Campaign variables: mixing and matching your marketing programs.

Integrated marketing campaigns can produce major growth in both top and bottom-line revenue through cost efficiencies and greater constituent loyalty. But, two of the biggest obstacles to integrating channels and dismantling silos are the ways that marketing and development activities are typically funded and financial success measured. How do organizations overcome these obstacles?

Measuring the results of marketing strategies to maximize successes was the subject of a seminar at the Direct Marketing Association (DMA) Nonprofit Federation's Leadership Summit, held earlier this year in Denver.

Kevin Moran, co-founder and principal of Integral, a company that works with nonprofit organizations to conduct analysis on business model performance, discussed why traditional measures of success need to be expanded for today's sophisticated marketers. Although traditional performance metrics such as response rates and average gifts are easy to understand--by marketers and across organizations--and are easT to measure and adjust, they are limited in scope, especially in impacting critical issues of strategy implementation, investment decision making, fundraising optimization and channel evaluation.

"These metrics are moments in time and tend to reinforce functional silos," Moran said. "They are not consistent with today's multi-channel business model realities, where risks are greater, and they sacrifice long-term thinking for rearview mirror thinking. In addition, they are limited in their understanding of the right levels of investment, and they tend to be less donor centric."

Instead, an approach that balances historical metrics with drivers for future performance needs to assist in identifying the right supporters and the appropriate levels of investment, and provide insight into how today's strategies impact the long-term relationship. One such strategy is the investment portfolio management approach.

"This approach outlines where fundraising needs to go and how to get there," Moran said. "It helps manage risk--marketers know where to invest and when as the donor value propositions evolve. It becomes a philosophy and brings strategic alignment within an organization and with partners. It's measurable--both today and in the long term."

In his seminar, entitled Bending the Financial Mindset, Moran presented examples of how some of Integral's clients have improved their return on investment (ROI) by using the investment portfolio management approach. Client A was charged with building an acquisition program that generated a positive return in 18 months. There was no correlation to initial performance or ROI measures established by the board. Investments needed to change.

"Strategies were changed to reallocate investment dollars and develop targeted strategies to increase value in weaker performers," Moran said. "The results were that volume remained constant, budgets were reallocated to post-join activities, and ROI was positive within 12 months. The new ROI is now the measure of success."

However, investment levels using ROI metrics do not tell the complete story as to which donors deserve organizational investments. Due to budgetary restrictions, Client B was prepared to significantly reduce investments in their acquisition programs and events. It was believed that high-dollar events and Web donors' acquisition were the most productive and, therefore, should remain.

An analysis was conducted which showed that, based solely on initial performance, this hypothesis was true; however, direct mail and donor rate of return (DRR) at low-dollar events far exceeded those of Web donors--and direct mail exceeded DRR at high-dollar events. The results of implementing an investment portfolio approach were that investments increased in all channels and retention program investments were increased to improve the return of Web donors.

Client C questioned the value of telemarketing campaigns and sought to dramatically reduce investments as short-term campaign metrics, such as pledge rates and campaign net revenue per donor, began to decline. A test was conducted to determine if including long-term metrics would alter the recommendation to decrease the telemarketing investment. The results: 12-month retention is up more than 250 percent on the donors who pledged and those who were contacted and refused, compared to the test panels that were excluded from calling. The organization's approach and philosophy on telemarketing has since changed.

"Clients are now able to integrate long-term metrics in today's decision making to ensure the long-term health of their donor base," Moran said. "Integrating these types of metrics provides a complete picture of the interaction and assigns different value targets--even if a person doesn't generate a gift in the short term."

In 2004, Client D had a dramatic influx of new donors--four times greater than in 2003, and most of whom had never given a charitable gift. The client had expanded the entry point channels, including telemarketing, Web, direct mail and canvassing, and was unsure of the value of the new donor pool. They launched an aggressive conversion program and, using donor conversion metrics and DRR, the client knew how much to invest and the timeline by donor type and channel to maximize giving.

The results: Behavioral traits have been established with short- and long-term metrics that emphasize maximizing donor value and integrating channel communications.

According to Moran, the benefits of the investment portfolio management approach include:

[check] Being able to articulate the value proposition of donors, channels and discrete strategies--in both the short and long term;

[check] Knowing where to invest and disinvest for the long term-and when to do it;

[check] Having a better, quantifiable understanding of risk and the health of all business models;

[check] Leading a new philosophy and bringing strategic alignment with an organization and with partners; and

[check] Measuring, monitoring and managing the long-term value of your donor base and increasing its value.

"Nonprofits have talked about ROI and lifetime value for years," Moran said. "Bringing a wider base of metrics can ensure that these organizations know where to invest and in whom to maximize revenue. These new measures of success align the organization and its partners to develop strategies that provide the greatest return and develop a strong and growing donor base to support their mission."

Gina Bernacchi is a freelance writer based in Denver and frequent contributor to The NonProfit Times.