The $2.3 BILLION coffee cup

This past week a simple setting and editing mishap resulted in $2.3 billion in free advertising for Starbucks. And the best part, it wasn’t even a Starbucks cup – it was a generic craft services cup.

https://www.cnbc.com/2019/05/07/starbucks-got-2point3-billion-in-free-advertising-from-game-of-thrones-gaffe.html

GoT Coffee Cup Blunder

It certainly speaks to the strength of the Starbucks brand (people just ASSUME it’s Starbucks), but it’s also a lesson in influencer marketing and how nonprofits can be a part of popular culture.

Sure, it’s unlikely that Jon Snow will show up wearing your company’s golf polo. But cultivating those relationships online and making sure your celebrity and athlete advocates have a bunch of your “swag” can better your chances of them tweeting on your behalf, or showing up somewhere (and having their photo taken) in your T-shirt.

Greenpeace opportunistically – and creatively – capitalized on the buzz by inserting themselves into the conversation and making the case for the dangers of single-use plastics.

https://www.foxnews.com/entertainment/game-of-thrones-coffee-cup-snafu-draws-greenpeaces-attention

Food (or coffee) for thought…

Experience Matters

Before you read the rest of this blog, I’d like to ask you a question.

How do you think your donors would rate their experience with you? On a scale of 1 to 10. Not your mission or your purpose, but the experience they have with you?

Be honest.

Do you think they would tell you that they feel truly heard, appreciated, and recognized? That they are getting something out of the value exchange? Do they feel like you know something about them — beyond when their last gift was or how much it was for?

So, with that rattling around in your brain, I’d like you to meet my friend Jane, your donor — everyone’s donor, really.

Jane

Who is Jane?

Well, Jane gets direct mail and email, and sees your social posts and banner ads. She’s largely channel agnostic in how she consumes information, and as she bounces between channels, her peers play an important role in her decision-making process.

She’s busy, impatient, maybe a touch skeptical — and her favorite consumer brands (Amazon, Patagonia, et al.) have raised the bar in terms of what she expects experientially in return for her money.

Finally, maybe most importantly, Jane doesn’t define herself in the way many fundraisers do. She doesn’t see herself as an active, mid-level, major, or lapsed donor.

She probably doesn’t even know what a “sustainer” is.

She’s a person, a person who cared enough to make a contribution to your organization.

Once we have acquired Jane and she’s gone from being unknown to known, what do we want her to do next?

Make another gift, right? So we ask her — probably a lot.

But what does Jane want? What does Jane expect?

Maybe she wants to make another gift, and if she does, great! Or maybe she just wants to learn more about who you are or what you do, what her contribution will help accomplish — maybe she wants to be an advocate or start a fundraiser of her own.

Maybe she doesn’t want to do anything at all.

As fundraisers, we look at retention rates and we get excited (with good reason) about multi-year retention rates of 70% or 75%, but that’s a percentage of a percentage. Truth is, somewhere around three-quarters of your donors make one gift and are never heard from again. Our research shows that the average lifespan of a donor is less than two years.

Of course, this leads to a never-ending (and costly) search for more Janes.

To mitigate this, we tend to ask “how?” How do we retain Jane, how do we get her to deepen her investment?

At THD, we propose it’s time to start asking “why?”

Why did we lose Jane? What about her experience caused her to drift away?

It’s time to shift our focus to understanding Jane the person, not the donor — what motivates her, what excites her, and what will keep her engaged with us longer.

How do we value a donor?

What value exists in a donor who’s empowered and motivated to go deeper? There is real value in advocacy. There is earned media value in that social video share. And we have all seen the explosion and tremendous impact of peer-to-peer fundraising.

Our data makes a compelling case for the value of multiple relationships. On average, donors with two organizational relationships (e.g., donor/advocate or donor/fundraiser) are 49% more valuable in year one and 38% more valuable five years in. With three relationships, the value factor is even greater (e.g., donor/fundraiser/advocate), 97% and 85%, respectively.

Heck, in 2017 alone, 63 million Americans volunteered 8 billion hours of their time to nonprofits. At $24.69 per hour, that accounts for a staggering $197.5 billion in value*. That’s billion, with a B.

Bottom line: the key to increasing donor value is a better experience that gives the donors options, multiple ways, and reasons to remain engaged — which ultimately extends donor lifespan.

The more ways they connect (or don’t), the more we can learn. And the more we know, the better we can make the experience.

We call this the Donor Experience Value Chain.

With so much data available to us, we can develop strategies offering touchpoints that continually inform us about what is important to donors. While every stage might not include giving, the bond between an organization and the donor becomes stronger, the term of the relationship extends, and the opportunities to ask become greater and land with more authenticity and impact.

Initial Engagement

We have identified six key stages in the donor experience. These stages will seem familiar in many ways, but it’s not the definition of the stages that is important. It is understanding the value of donors in these stages. Having a view into how people are migrating can help us refine our approaches and move people into/keep people in the most valuable stages.

Onboarding

So, this might be starting to sound a lot like donor journeys.

Journeys are presented as a set of predicted or preferred paths. While these are helpful, we think that looking at an experience, and the value of a donor at various stages of that experience, is of far greater value to a fundraiser. We aren’t trying to map people along a particular journey because, ultimately, with the amount of channels and engagement points available to a donor, the number of journeys is almost infinite.

This is where things are getting pretty exciting here at THD.

We are working to aggregate the data available to us into views that will help us understand how donors on file are progressing through their lifecycle, the value over the course of their lifetime, and how our work is influencing these moves.

Summary

In addition to the standard KPIs we all live by, we are introducing a new way to understand the health and composition of your file. This will help us augment and improve the way in which we segment and communicate with our donors, extend the length of their relationship with an organization, and, ultimately, improve the lifetime value of a donor.

We will be at the DMA conference this week in D.C. talking all about donor experience. If you see someone wearing a button that looks like this, come say “hello”!


Experience Matters

*Independent Sector https://independentsector.org/news-post/value-of-volunteer-time-release/

Second Gift Strategies that Work!

Sarah Koss
VP, Account Services

We all know that getting the second gift from a new donor is a key objective in the donor journey and crucial to long-term retention. And yet, as many as 70% of all donors leave us after that first gift. How can we enhance & extend the donor journey to reverse the trend?

Here are a few second gift strategies that can make a difference to your program:

Say “thank you” … then say it again

Many times the first communication after the first gift is an acknowledgement, which is meant to provide the donor with a tax receipt for his/her first gift to the organization and solidify the donor’s feelings of goodwill.

Before your newest donor receives yet another request for money, you have an opportunity to begin building goodwill. If you’re using best practices, everyone will receive an acknowledgment with a tax receipt in a timely manner after the first gift. But consider going even further:

  • A real, honest message of thanks. While it’s true that most acknowledgments include a thank you, they also include another ask, which can diminish their impact. Consider a communication that is a pure and unadulterated thank you across all channels. For high dollar donors, consider a phone call. For lower dollar donors, consider cost effective formats such as a postcard or email.
  • Welcome them into the community. It is critical that you educate the donor about your organization and show them their impact in order to solidify their place in your community. You can include all that in a multi part email “Welcome!” series that makes them feel good about their gift and introduces them to many facets of your organization. There doesn’t have to be a lot of content, but showing impact is key.
  • Begin a dialogue. Another important element in the Welcome is to start a dialogue with your donors. Including a brief survey is an excellent way to accomplish this. Let them have a say in how often they would like to hear from you and in what channel.

Pay attention to the age-old best practice: renew as acquired

We’ve seen response rates more than double when the donor’s original acquisition vehicle is sent within the first three months of the renewal cycle!

Speak to donors personally

In the first year of the donor relationship, it’s critical to speak to them appropriately. Often, new donors are simply thrown into renewal segmentation and receive renewal messaging that doesn’t resonate with them or acknowledge their new relationship. Think about:

  • Segmenting out new donors for the first year of their relationship, further acknowledging and thanking them. You can also encourage a second gift in a way that shows you recognize their status. For example, instead of asking the donor to “renew their gift” ask them to consider “an additional gift.”
  • Review and evaluate existing control content to ensure the new donor is receiving information that is relevant. Your GA data and social threads are great sources for what your constituents are consuming & responding to. Newsletters represent a great opportunity to present mission information as well as highlight the donor’s impact and enhance the relationship.
  • Introduce your new donors to other ways of getting involved. This can include volunteering or joining an event. Or it can be an opportunity to join a monthly giving program, subscribe to your blog, or participate in your online forums. We know that the more engaged they are with you, the better they will retain.

Remember, if you can get that second gift, you increase a donor’s chances of retaining by anywhere from 35 to 60%. So if you’re not putting second gift strategies into place, we’ll be happy to partner with you to increase those all-important retention rates.

Similarly, be sure to get in touch if there are subjects you’d like to see in future issues of Straight Talk.

Happy reading!

Tax Changes in 2018 – Are You Ready?


The new tax bill signed into law in 2017 has raised many questions – and concerns – among non-profit leaders. Here is a brief recap of what’s changing for 2018:


Downward Chart

New tax brackets have gone down: Highest rate for married taxpayers filing jointly is now 37% on income of $600,000 and above, with similar changes for single taxpayers.

Upward Chart

Standard deduction was increased to $24,000 from $12,700 for Married taxpayers filing jointly, and personal exemptions were eliminated, with similar changes for single taxpayers.

$10000

State and Local (SALT) deduction limited to $10,000.

House

Mortgage interest deduction was limited for new mortgages taken after December 14, 2017. Home equity loan interest is no longer deductible.


The question for most nonprofits is: Because the standard deduction was increased, and the SALT deduction was limited, how many donors who itemized their charitable deductions in the past may no longer benefit from itemizing? Will donors decide to reduce their giving? If so, what impact will this have on revenue in the coming year and beyond?

As you can see in the chart below, donations from individuals and bequests have been on an upward trend for the past 30 years, with an average increase of 1.9 percent per year. The exception was a notable decline in 2008-2009 during the Great Recession. The only other obvious decline occurred during the 2000 dot-com bubble.

Data Giving Chart

There have been several tax law changes in that period, though none as directly related to the charitable deduction as the 2018 change to the standard deduction. From a historical perspective (see Major Tax Law Changes above), there doesn’t appear to be a direct correlation between tax law changes and charitable giving. Individual donors make their giving decisions due to a variety of factors. Our nation’s economic outlook plays a significant role, so the current low unemployment and high stock market valuations should indicate a positive outlook for fundraising revenue in 2018.

And we know that the single most significant factor in a donor’s giving to any individual non-profit is the donor’s connection and commitment to the mission.

Nevertheless, the tax law changes may have some impact on specific segments of the population. Anticipating those potential impacts will allow us to implement the best strategies to optimize revenue, particularly at the end of the calendar year, when tax concerns are most likely to be in the minds of donors.


Potential Impact by Donor Segment

Share of Tax

Donors with Adjusted Gross Income (AGI) of $100,000 or less:

Minimal impact. These donors, who likely make up the bulk of the direct response file for many organizations, itemize deductions less often. However, these donors will see a small increase in their paycheck withholding if they are W-2 employees, starting in February.


Donors with AGI in the range of $100,000 to $400,000:

Depending on circumstances, these donors, who are likely midlevel donors giving $500-$10,000 per year for most organizations, may experience noticeable changes in their tax returns. Most donors at this income range likely itemized returns in the recent past (see chart above, 77% of filers with AGI $100;-$200k, 93% of filers with AGI $200k-$500k), and are accustomed to the benefit of the charitable deduction. It stands to reason that these donors may consider lowering their giving amount by roughly the cost of loss of the deduction (equal to the amount of their 2017 marginal tax bracket of 28%-33%).

However, these donors are likely to also experience a significant reduction in their overall federal income tax bill, due to the changes in tax rates. In particular, the shift of tax rates at the income range of $165,001-$315,000 of 28-33%, down to 24%, should provide a sizeable increase in disposable income. Ignoring for a moment the complexities of the deduction changes and the Alternative Minimum Tax (AMT), this means a donor with an Adjusted Gross Income (AGI) of $315,000 will owe $14,987 less in federal taxes in 2018 than 2017.

Every donor in this AGI range will experience slightly different results, depending on their own personal circumstances. We expect that long term these changes should offset one another for this population, but that some of these donors will reduce their giving in 2018 due to the loss of the value of the charitable deduction.


Donors with an AGI greater than $400,000:

These donors likely make up the majority of non-profit Major Gift portfolios. Most of these donors will have deductions exceeding the value of the standard deduction, such that it will be worthwhile to itemize their charitable deductions. These donors will continue to benefit from that deduction, so we do not anticipate changes in tax law to have a significant impact on their giving behavior.


Other Considerations:

Donors on fixed income, specifically donors age 65+, are of particular concern due to their prevalence in many organization’s direct response files. As discussed, donors at lower income ranges are unlikely to experience a significant change. However, the value of the IRA Charitable Rollover provision as a giving tool has increased for donors age 70½ and older now that the charitable deduction is less available.

One trend we do expect to continue, or even accelerate, due to these changes, is the rise in the prevalence of the Donor Advised Fund (DAF). Because these funds allow donors to group their charitable deduction into tax years when it is most advantageous, we expect that more donors will use this tool in the future. The challenge non-profits will face will be in identifying the true donors behind the DAFs, and appropriately cultivating and stewarding those donors to cement their connection to the organizations’ mission.


Thinking Ahead: Insights for Your Year End Fundraising


THD BENCHMARKS

To stay ahead of potential revenue shortfalls, THD will proactively track and analyze year over year performance of total giving for all of our clients in the first and second quarter of 2018 analyzing key demographic indicators, including income ranges and age bands, to assess the potential impact of the new tax law changes.


If you’re interested in hearing how THD’s Tax Impact Benchmark can help you get a jumpstart on protecting your year-end revenue, please contact Eric Johnson.

Your Best Planned Gift Pipeline… is Your Database

Jess Hutchins
Director, Donor Advancement

Did you see the recent headline about the $4 million dollar bequest from a janitor? As a former Planned Gift Officer, I see these stories all the time. Where do these donors come from, and how can I find them? Those questions would often pop into my head.

I was delighted to hear just such a story from a client last week. A multi-million dollar bequest they knew nothing about – good for them!

Here’s what we learned when we dug into the donor’s history:

  • His first gift of $45 was in 2012 in response to a direct mail acquisition package
  • All subsequent gifts were made in response to direct mail appeals
  • Since coming onto the file, this donor made a total of 11 lifetime gifts
  • All his gifts were made in response to direct mailings
  • His largest gift ever was $1,000 (all other gifts between $25 and $54)
  • Last gift was in May, 2014 (we’ll get back to this later)

This gift – and the donor who made it – illustrates why a robust direct response program – and its database – is a critical pipeline for any nonprofit who wants to increase planned giving revenue (and who doesn’t?).

And yet, it’s an opportunity that is being missed, mishandled, and far too often, misunderstood.

“Many of our valued donors who have provided for Mercy Corps in their wills are acquired through donor acquisition direct mail campaigns, including a recent six-figure donation.”

David Rubin
Senior Director of Major Gifts
Mercy Corps

A different mindset
Planned giving professionals often come from different backgrounds than direct response marketers. We know that the organization we work for has a direct mail fundraising program and asks donors for annual gifts – but often we don’t really know who these donors are, how they behave, or that many of them are qualified to be pursued for planned gifts.

What it took me almost ten years to learn is that, in fact, this database is a virtual gold mine for PG prospecting.

Some organizations are going to have millions of records on their database, some will only have thousands. But the process of identifying, communicating, and cultivation remains the same. One of our most successful programs was with a highly respected international humanitarian organization with more than two million active donors.

We’ve included a brief case study of how THD was able to uncover nearly 8,000 PG prospects for cultivation and stewardship in one client’s database… and successfully generate dozens of planned gifts.

But identifying planned giving prospects is just the beginning. Without a clear plan to cultivate, steward, and communicate with them, you’re wasting your time and money.

Where intention and action meet
Most planned gifts are nothing more than good intentions… until the check is in the mail.

Yes there are some cases, such as irrevocable trusts, where you can count on the revenue. But since most gifts are bequests, they can be changed, altered, or withdrawn at any time.

Without continued cultivation and consistent communication, you can lose a percentage of planned gifts BEFORE they are received by your organization.

So reach out to them even if they have already indicated that you’re in their will. Make sure that your organization is top of mind. And continue to keep them active, engaged, and involved.

How to recognize when someone’s ready for a planned gift
There is one excellent marker for a potential planned gift, and it may not be what you expect.

Take another look at the behavior of the donor who left that multi-million dollar gift I mentioned earlier. He gave frequently and he was loyal, both of which matter. But there was one specific behavior that you want to look for.

He had stopped giving more than two years ago.

When loyal donors lapse, it might indicate a lifestyle change (such as moving to a fixed income) that prevents them from making annual gifts. At this point, whatever they give is going to be through their estate.

These are donors who love you and may want to make sizable gifts! But if you’re not watching closely (or having a PG partner do it for you) these prospects will make their gift to someone else.

When it comes to planned giving, matures rule
Beginning this year, the oldest baby boomers will turn 70. Approximately 72 percent of them give to charity – and the majority reside on a database, along with both older and younger donors who are excellent prospects for planned giving.

Show the love to your direct response donors and you will reap planned gifts for years and perhaps even decades to come.

To continue this conversation with our team at THD, click here.