Start by listening

Almost a decade ago, my colleagues at Good Works and I conducted the first-ever quantitative research study of direct mail donors in Canada. We surveyed 500 Canadian direct mail donors who had made two or more gifts to the same charity within the previous three years of the study. Our study deliberately looked at everyday donors. We eliminated donors who we knew were giving monthly, those who had made gifts of $500 or more to the charity, and those who had shown any interest whatsoever in making a planned gift.

One of our research objectives was to examine whether ordinary donors – those who make one-time gifts of less than $500 – could make much larger gifts.

Here’s what we found:

• 17% of these ordinary donors had in fact made single gifts in the amount of $500 or more, only it was to a different charity…not to the charity who had listed the individual as one of their donors in the first place.
• 11% of these ordinary donors had given more than $1,000 cumulatively to various charities in the twelve months prior to being surveyed.

The upshot? Something like one donor in seven on your database is giving a lot more to charity than the $40 or $100 you’re asking for (and getting) now.

In focus groups we’ve done for clients, one message has been repeated consistently over the past decade: donors are proactively shortening their lists of chosen charities – and giving MORE to the charities who stay on their shorter lists.

This means that your donors will do one of two things to you. They’ll either keep you on their list and give more – or they’ll pitch you overboard and stick with someone else who’s giving them a more fulsome experience.

The question is: how can you get a bigger share of their philanthropic envelopes than you’re getting now?

Show me the money!

Let’s assume that you use direct mail as an important tactic in your fundraising portfolio. Here are some statistics relative to direct mail and hourglass giving:

• There are some 26 million adults in Canada today.
• 30% of these people make donations to charity through the mail. That’s 7.8 million direct mail donors in Canada today.
• 1 donor in 7 has made a single gift of $500 or more to charity recently. That’s 1.1 million Canadians who are cutting cheques to someone for $500 or more.
• Assuming that each donor only makes one gift of this magnitude, the total value of this big-gift market is more than a half-billion dollars!!

Profiling the $500+ donor

In the Good Works direct mail donor poll, we found that $500+ single-gift donors were different from the crowd in four fundamental ways:

One. More $500+ donors were university-educated than donors as a whole.

Two. Household income was (not surprisingly!) the biggest differentiator. The $500+ donors tended to have family incomes in excess of $75,000. To us, that’s a decidedly middle-class income. These are not necessarily wealthy people at all.

Three. Not surprisingly (to us at least) these bigger single-gift donors attended religious services more frequently than $50 and $100 donors. (The Judeo-Christian ethic continues to be a heavy influencer of giving in the West.)

Four. Here’s the differentiating factor that DID surprise us. The $500+ donors tended to support 20 or more charities to a greater degree than the donors who gave smaller amounts.

From data to opinion

Now, let’s step from research findings (the DATA) to conjecture (our OPINION).

We believe (and need to confirm) that age demographics will play a big role in predicting who will give at the $500 and $1,000 level.

In our consulting at Good Works, we advise our clients to be mindful of the four generational cohorts that make up the overall donor population:

• Civics (also called the WW2 Generation) were born before 1946.
• Baby Boomers were born between 1946 and 1966.
• Generation Xers were born between 1967 and 1982.
• Millenials (aka Gen Y) were born after 1982.

It stands to reason that large single gifts will predominantly come from Baby Boomers. Why?

• Today’s Boomer is between 46 and 66 years old. That’s the highest-earning time of life – and many Boomers have paid off mortgages and gotten their kids through college. Incomes are still high – while their cost of living (at least their expenditures on those big ticket items like housing and education) is going down.
• The Civic Generation has retired for the most part. It’s asset-rich, but largely cash-poor. While we’ve been evangelizing these folks for years as great legacy prospects, most of them don’t have the disposable cash to start making big gifts now. You’d be smart to keep focusing on these donors for bequests.
• There will be some potential in Generation X for bigger gifts – but most Gen Xers (aged 30-45) are still absorbed with student loans, mortgage payments, daycare and eventually another round of tuition fees.
• Millenials are still under 30 for the most part. They just haven’t got the cash yet to start cutting $1,000 cheques, no matter how much they’d like to. (Note: They WILL someday – but they’re just not there yet.)

Our clients and colleagues have been concerned about age cohorts for years. They know that their Civic donors are retiring (and dying). They know that Boomers are different from their parents. We’re ALL hungry to tap the Boomer market.

Enter the hero!

My colleagues and I at Good Works are huge fans of the Bluefrog Agency in London UK. These are very smart and creative people – and they happen to share our passion for donor research.

In 2007, Bluefrog published a brilliant research report titled The Fundraiser’s Guide to Mid-Value Donors. We recommend that you read it in its entirety.

The Bluefrog research studied UK donors who had given multiple gifts of between £100 and £1,000 in the two years prior to the study.

We want to focus in on one element of the Bluefrog report – the typology of these mid-value donors. The Bluefrog study found that this donor group was really comprised of three (beautifully named!) segments.

The first segment, and where 1/5 of these donors are categorized, belong to what Bluefrog calls the Noblesse Oblige group. This group is older (average age of 73); very well-to-do (they don’t worry about having enough money). They often come from old money or earned a lot of it during their careers.

The second segment (also about 1/5 of the group) is called Humble and Holy. These folks actually don’t have a lot of disposable income – but have (often religiously-driven) hugely philanthropic and generous values. I think of them as traditional tithers who believe it’s their spiritual calling to give back 10% (or thereabouts) of what they have.

By far the biggest segment (60% of the group) is comprised of donors that Bluefrog calls Middle Class Heroes. This group is decidedly younger (half of them are under 50 – making this group a mix of Boomers and Gen Xers). This group is decidedly middle class – consisting of doctors, lawyers, IT consultants and entrepreneurs.

The motivators for giving in this study are fascinating. Both the Noblesse Oblige (because it’s expected of them) and the Humble and Holy (because God wants them to) give because they feel that they SHOULD. They’re responding to some sort of social or moral imperative.

The Middle Class Heroes on the other hand give because they WANT TO. They feel empowered enough to make the world a better place and they simply want to make it happen.

(NOTE: The Bluefrog study – like the Good Works research – didn’t find donor recognition or membership in special donor societies as a primary driver in giving. Nor did our research find tax considerations as a primary motivator.)

So, what exactly is a hero gift?

There is no absolute or singular definition of a HERO gift. In broad strokes, we’d define it this way:

• Typical direct response upgrades attempt to generate increased gift amounts of 25% or 50%. A HERO upgrade involves a MULTIPLE increase over recent gift amounts. So, a HERO gift might be ten times what that donor usually gives. A typical example might be a ‘regular’ $60 direct mail donor who is asked to upgrade to a $500 investment in your cause.
• A HERO gift implies that the donor has selected you to be among the top echelon of the charities they support (which in many cases could be 20 or more). There’s an unspoken contract here that you’re taking the relationship to a new and more serious level.
• The HERO gift level will vary from one organization to another. A small social service agency might consider the HERO range to be in the $100 to $500 level – while a large hospital foundation or university might consider that mid-range to be in the $5,000 to $25,000 range. You don’t have to measure up to someone else to find the neglected HERO range that’s right for you.

Are HERO gifts a stepping stone to major gifts? Sometimes yes, sometimes no…

Some donors will have capacity well beyond the new giving level you’re asking for. As their commitment to you grows, you can test further stretch giving. Many however, will feel that their HERO gift is the most they can manage.

Hero-nomics

Let’s take a minute to look at the economics of HERO Giving and what it might mean to your fundraising program.

Let’s imagine a charity with a direct mail donor file of 25,000 active annual giving donors. These donors give 1.3 gifts of $35 per year on average. The gross revenue from this charity’s annual program would be $1.14 million.

Now, let’s say that this same charity can convert 2% of its donors to annual giving at the $500 level – and 1% of its donors to the $1,000 level. The new HERO Donor segment would give $500,000 per year. That’s a 44% increase in gross revenues per year.

Now let’s take it a step further. This same charity converts 10% of its HERO Donor segment to major gifts at an average amount of $5,000. These 75 major donors would be worth another $375,000 in annual revenue.

Is it possible to convert ordinary donors to this magnitude of giving? Of course it is! Will it be easy? Probably not. Will it be worth doing? Absolutely. We’ll bet the farm on it.

 

Fraser Green is Chief Strategist & Smartypants at Good Works – a fundraising consulting firm that specializes in helping charities build highly loyal donor constituencies. Download the entire white paper on Hero Giving to give it a read. Fraser welcomes both your ideas and criticisms. Please email him at fraser@goodworksco.ca or visit www.goodworksco.ca.