The issue of personalization arises in virtually every conversation pertaining to donor communications. Personalized communication can result in revenue increases ranging from sublime to off-the-charts.
But personalization takes a lot of time and effort, and not all organizations have the bandwidth.
If you can't personalize communications to everyone (which is obviously best), there are ways of segmenting out groups to focus on. Here are a few common ideas:
- As many as time allows
- All major donors ("major" as defined by the nonprofit)
- All repeat donors
- All first-time donors
- All donors giving above our average gift amount
- As much as our budget allows
A new fundraiser would be hard-pressed to know which direction to take based upon the above options, especially with limited resources. And these segments rarely tell the whole story.
So, how should they decide who receives the personal touch?
Here are two possible methods:
1) Research-Backed Percentages
The 2014 report from the Fundraising Effectiveness Project - jointly sponsored by The Urban Institute and AFP - reveals two criteria that could have major impact, if you can successfully segment your data. The two segments or criteria are:
- 12% of the donors provide 88% of the funding
- 3% of the donors provide 76% of the funding
So depending on your resources, one could easily argue for performing totally personalized communications on either that specific 3% or 12% and thereby impacting 76% or 88% of your funding.
If such personalized efforts are not already in place, the resulting impact could be dramatic!
Either percentage is an excellent starting benchmark for nonprofits looking for a specific game plan to put into use.
2) Lifetime Value vs. Cost of Personalization
This method requires even more than just decent database reporting and segmenting. Bringing costs and lifetime value into consideration usually requires more in depth analysis involving accounting related data.
This can be well worth the additional effort since both the cost and revenue side of the budget will be expanded. In fact, you may be quite pleasantly surprised by the increases in fundraising revenue!
Comparing the cost of personalization over the average lifetime of any donor involves not just the communication expenditures such as printing/mailing costs or electronic fees, but should also include labor costs.
If they are tracked for each and every communication effort, averages can begin to be formed over time. Compiling those averages as they apply to various donor types or groupings should provide the cost side of the equation.
Lifetime value for any donor is the total dollars received while the donor remains active in the database. Thereby creating this equation:
Lifetime Value > Personalization Costs = Success
Applying this cost/benefit equation to each subset of donors should allow you to know exactly how far in the database such personalization efforts should go.
Perhaps Personalization Should Apply to Every Donor?
Certainly, some aspect of personalized communications can and should be the case for every donor. The better your systems for database management and communications, the easier this effort can be.
The two methods above can help provide the justification for your donor personalization efforts at your nonprofit. Hopefully, one or both, can lead to usage of this key factor in donor retention and fundraising revenue growth over time!
The preceding is a guest post by Jay Love, Co-Founder and CEO of Bloomerang, which helps nonprofit organizations to reach, engage, and retain the advocates they depend on to achieve their vision for a better world. A veteran of the nonprofit technology sector, Jay is a founding member of the AFP Business Member Council and chair of the AFP Ethics Committee.