big organization, a little organization so that you can feel better about who you are and what you do because your important don't forget some people make things happen. Some people watch things happen. Then there are those who wondered what happened were people.
You're a person who make something happen. You find others in the community, donors, board members, volunteers, leaders who want to make things happen for the people and things in our community that are wondering what happened. The hole between for profit and government philanthropy lives. Take care of the things that are really important, and you are doing that every day.
I'll look forward to seeing you the next time. Right back here on the next edition of Around With Randall. And don't forget, make it a great day.