The people who say this most often are board members. Uninformed board members. Timid board members. Board members who don’t understand that charitable organizations live or die by their donors, and that you and I must spend money to acquire, steward, upgrade and retain our donors.

The surest way to win board approval for your donor acquisition and stewardship budget is to know your long-term donor value.

Long-term donor value defined
Long-term donor value is simply the gross amount of income you expect to receive from a typical donor during a given timeframe. When you know how much a typical donor is worth to your organization long-term, then you know how much you should be willing to invest to acquire, steward and upgrade that donor.

For example, if you know that your typical donor will donate roughly $1,998 to your charity during the first five years following that donor’s first gift, you should be willing to spend a fair amount of money to acquire and cultivate that donor.

The key to winning board approval is knowing how quickly a typical donor will break even, and how much that donor will give you over time.

How to calculate your long-term donor value

1. Decide on the time period you want to measure following the donor’s first gift. The period could be ten years, five years, three years–any period you want to measure. For the purposes of this illustration, I’m using a period of five years.

2. Choose an acquisition channel. Long-term donor value varies greatly depending on how donors are acquired. So don’t mix up your results. Pick just one channel of acquisition. In this example, we want to know the long-term value of donors acquired through direct mail.

3. Run a query on your donor database to find all the donors who gave their first gift to your organization five years ago in response to a direct mail donor acquisition mailing.

4. Run a report on these donors to find every gift they have ever given to your charity, through every channel (direct mail, phone, monthly, special event, online, bequest and so on).

5. Include the following fields in your report for each gift:

* Donor ID
* Date of gift
* Size of gift

6. Export the results of the report

7. Create a spreadsheet

8. Down the left side of the first column (Column A), create the following rows:

1. Donors Acquired
2. Cumulative Gifts
3. Cumulative Revenue
4. Cumulative Average Gifts Per Donor
5. Average Annual Gift
6. Long-Term Donor Value

9. In the columns to the right, create one column for each year. Our spreadsheet will look like this: Column B is Year 1, Column C is Year 2, Column D is Year 3, Column E is Year 4, Column F is Year 5

10. Populate Column B with the results for Year 1, the year of acquisition. It will look like this:
1. Donors Acquired, 6,856
2. Cumulative Gifts, 10,912
3. Cumulative Revenue, $3,002,975
4. Cumulative Average Gifts Per Donor, 1.6
5. Average Annual Gift, $275
6. Long-Term Donor Value, $438

To see a sample of this spreadsheet, click here.

11. Let’s look at Column B.
Row 1 is the number of donors you acquired in Year 1: 6,856

Row 2 is the total number of gifts these donors gave you in Year 1. Gifts given is larger than donors acquired because some donors gave more than once in Year 1.

Row 3 is the total dollar value of all the donations these donors gave in Year 1, through all channels.

Row 4 is a formula field that divides the Cumulative Gifts (Row 2) by the number of Donors who gave this year (Row 1).

Row 5 is a formula field that divides total revenue received that year (Row 3) by the number of donors (Row 1).

Row 6 is a formula field that multiplies Average Annual Gift (Row 5) by Cumulative Average Gifts Per Donor (Row 4).

To see a sample of this spreadsheet, click here.

13. For the remaining four years, you populate the columns in the same way and end up with a spreadsheet that looks like this (each column is separated by a comma):

Year 1, Year 2, Year 3, Year 4, Year 5
Donors Acquired in Year 1, 6,856
Cumulative Gifts, $10,912, $19,227, $26,553, $33,286, $38,376
Cumulative Average Gifts Per Donor, 1.6, 2.8, 3.9, 4.9, 5.6
Cumulative Revenue, $3,002,975, $4,877,466, $7,051,333, $10,781,172, $13,695,731
Average Annual Gift, $275, $254, $266, $324, $357
Long-Term Donor Value, $438, $712, $1,029, $1,573, $1,998

As you can see, the long-term value of a donor acquired by direct mail is $438 in Year 1 and $1,998 in Year 5. Your results may differ.

To see a sample of this spreadsheet, click here.

Remember this for the long-term
The longer the period of time you choose to calculate long-term donor value, the more important it is that you include every gift ever given by every channel. A new donor acquired by direct mail will likely give you only direct mail gifts for the first few years. But a donor acquired by direct mail who stays with your charity for 20 years may eventually give monthly gifts, contribute to your capital campaign, give at a special event, participate in your walk-a-thon, give online, respond to an email appeal, join your Legacy League, and leave you a sizeable bequest when she passes away.

The key to understanding your long-term donor value is always knowing which donor acquisition channel you are referring to and which gifts you are referring to. In the above example, the long-term donor value calculation is based on all donors acquired by direct mail five years ago and includes all the gifts they ever gave during those five years. Naturally, if this calculation included only their direct mail gifts in that time period, the results would be different.

Now approach your board of directors well-armed
As you can see, when you know what your average long-term donor value is, in other words, when you know how much money a typical donor gives to your charity in a given timeframe, you can approach your board with hard, persuasive evidence for investing in donor acquisition, donor stewardship, monthly donor conversion, bequest marketing, gift upgrading, mid-level-donor stewardship and much more.

To see a sample of this spreadsheet, click here.

Need help with your direct mail program?
Download this book now.
Mail Superiority: How to Run a Profitable Annual Direct Mail Fundraising Program.

Need help?
If you need help raising money through the mail , give me a call at Harvey McKinnon Associates, at (416) 537-2904 ext. 212

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Average lifetime value, of course, is the gross income you receive from your typical donor during the time the donor is giving to your charity.

Donors to your charity give different amounts. Some give a lot. Some give a little. Some give often, some give seldom. Some give one gift. Others give multiple gifts. Some give for a year. Others give for decades. Some give through one channel (direct mail, for example). Others give through multiple channels (direct mail, online, phone, special events).

Your goal as a fundraiser is to figure out how long your average donor gives to your organization, and how much that donor gives during that “lifetime.” You should know what this number is for every fundraising channel, and for all channels combined.

If your average lifetime donor value is high, then your donors likely stay with you for a long time. You are doing a good job of donor retention.

If your average lifetime donor value is high, your average donor likely gives through more than one channel during her lifetime (direct mail, phone, online, face to face, for example). You are doing a good job of multi-channel fundraising.

If your average lifetime donor value is high, your typical donor likely increases the size of her gift over time. You are doing a good job of donor upgrading.

If your average lifetime donor value is high, you are likely moving your donors up the “donor pyramid,” from single annual gifts, to multiple monthly gifts, to larger gifts (major or capital), and, eventually, to a bequest when they pass away. You are doing a good job of donor engagement and stewardship.

If your average lifetime donor value is high, you are obviously watching your key donor and revenue metrics, such as net cost to acquire a donor, average gift, attrition rate, renewal rate, average revenue per year per donor, average number of gifts per year per donor, return on investment, cost to raise a dollar, and so on.

If your average lifetime donor value is low, or shrinking, you likely have one of the following problems:

• You are attracting the wrong kinds of donors (one-gift, low-dollar)
• You are over-soliciting, or under-soliciting
• You are treating your donors as paycheques, not people
• You are not trying to move your donors up the donor pyramid
• You are not segmenting your donors based on recency, frequency and monetary value, and are therefore not maximizing the value of each donor in your database

When your average donors stay with you for a long time, and increase their level of commitment over time, you are clearly creating and maintaining meaningful, mutually beneficial relationships with your supporters. You know that because your average donor lifetime value tells you so.

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Let’s assume you need to raise $1 million annually.

Step 1: List your giving methods.
Open a new spreadsheet. In Column A, list the methods you’ll use to raise funds from donors. Your column will look something like this:

INDIVIDUALS
Direct Mail
Email
Major Gifts
Monthly Giving
Online

INSTITUTIONS
Corporations
Foundations
Government

Step 2: Assign a percentage of your total revenue goal to each fundraising method.
Most charities raise 80% of their annual income from individuals and the remaining 20% from institutions. In Column B, assign a percentage to each method to show the percentage of your annual revenue goal you’ll raise from each method. Your column will look like this:

INDIVIDUALS: PORTION OF ANNUAL REVENUE GOAL, %
Direct Mail: 30%
Email: 10%
Major Gifts: 20%
Monthly Giving: 10%
Online: 10%
SUB-TOTAL: 80%

INSTITUTIONS: PORTION OF ANNUAL REVENUE GOAL, %
Corporations: 5%
Foundations: 10%
Government: 5%
SUB-TOTAL: 20%
GRAND TOTAL: 100%

Step 3: Calculate how much revenue will come from each fundraising method.
In Column C, multiply your annual revenue goal (in this case, $1 million), by the percentage revenue goal for each method. Your results will look like this:

INDIVIDUALS: PORTION OF ANNUAL REVENUE GOAL, $
Direct Mail: $300,000
Email: $100,000
Major Gifts: $200,000
Monthly Giving: $100,000
Online: $100,000
SUB-TOTAL: $800,000

INSTITUTIONS: PORTION OF ANNUAL REVENUE GOAL, $
Corporations: $50,000
Foundations: $100,000
Government: $50,000
SUB-TOTAL: $200,000
GRAND TOTAL: $1,000,000

Step 4: Calculate your average annual revenue per donor, per fundraising method.
Based on your experience with donors from each fundraising method, calculate in Column D how much each donor will donate each year, on average. Your column will look like this:

INDIVIDUALS: AVERAGE ANNUAL REVENUE PER DONOR TYPE
Direct Mail Donor: $80
Email Donor: $80
Major Donor: $10,000
Monthly Donor: $360 ($30/mo.)
Online Donor: $150

INSTITUTIONS: AVERAGE ANNUAL REVENUE PER DONOR TYPE
Corporation: $10,000
Foundation: $20,000
Government: $50,000

Step 5: Calculate how many donors you’ll need per fundraising method to reach your annual revenue goal.
In Column E, divide your revenue goal per method (Step 3) by the average annual revenue per donor type (Step 4). Your column will look like this:

INDIVIDUALS: DONORS NEEDED TO REACH $1 MILLION ANNUAL GOAL
Direct Mail Donors: 3,750
Email Donors: 1,250
Major Donors: 20
Monthly Donors: 278
Online Donors: 667
SUB-TOTAL: 5,964

INSTITUTIONS: DONORS NEEDED TO REACH $1 MILLION ANNUAL GOAL
Corporations: 5
Foundations: 5
Government: 1
SUB-TOTAL: 11
GRAND TOTAL: 5,975

Thus, to reach this hypothetical annual fundraising goal of $1 million, you’ll need to acquire 5,975 donors. Your results will vary, of course, depending on the fundraising methods you use, the percentage of your annual revenue goal you aim to generate with each method, and your average annual revenue per donor type. But the same principles apply.

Learn More
Attend my six-part tele-seminar, How to Run a Successful Direct Mail Fundraising Program. Taught over the phone six Saturdays in a row. My most popular seminar. Starts September 3, 2011. Early Bird Special expires August 27, 2011. Details.

Need help?
If you need help writing, designing, personalizing or mailing your fundraising appeals, or managing your direct mail fundraising program, give me a call at Harvey McKinnon Associates, at (416) 537-2904 ext. 212

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Everything looked fine except for one small mistake. Throughout the document, he referred to me as Neil Sharpe. “I, Neil Sharpe, being of sound mind and body, do declare this to be my last will and testament.”

Well, it certainly was my last will and testament using that lawyer, because my name is not Neil. The will he drafted was invalid. It would never have worked after my death, or Neil’s death, for that matter.

Your fundraising letter can flop just as badly with your donor if it sounds as though you don’t know her. The same letter mailed to every donor in your database can’t help but sound generic and impersonal. The same letter that thanks current donors for their support sounds silly when addressed to someone who hasn’t given a donation in three years.

So if you’re a direct mail fundraiser and you want to increase your response rates or gross revenue, invest in some simple letter personalization. Invest in simple letter changes that show your donor that you know him. The more personal you make your letter, the more likely your donor is to read it, believe it, and respond.

The easiest way to personalize your letter is to segment it into donor groups. There are five main donor groups: new donors, current donors, lapsed donors, monthly donors, giving-circle donors.

1. New donors
A new donor is someone who has just given her first gift, and has never given before. In your letter, acknowledge that the donor is new. Thank her for that first gift. Thank her for joining a group of like-minded people (your other donors). Welcome her.

2. Current donors
A current donor is someone who has given a donation during the last 12 months. So acknowledge that. You can refer to his “recent support,” or “continued support.’ Or you can even mention that you are grateful for his most recent gift, received on “such-and-such a date.”

3. Lapsed donors
A lapsed donor is someone who hasn’t given a gift during the last 12 months, but did give a gift in the 12 months before that, or the 12 months before that, or the 12 months before that. A donor who hasn’t given a gift in four or more years isn’t lapsed, but dormant.

Let a lapsed donor know that you miss her support. Don’t speak to her as a current donor. Don’t say “your recent gift is changing the world,” because it isn’t. It was spent long ago. The secret with lapsed donors is to say you miss them rather than their money. “I haven’t heard from you for a while” sounds more personal and friendly than, “Neil, you haven’t made a gift in over two years.”

4. Monthly donors
No need to tell you what a monthly donor is. But donors who give a gift every month are usually excluded from your regular appeal letters, so if you are writing them, asking for a special gift, let them know that you know that they already support your charity with an automatic gift every 30 days. Show your gratitude for their regular support. Acknowledge that you are asking them to make an extra, special gift above and beyond their regular monthly one.

5. Giving-circle donors
If you have a mid-level donor program or a giving circle for donors who donate above a given level (the President’s Circle for $1,000 donors, for example), then these donors will be especially offended if you don’t acknowledge their membership. So do. Enough said.

Dividing your letter into four segments is easy. Simply write the letter, then reserve a paragraph on page one where you speak to each donor segment individually (personalizing page one of your letter but leaving the following pages generic is the cheapest way to personalize). Then give your lettershop the text for your letter, show where the variable paragraph appears, and supply four paragraphs of text to go into that place in the letter, a different paragraph for each donor segment. Then give the lettershop your mailing list, and, for each donor in the list, name the donor segment the donor belongs to.

Personalization works. I once worked at a national charity. I turned their generic fundraising letters into personalized letters that spoke to each donor individually, and showed the donor that the organization knew who they were. My executive director, who signed all the letters, began receiving all sorts of mail and phone calls from donors, thanking him for his letters. As he travelled the country and met with donors, he heard the same refrain: “Thank you so much for your letters. They sound like they’re written just to me.”

Which isn’t surprising, since they were.

Learn More
Attend my six-part tele-seminar, How to Run a Successful Direct Mail Fundraising Program. Taught over the phone six Saturdays in a row. My most popular seminar. Starts September 3, 2011. Early Bird Special expires August 27, 2011. Details.

Need help?
If you need help writing, designing, personalizing or mailing your fundraising appeals, or managing your direct mail fundraising program, give me a call at Harvey McKinnon Associates, at (416) 537-2904 ext. 212

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You don’t just drop him into a pot of boiling water. He’ll jump out.

Instead, you place him in a pot of cool water, then warm the pot gradually to a boil. The frog grows accustomed to the rising temperature, until it’s too late. He boils.

Know how to go bankrupt as a charity?

Not by making one sudden radical change. That can be reversed.

No, to go bankrupt as a charity, all you have to do is continue doing what you’re doing right now, without watching for changes in your environment. Pay no attention to trends in your data, ignore industry benchmarks, and you’ll eventually reach boiling point and expire.

On the other hand, if you want to boost your net revenue each year, and continue to attract new donors, members and supporters to your cause, you must watch two things: watch for trends in your results, and watch for trends in the industry. Here are the main things you should be watching to make sure you’re not the frog in the pot.

1. Gross Donated Revenue by Channel
You raise funds using multiple channels. You need to know which channels raise the most revenue. And which ones raise the least. You can only discover this by measuring your gross donated income by channel each year, and comparing your current year results with previous years.

Look for trends. Which channels are growing? Which ones are declining? Then compare your results with other charities in general, and with other charities in your sector in particular.

Make sure you measure every channel. Some channels are growing in popularity (mobile, for example), while others are waning (fundraising banquets, for example).

Here are the major channels: bequests, direct mail, direct-response television, email, face-to-face (street & door-to-door canvassing), grant proposals, major gifts solicited in person, mobile, phone, social media, special events, website.

2. Average Gift by Channel
Some fundraising methods (channels) generate larger gifts than others. Which channel generates the largest average gift for your cause? Which channel brings in the lowest? Measure your average gift for each fundraising method you use and you’ll know. Track this number over time to discover which channels are growing more effective, and therefore need more of your resources.

3. Total Donors Acquired, by Channel
Which of your donor acquisition methods brings in the most donors, and which the least? Measure and find out. Look for trends over the past 10 years. Tweak your program accordingly. Then find out how you compare with other charities.

4. Attrition Rate by Channel
Some donor acquisition methods are notorious for high attrition rates. Direct mail donors acquired through lotteries, for example, tend to fall away (never donate again) at much higher rates than donors acquired through other methods. Which of your donor acquisition channels has the highest attrition rate? And which the lowest? You have options, you know. You can always drop a channel that has an unsustainably high attrition rate.

The key to growth is to watch for trends in your fundraising results, and to compare your organization with others in your sector to see how well you’re doing. That way you can be hot. Just not boiling hot.

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Watch a few episodes of either show and you’ll quickly discover the most common mistake wannabe entrepreneurs make: They don’t know their numbers.

They don’t know their costs. Or their break-even point. Or the size of their market. They don’t know the numbers that will persuade investors to fund their business venture. So they walk away without a penny.

In fundraising, you live or die by your numbers. You can’t hope to get your budget approved (or hold onto your job) unless you can demonstrate that you know your business. And your business is numbers.

Here are the six numbers you need to know cold.

1. Net Annual Growth in Active Donors
Every year you add donors through acquisition and lose donors through attrition. The difference between these two numbers is your net growth. It’s either positive or negative (or unchanged–unlikely). Don’t measure just the number of new donors you add annually. That number might look impressive, but it’s false. 80,232 donors acquired minus 81,439 donors lost isn’t growth.

2. Net Cost Per Donor Acquired
Figure out how much you need to spend to acquire a new donor for every channel you use (direct mail, face-to-face, online, direct response TV, special events, and so on). You need to know this number to win board approval for a donor acquisition budget. Donor acquisition costs money. The other number you need to know is Lifetime Donor Value by Channel (below).

3. Attrition Rate by Channel
Donors die, lose their jobs, move, retire, divorce and do other disagreeable things that make them stop supporting your cause. Although many of these things are beyond your control, you still need to know the number of donors you lose each year, expressed as a percentage of your active donors, and calculated for every channel you use to raise funds. When you know your attrition rate, you know how many new donors you must acquire each year just to stop your file from shrinking. Because it is shrinking.

4. Renewal Rate by Channel
What percentage of your donors who give a gift one year also give a gift the next year? That’s your renewal rate. Your renewal rate indicates how passionate your supporters are about your cause. It also indicates how successful your donor stewardship program is.

5. Second Gift Conversion Rate
Most people who make one gift to a charity never make another. If you have a low Second Gift Conversion Rate, you either are attracting donors who are unlikely to make a second gift, you are not treating your first-time donors properly, or you are not asking for that vital second gift soon enough (or all three).

6. Lifetime Donor Value by Channel
How much does one of your average donors contribute to your charity in her lifetime? That’s the number you need to know to justify your investment in donor acquisition and stewardship. Include in this number every gift ever given, including annual gifts, major gifts, special event gifts and bequests. Know this number for every channel you acquire donors by.

By the way, if you master these six numbers, and adjust your fundraising program accordingly, you’ll have the knowledge and expertise you need to negotiate another vital fundraising number: your salary.

Learn More:
Direct Mail Fundraising Arithmetic Demystified.
Master the 14 most common formulas that help you measure-and improve-your DM fundraising results.

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Prefix: Major donors tend to be university educated. Their prefix may give that away. Search for donors who have Dr., Hon., Judge or Prof. before their name. Also look for “Mr. & Mrs.” salutations, since most generous donors are married.

First Name: Search for first names that have been handed down through multiple generations, such as John Rockefeller, III. Names like this indicate old money.

Middle Name: Use this name when searching online directories, LinkedIn, Facebook and other sites for donors who have common names. People with common names (such as John Smith) sometimes use their full name (John Phillip Smith, for example) or their middle initial (John P. Smith) to distinguish themselves from other people with the same first and last name.

Last Name: Does the last name sound familiar? Is it the name of a local leader, business tycoon or celebrity (author, artist, athlete)? Also search your database for other donors with the same last name living at the same address. Are these two donors married to each other? Check the other donor’s giving history to see if the donor gives less, the same or more than your current donor. You may find that the spouse is the more generous donor. Add the two totals to see how much the couple gives annually.

Suffix: Look for suffixes that indicate a higher level of income:

• post-graduate degree, such as MBA, Ph.D
• professional designation, such as CPA, MD
• senior job title, such as CEO, president, vice-president

Salutation: If your donor is actually a couple that gives as a couple (whom you address as “Dear Alan & Ruth,” for example), Google them as a couple. They may have donated large gifts to other causes as a couple.

Check the change log or notes field in your database to see if donors with single name salutations were once listed as a couple, and vice versa. Changes in marital status usually affect a person’s ability to give (either improving it or hindering it).

The best person to approach for a major gift is someone who already supports your charity. Sometimes those donors are hidden in plain sight in your donor database. Here’s how to find them.

C/O Names: Exercise extra caution with donors whose mail is care of someone else (“Alan Sharpe C/O Samuel Trudel,” for example), particularly if the C/O person has the letters “POA” (Power of Attorney) after their name. Donors who receive their mail care of someone else at the same address are likely infirm and unable to make prudent decisions about their finances.

Address: Look for donors who live in upper-income neighbourhoods. If in doubt, view the donor’s house using Google Street View. Look for high-end homes with multiple garages (while remembering that most generous people live in modest homes).

Multiple Addresses: Search for donors who have more than one address on their record. Look for seasonal addresses, such as a cottage in Muskoka or a second house in The Hamptons.

Institution Name: Many major donors are businesses owners who give through their businesses to save taxes. Search to see if these corporate donors are also in your database as individuals. Google the company name and visit the company website to learn more about the owner’s net worth.

Some high-net-worth individuals donate their largest gifts through their family foundation and their smaller gifts as individuals. Search your database for foundations, then look for donors in your database whose last names match the names on the family foundation board of directors. You may find, for example, that you receive donations from “The Bill and Belinda Baxter Foundation” as well as from “Bill and Belinda Baxter” themselves. Google the foundation name and visit the foundation website (the larger family foundations have websites) to learn more about the net worth of the individual(s) who controls the family foundation.

Phone Number: Does the phone number include an extension number? Perform a reverse lookup on the phone number to discover the name of the company. Google the company name and visit the company website to learn more about the donor’s role there. Is she the owner or a senior executive?

Email Address: Look for domain names that indicate higher income, such as jsmith@ibm.com (possible executive at a Fortune 500 firm) and john.carruthers@carrutherscontracting.ca (owner of a large, local general contracting business). Visit the domain name and search within the site for the donor by name, using the “Search within site” feature on your Google Toolbar.

Google the donor’s email address. You may just find that it appears on a listing of another charity’s board of directors, or on online discussion groups that give you insight into the donor’s interests.

Date of First Gift: Search for donors who gave their first gift a long time ago and have given faithfully ever since.

Number of Lifetime Gifts: Search for donors who have given more gifts in their lifetime than your average, even if the total amount, monetarily, is not unusually high.

Value of Lifetime Gifts: Look for donors who have given more money in their lifetime than your average donor.

Largest Gift: Search for donors who have already given a gift that meets or exceeds your threshold for a major gift.

Cumulative Value of Annual Giving: Some major donors give you a major gift each year, but in installments. You’ll miss these donors if you search only for large single gifts. Search instead for donors whose cumulative annual giving meets or exceeds your threshold for a major gift. For example, if your threshold for a major gift is $10,000, look for donors who have given multiple gifts in one year that totaled $10,000 or more.

Date of Last Gift: The best prospects for major gifts gave you a gift within the last 12 months. If they have not supported you for years, they have a reason. You’ll need to discover it, and remedy it, before you can expect to receive another gift.

Learn more
Uncovering Local Millionaires.
Learn how to recognize, find and approach undiscovered millionaires in your city with this three-part seminar recording.

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2. Make a distinction between members and non-members
If you are a member-based charity, speak to your members as fellow labourers, acknowledging in subtle ways in each letter that you recognize them as members of your association. Speak to non-members as supporters of your charity, and as partners in your work.

3. Make a distinction between donors and non-donors
Acknowledge active donors, thanking them in the body of each letter for their recent donations, mentioning their last gift amount and date received where appropriate, demonstrating that you value and appreciate them in particular. Treat non-donors as friends, encouraging them to donate. Avoid language that implies they currently support your organization.

4. Make a distinction between active donors, lapsed donors and former donors
Monitor your house file to see what percentage of donors renew their support every 12 months-and what percentage doesn’t. Encourage active donors to renew their support. Try even harder, through special lapsed-donor-activation-letters, to recover donors who lapse each year. Treat long-lapsed donors as non-donors who must be won all over again to your mission.

5. Make a distinction between annual donors and monthly donors
Donors who support you through pre-authorized monthly giving are one of your most valuable assets. Don’t take them for granted.

6. Make a distinction between major donors and non-major donors
Don’t ask donors to give you a gift of $15, $30 or $75 when they have demonstrated their capacity to give major gifts through the mail. Set a threshold for what you consider a major direct-mail gift, and mail these donors a personalized letter or reply device that asks for a major gift that is within their means.

7. Balance asking with informing
Do not make every direct mail piece you mail an ask. And don’t make every package you mail informational only. Instead, strike a balance between asking and informing.

8. Make your appeals personal and donor-centred
Every letter should be addressed to a person by name with a personalized salutation, or, if the name on file is a couple, to a couple by name. No letters should be mailed without a salutation, or with an impersonal salutation (such as “Dear Friend”). Your letters should look like letters, and feature a separate reply device.

Learn more
Raise More Money and Retain More Donors by Reducing Your Returned Mail

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1. Outdated prefixes
Prefixes are the letters placed in front of a person’s name. The most common prefixes are Mr, Mr & Mrs, and Ms. Most donor management software has a prefix field. When you pull a mailing list, the software pulls the prefix field and adds it to the name fields (name_first, name_middle, name_last), so that the first line of your address looks like this: Mr & Mrs Bob Smith.

The most common error with prefixes is forgetting to change the prefix when one of the spouses dies. For example, you have a couple that supports your organization. They are Bob and Ruth Smith. You have one record for this couple. Their prefix is Mr & Mrs. Their address line is Mr & Mrs Bob Smith. Bob dies. You change the first_name field on the donor record from Bob & Ruth to just Ruth but forget to change the prefix field. Now the address line is Mr & Mrs Ruth Smith when it should be Mrs Ruth Smith.

2. C/O names in the Address 1 field
Sometimes you need to mail your donors care-of another person, such as a power of attorney or family member. If your donor management software is typical, it gives you no place to record the care-of person. So you put that information in the Address 1 field, like this:

Bob Smith
C/O Bruce Carruthers
123 Any Street

The problem is, the lettershop that checks your mailing list for address accuracy (using postal-service-approved software)will likely reject these records because the Address 1 field does not contain a valid address.

The solution is to create a care-of field in your database. If that’s not possible, pull your mailing list and clean it up by creating a Name 2 field. Cut the care-of information from the Address 1 field and paste it into this field. Paste the address information that was in Address 2 into Address 1 (which is now empty).

3. One-character salutationsThe salutation field contains the title you address your donors by. On my donor record, the salutation is Alan. Letters addressed to me say: “Dear Alan.” Some donor management software creates salutations automatically by copying the contents of the first_name field. If my first name is Alan, the system automatically puts Alan into the salutation field. If the first_name on my record is Alan & Ruth, the system automatically puts Alan & Ruth into the salutation field.

The most common error with salutations is single character salutations, created when the donor only supplies a first initial, not a first name (on the donor’s cheque, for example). The system automatically puts this single character into the salutation field. You then address your donor as, “Dear B” or “Dear F.” If you cannot find a way to automatically prevent this within your donor management software, search the system for single character salutations and replace them with a formal salutation, such as “Mr Smith” (assuming you know the donor’s gender), or a generic salutation, such as “Friend.”

4. Foreign addresses not flagged as such
Your donor management software should have a country field for each donor record. The easiest way to use this field is to populate it for all donors that live outside your country (the minority) and to leave it blank for all donors who live within your country (the majority). This way, you can easily find all overseas donors by searching for all records that have any data in the country field. Conversely, you can exclude all overseas donors from your domestic mailings by excluding records that have any data in the country field.

The most common mistake with foreign records is an empty country field. This means foreign addresses are included in domestic mailings by mistake. To find these records, search your database for records that have nothing in the country field and have the wrong number of characters in the postal code field. For example, in Canada, we have seven characters in our postal codes. We find foreign addresses by searching for records that have fewer than seven characters (five-character zip codes, for example)or more than seven characters, (nine-character zip codes, for example.

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The secret to making your impersonal fundraising letter personal is personalization. Which is hard when you don’t know your direct mail donor personally. So here are some ways to make an otherwise form letter friendlier when all you know about your donor is their name, address and giving history.

1. Address your donor by name. Only strangers call me “friend.” Friends call me Alan, or Al, or Canuck. I’m more likely to pay attention to your letter when it begins, “Dear Alan.”

2. Avoid formality. While we’re on the subject of appeal letter salutations, use a personal salutation rather than a formal one. Call me Alan and not Mr. Alan Sharpe. If you refer to me by my full name, I’ll think I’m reading a court summons.

3. Thank your donor for their last gift. As Mal Warwick says, every fundraising letter should thank your donor for her last gift. So say something like, “Thank you for your recent donation.” Let your donor know that you know she is a donor.

4. Name the gift month, not the date. Your fundraising software will tell you that Jack Stutzman gave you a gift on 05/23/2010. You shouldn’t. Instead, thank Jack by the month. say something like, “Thank you for your recent gift, which you sent us this past May.”

5. Name their region, not their city. Referring to the city where your donor lives is easy. It’s in your database. You know that. Your donor knows that. So instead of saying, “Living in Saskatoon as you do, I imagine . . .” say “Living on the Prairies as you do, I imagine . . .”

6. Refer to your last letter. A quick way to establish rapport with a direct mail donor is to mention something you said in a recent letter. For example, “When I last wrote to you, back in April, you’ll remember that I described the great need for affordable retrovirals to combat AIDS in Lesotho.”

Learn More

Handbook Number 23
53 Creative Ways to Personalize Your Fundraising Letters.
Build rapport, sound conversational, show interest and strengthen relationships with donors.

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See more definitions at the Glossary of Direct Mail Fundraising

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Perhaps they moved and left no forwarding address. Perhaps they married and changed their name without consulting you. You don’t know. And what you don’t know will hurt you. The problem with returned mail, or, as it’s known in the trade, Undeliverable-As-Addressed mail, is not that it costs you money in wasted materials and postage. Your problem is not that you lose $1.75 with every bounced envelope ($1 for the letter & postage and $0.75 for the return postage). The problem with returned mail is that each piece represents a loss of around $481 to your organization. That’s the cost of losing a typical donor.

Do the math for yourself the next time you run a direct mail fundraising campaign. Count the number of pieces of mail that come back to you as undeliverable. Then look up each donor in your database. Discover how often they gave and how much they gave. Use the add button on your calculator. Breathe deeply.

A charity I know did just that. They analyzed 151 pieces of returned mail from a recent campaign (one that generated over 600 undeliverable mail pieces). Here’s what they discovered: 

• Total number of gifts received from these donors in their combined lifetimes: 1,100
• Total gross revenue received from these donors in their combined lifetimes: $72,709.10
• Shortest amount of time a donor had been with them: 2 months
• Longest amount of time a donor had been with them: 14 years
• Smallest number of lifetime gifts received from a donor: 1
• Largest number of lifetime gifts received from a donor: 67
• Smallest gift received from a donor: $5
• Largest gift received from a donor: $4,000
• Average lifetime value of each donor lost: $481.51

No wonder Elvis Presley was so heartbroken when his letter came back RETURN TO SENDER.

If you hate the thought of throwing away $481 every time you throw away a piece of returned mail, drop me a line. I want to discover what others in the non-profit sector are doing to reduce their volume of returned mail. Tell me what your organization does to keep a clean database, eliminate duplicates, keep addresses accurate, stay in touch with donors who move, and locate those that leave no forwarding address. I’ll include your suggestions in my upcoming handbook on the topic of lowering costs and increasing revenue by reducing your volume of returned mail. And I’ll send you a complimentary copy. By email, of course.

You might be interested in these…

Direct Mail Fundraising ROI Calculator Automatically calculate the 10 most vital formulas for measuring the return on investment (ROI) of your direct mail, with this special calculator.

Mail Superiority Learn the proven, step-by-step process for raising funds and friends cost effectively, year after year.

Handbook Number 27 Raise More Money and Retain More Donors by Reducing Your Returned Mail. Tips, tactics and industry best practices for reducing your volume of “undeliverable” and “bad addresses”.

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1. Give the lettershop irrelevant data
Why supply only the donor number, campaign keycode, name, address, city, province and postal code (or state and zip) when you can instead add all sorts of extraneous data and personal information to each record? Why not tell the lettershop the shoe size of each donor? And the name of their pet? You’ll compromise donor confidentiality, increase the chances for mistakes, boost your volume of nixies and undeliverable mail, and compel your lettershop to order Prozac by the case.

2. Supply your date file with no field headings
The first record in your data file should look just like a donor record except it contains the name of each field instead of the data. But that’s so last Millenium. So add some colour to your lettershop’s vocabulary by submitting your data file with no field names. Let the folks in data figure out for themselves if the number in the field that looks like this <<$100.00>> is the donor’s last gift or the ask amount or the price of a Grande Latte No Whip at the Starbucks in Trafalgar Square.

3. Give your data file fields and your mail merge fields different names
If you have a field in your data file called <<first_name>> and you want that field to appear in your letter as variable data, call it <<name>> or <<F_nme>> or something more exotic.

4. Give your data file a no-name name
Just before you upload your data file to your lettershop, pretend that they were sincere when they said, “We treat you like you are our only customer.” Name your data file “mailing_list.csv.” Or just “list.csv.” They will know it is from you.

I know these methods work brilliantly at confusing lettershops because I have employed the first three to good effect. Only once each, mind you. There must be other ways to bungle a mailing. Let me know your favourites.

You might be interested in…

Breakthrough Fundraising Letters. How to write direct mail donation request appeals that attract more donors, raise more money, and build stronger relationships. Available in paperback and as an e-book.

Mail Superiority Learn the proven, step-by-step process for raising funds and friends cost effectively, year after year.

Handbook Number 16 Direct Mail Fundraising Arithmetic Demystified. Master 14 common formulas that help you measure—and improve—your DM fundraising results.

Handbook Number 27 Raise More Money and Retain More Donors by Reducing Your Returned Mail. Raise More Money and Retain More Donors by Reducing Your Returned Mail. Tips, tactics and industry best practices for reducing your volume of “undeliverable” and “bad addresses”.

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“No matter how hard you work at this, some mail will be returned as undeliverable (what is called a “nixie”). Don’t take this as the final word. The postal sorting equipment can make mistakes and individuals can temporarily stop their mail. First, do everything you can to get the correct address. Get on the phone. Send an e-mail. Check the Internet. Second, send out the returned mailing again to the same address but put it in a new envelope and hand-write the address (manual sortation). Finally, don’t mark the donor’s record undeliverable. Send at least two more mailings and, if those are returned, then mark the record “undeliverable” or “bad address.” It’s not just in baseball that it takes three strikes before you’re out.”

This proves how important it is for you to capture phone numbers and email addreses for all your donors. Some donors move without changing their phone numbers. And most donors keep the same email address regardless of how often the move. To reduce the amount of undeliverable mail (nixies) you receive, do this in as many places as possible, including:

• on the direct mail reply device that donors mail with their gift
• on your online donation page
• on your newsletter subscription form, both online and offline
• in the thank-you letter you mail after the first gift

Can you think of any other times and ways to solicit donor phone numbers? Make a comment.

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Seminar-on-Demand 008-3 How to Attract Donors to Your Website Presenter: Alan Sharpe. Learn how to optimize your website to rank higher on the search engines, take advantage of You Tube, My Space and other social networking sites to drive potential donors to your website, and avoid common mistakes that penalize your search engine rankings. 56 pages of tips, best-practices and full-colour samples of effective websites. 90-minute recording of a live seminar. Delivered by mail on a CD.

Mail Superiority. Learn the proven, step-by-step process for raising funds and friends cost effectively, year after year.

And…

Handbook Number 24 75 Easy Ways to Build Your Opt-in Email List. Acquire new subscribers, donors, members and advocates with these tested strategies.

Handbook Number 27 Raise More Money and Retain More Donors by Reducing Your Returned Mail. Tips, tactics and industry best practices for reducing your volume of “undeliverable” and “bad addresses”.

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You’d be upset. My actions would cost you plenty. You’d waste money mailing these 1,200 donors, since all of your letters would come back to you. You’d lose money because you’d pay the post office roughly 75 cents a piece to have those packages returned to you. You’d lose future revenue from these donors, including any chance of a major gift or bequest. And you’d suddenly increase your costs, since, to be prudent, you’d have to spend money to acquire new donors to replace the ones you lost.

Worst of all, you’d suffer these losses not because of any error on your part, and not because of any change in your donor’s affection for your organization, but simply because the address you had on file no longer matched the address of your donor.

This scenario is hypothetical but it isn’t fiction. I just finished a direct mail fundraising mailing for a national charity. We mailed 43,000 pieces to recent donors. Twelve-hundred of them were undeliverable because the donors had moved and not told us. Bud did we lose money? No. Because we used the National Change Of Address (NCOA) service provided by our post office.

The post office keeps a file of people who have moved and given the post office their new mailing address. The post office lets licensed vendors (such as your lettershop) compare their mailing lists against this NCOA list before mailing. If a name in the mailing list matches one in the NCOA file (in other words, if the NCOA files shows that one of your donors has moved in the last six months), the post office supplies the new address so you can update your mailing list BEFORE YOU MAIL.

Because we used the NCOA service before we mailed our campaign, the 1,200 pieces that would otherwise have been returned to us on our nickel instead reached our donors at their new addresses. Plus, we received a file from the lettershop listing all of these recently-moved donors. We are updating our database (not by hand, I might ad) with the new addresses of individuals, families and businesses in our donor database.

Over 40 million Americans change their address annually. In Canada, 1.2 million households file a Change of Address Notification form with Canada Post each year. The majority of your donors will move and forget to notify you of their new address. I am seeing this first-hand in my mailbox these days. I moved to a new city three months ago. I notified the post office but didn’t notify any of the charities I support (not yet).

Every week I have received a fundraising letter from one of my charities. The majority of them have arrived at my new address with the Canada Post yellow mail forwarding label slapped across my old address. A few have arrived at my new address bearing my new address. These organization know I have moved. The others do not. Unless I tell those other organizations I have moved, and unless they use the NCOA service soon, I will vanish from their donor file in a few months.

Handbook Number 19
Mailing Lists: Where and How to Discover the Best Ones for Your Next Direct Mail Appeal.
Acquire new donors and members by mailing to people most likely to respond to your appeals.

And…

Handbook Number 16
Direct Mail Fundraising Arithmetic Demystified.
Master 14 common formulas that help you measure—and improve—your DM fundraising results.

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But your data is only useful if you can make sense of it. And many non-profit organizations can’t. For example, I regularly work charities who cannot quickly or easily tell me how many of their donors are individuals, how many are businesses and how many are government agencies. Or they can’t tell me (easily and quickly) how many of their individual donors are also volunteers, or how many of their service club donors have not made a gift in 12 months.

These charities are not exclusive enough in their data entry. They have a field in their fundraising software called “Donor Type” or “Record Type,” and they type into this field whatever they think best helps them identify the donor.

For example, in this Type field they might enter the following codes:

I = Individual
B = Business
S = Service Club
M = Board Member
T = Teacher
V = Volunteer

You can see the problem, can’t you? An individual might also be a board member. A teacher might also be a volunteer. A director of development will never be able to count how many individual donors the charity has by counting all the records flagged “I” in the Type field because these categories are not mutually exclusive. Teachers, board members and volunteers are all individuals.

The type field in your donor management system needs to meet two criteria.

1. It must be a “must enter” field. It must not be allowed to remain blank.

2. It must contain mutually exclusive categories, such as the following:

B = Business
C = Church
F = Foundation
G = Government
I = Individual
S = Service Club

If you want to add supplementary information to each record, create a non-mutually exclusive field. These fields often contain what are called Flags, Sort Codes and Promotion Codes. A Flag Code might contain the letter V for volunteer, or BM for board member.

Thus, a record for Jane Smith might have the letter I in the Type field (she is an individual, not a business or a church), and the letters AL, MD and BM in the Flags field, perhaps separated by commas (thus: AL, MD, BM), since Jane is also an Alumni, a Major Donor and a Board Member.

Good fundraising software lets you sort on any of these categories. You can find out how many Individuals are also Volunteers, for example. When your data entry practices are sound, you can define multiple relationships for each donor record. You have a wealth of possibilities at your fingertips, literally.

Mail Superiority. Learn the proven, step-by-step process for raising funds and friends cost effectively, year after year.

And don’t miss…

Handbook Number 16 Direct Mail Fundraising Arithmetic Demystified. Master 14 common formulas that help you measure—and improve—your DM fundraising results.

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Method #1: Build Your List Yourself
Host a special event, offer a free newsletter, ask your members to recruit new members, put a sign-up form on your website. In other words, use every method you can to get the names and addresses of potential donors.

Advantages:
1. Every name you gain is yours to keep and use as many times as you want.
2. You control the quality of the names you acquire.
3. You build a highly targeted list of people who want to receive your fundraising letters and newsletters.

Disadvantages:
1. Time consuming
2. Labor intensive

Method #2: Rent A List From Someone Else
The mailing list you want to build might already exist. Simply call the owner of the list and ask if you can rent it. There are tens of thousands of lists available. If you want to reach Jewish donors, for example, you can mail to a list of Compassionate Jewish Contributors (192,377 names), Hi-Dollar Jewish Women Donors (109,527 names), Jewish Book Buyers (14,289 names) and Committed Jewish Educators (4,877 names).

You can also borrow names from another organization in exchange for them borrowing names from your list. This is called a list exchange.

Advantages:
1. You can reach tens of thousands, even hundreds of thousands, of potential donors immediately.
2. Someone else does all the work of collecting the names and addresses.

Disadvantages:
1. Renting names costs roughly $100 for every 1,000 names.
2. You can only mail to these lists once. To mail them again, you must rent the names again.
3. Only the names who respond to your mailing are yours to keep.

Method #3: Use A List Broker To Create A Custom List
A list broker is a specialist who helps not-for-profit organizations rent lists from list owners (usually businesses or other not-for-profits). Their services include research, selection and recommendation of lists. Look in your local Yellow Pages under “Mailing Lists and Services.” List brokers can create a custom list for you (usually by combining other lists), one based on your needs and campaign goals.

Advantages:
1. List brokers save you time and money because they know the lists that are available. They can recommend the lists that will likely work best for you.
2. You can reach tens of thousands, even hundreds of thousands, of potential donors immediately.
3. Someone else does all the work of collecting the names and addresses.

Disadvantages:
1. Renting names costs roughly $100 for every 1,000 names.
2. You can only mail to these lists once. To mail them again, you must rent the names again.
3. Only the names who respond to your mailing are yours to keep. 

You might be interested in these…

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Handbook Number 7 18 Places to Find New Donors Using Fundraising Letters. The professional fundraiser’s guide to creative and cost-effective donor acquisition.

Handbook Number 11 Attract New Donors and Members with a Magnetic Direct Mail Donor Acquisition Package. Discover over 75 tips, insider secrets and proven tactics by analyzing a superb donor acquisition package from a national charity.

The Fundraisers’ Book of Quotations. Inspire and motivate your donors with over 2,700 quips, proverbs, aphorisms, witticisms, zingers, epigrams, quotes, one-liners and words of wisdom from actors, writers, activists, philanthropists, artists, scientists, philosophers, poets, humorists, novelists, inventors, journalists, kings, queens, magnates, presidents, dissidents, preachers, paupers and others, famous and infamous, living and dead.

Breakthrough Fundraising Letters. How to write direct mail donation request appeals that attract more donors, raise more money, and build stronger relationships. Available in paperback and as an e-book.

Handbook Number 23 53 Creative Ways to Personalize Your Fundraising Letters. Build rapport, sound conversational, show interest and strengthen relationships with donors.

Handbook Number 20 Think Like Your Donors to Raise More Funds with Direct Mail Letters. Discover the secrets to building long-term, profitable relationships with your donors.

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When I conduct a comprehensive audit of an organization’s direct mail fundraising program, I invariably discover that they have all sorts of hard numbers about their response rates, average gifts and cost to raise a dollar. But they lack data on donor attrition rates, donor renewal rates and first-time donor conversion rates. Big mistake.

You need to look beyond your dollars and see the donors who gave them. Without donors you won’t have any dollars. My apologies to my readers in the UK, Europe, Asia and Africa, since you do not use the dollar as your currency. But the alliteration I’m looking for (donors and dollars) only works on this side of the pond, so please bear with me.

You could be happy today with your direct mail program if it generated an average gift of $45 but never realize that over half of your donors give you just one gift and never give again. See where I’m headed here?

Your average gift doesn’t tell you everything you need to know about your health any more than your response rate tells you everything.

In the direct mail fundraising business, your goal is to acquire and retain donors. Emphasis on the word retain. So some of the numbers you need to be watching have everything to do with donors and nothing to do with dollars.

Here are three metrics you should be following:

First-time donor conversion rate: The percentage of first-time donors who give a second gift.

Renewal rate: Percentage of donors in any given year who gave last year and this year as well (they “renewed” their gift this year, in other words).

Attrition rate: Percentage of donors who stop giving each year.

Yes, a healthy direct mail fundraising program generates a respectable net return on investment and keeps costs at a reasonable level. But it also acquires donors at a pace that exceeds the donor attrition rate. And it retains the donors it acquires, for as long as possible. So watch your donors as well as your dollars. You’ll stay out of trouble.

By the way, if you need a professional direct mail fundraising consultant to audit your direct mail fundraising program, give me a call. That’s 1 877 742-7732.

You might be interested in…

Direct Mail Fundraising ROI Calculator. Automatically calculate the 10 most vital formulas for measuring the return on investment (ROI) of your direct mail, with this special calculator.

Mail Superiority. Learn the proven, step-by-step process for raising funds and friends cost effectively, year after year.

Handbook Number 16 Direct Mail Fundraising Arithmetic Demystified. Master 14 common formulas that help you measure—and improve—your DM fundraising results.

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In every donor database are donors or members who are either unresponsive or less responsive than others in your file. These donors should receive fewer mailings than your most responsive donors.

Reducing the number of letters you drop in the mail immediately lowers your costs, thereby boosting your net revenue.

So how do you decide who to mail? You segment your database. The three most common ways of segmenting donors are Recency, Frequency and Monetary Value (RFM for short).

Your most valuable donors gave recently, give frequently and give much. Your least valuable (and most costly) donors have not given recently, give infrequently and give little.

When you segment your database by Recency, Frequency and Monetary Value, you quickly discover which segments are most responsive to your appeals and which segments generate the most revenue.

Donors who gave recently, give frequently and give much will respond in larger numbers to your direct mail appeal letters than those donor segments who gave a long time ago, give infrequently and give small donations.

Your results show you the people that you should mail less often. You do not have to mail every appeal and every newsletter to supporters who are unresponsive. Instead, you can drop these folks from you general mailings and perhaps mail them just twice a year.

Send them a renewal mailing or membership renewal mailing during the year, and ask them for another gift at Christmas.

Take the money you save and either bank it or spend it on your most-responsive donors. For example, in your next general mailing, affix first-class postage stamps to all envelopes going to donors who give you $500 or more each year.

Or spend the money on personalizing the reply device for these donors, asking for an amount that matches their giving history.

Your volunteer Board of Directors may wonder how you can possibly make more money by mailing fewer appeals to fewer people, but they will be delighted when you do.

If you need help writing and designing direct mail fundraising packages that appeal to each of your donor segments, give us a call at 1 877 742-7732.

You might be interested in…

Over 130 Sample Fundraising Letters. International, national and local charities share examples of their direct mail fundraising expertise.

Direct Mail Fundraising ROI Calculator. Automatically calculate the 10 most vital formulas for measuring the return on investment (ROI) of your direct mail, with this special calculator.

Handbook Number 16 Direct Mail Fundraising Arithmetic Demystified. Master 14 common formulas that help you measure—and improve—your DM fundraising results.

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