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How Educating Your Donors Can Put You in a Financial Death Spiral

June 27th, 2013 Posted in Fundraising

The purpose of fundraising is to raise funds. I only bring it up because it’s not as obvious as it sounds. Many organizations believe they should use their fundraising program to educate donors. To tell them things they don’t know, but we’ve decided they ought to know.

Most fundraisers have a handful of offers that work well. If they’re on top of things, they’re always testing to find new offers to expand their portfolio. But they consistently use the winners, those offers their donors respond to best.

Educate-the-donors fundraisers have a different approach: They use fundraising offers whether they work or not, because the goal is to give donors a “rounded” picture of the work.

That means they trot out calls to action that most donors don’t understand and don’t respond to. Donor-educators believe it’s worth the price. Some claim it will pay off over the long term as non-responding donors have aha moments. Others just seem to want to be understood, despite the cost.

So let’s look at the cost.

Let’s say you have 100 current donors. You send them 12 fundraising appeals a year.

 

  • 10 of those have strong offers, with an average response of 8%
  • 2 are not as good, with an average response of 5%

 

Over the course of a year, that’s 90 responses. At an average gift of $40, you get $3,600. Since many donors give more than once, that nets out to 45 donors giving in the course of a year.

The other 55 lapse. You will never again hear from most of them. The following year, the 45 who didn’t lapse will give $1,600.

Let’s try that again, but apply educate-the-donor metrics:

 

  • 2 strong appeals, averaging 8%
  • 5 mediocre appeals, averaging 5%
  • 5 weak appeals, averaging 3%

 

That set of donors got a broad education of the organization’s activities. But at what cost?

 

  • Total giving: $2,240
  • 56 gifts
  • 28 donors giving

 

That’s a 37% drop in revenue and number of gifts. Which hurts. But here’s the big hurt: Instead of 55% of the donors lapsing, 72% of them lapse. The remaining 28 will give just $1,000 in the following year.

Unless they’re pulling off miracles in new donor acquisition, that organization is in a financial death-spiral.

An educate-the-donor fundraising program has extremely high costs. Short term, and even more so for the long term.

And here’s the really sad part: Poor response is mostly a product of low involvement. Those weak appeals you send out to teach — nobody even reads them! They fail at teaching just as miserably as they fail at raising funds. There’s no education, no aha moments, no deeper understanding. And you lose your job in the bargain.

If you don’t want that, use your fundraising program to raise funds. Donors are in charge of their own education. They don’t want — and seldom accept — your help.

Posted by  on 21 June 2013 at 07:22 in Fundraising |

 

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