Deeper pockets: moving away from the low-dollar donor.

It's becoming more and more an unrequited relationship as nonprofits find themselves dealing with a burgeoning number of one-time givers, increased attrition rates, and donor lists that in some cases aren't working anymore.

Finding itself in a similar situation, The Epilepsy Foundation of America (EFA) decided to fight back and put an end to the trend of donors who love 'em and then leave 'em.

Reacting to the challenges facing direct mail these days, EFA and other nonprofit organizations are shying away from longstanding direct mail basics, including how they select donor lists. No longer interested in the masses of flash-in-the-pan, low-dollar donors, they're searching for more meaningful and lasting relationships.

The good ol' days

"Donors don't stick with a charity as long as they used to stick with them," explained Raymond J. Grace, chairman of Crofton, Md.-based Creative Direct Response (CDR). "Even in 1968 when I first got into this business, my boss used to say, 'There's just not enough names'."

In those days, "we didn't worry about things like dollar average, but that was when we were making $3 and $5 contributions make money for a charity," said Grace. "Nowadays, (charities) just can't afford that." Grace said charities today are lucky if they can get a 1 percent response in acquisition.

The donor market is changing. "Back when I started, we took 24-month, $5-plus donors, and that list selection worked," said Jennifer Girard, president of fundraising services at List Services Corporation in Naples, Fla. "The aging of the person, the fact that you have so much clutter and noise out there, as the years progressed, the selections have become tighter and tighter because the results have fallen off on selects."

Loyalty value

According to a survey of donor loyalty, despite 59 percent of respondents claiming "High Loyalty" to the organizations they support, today's typical charity profile looks more like a 30-percent renewal rate for first-time givers. The survey, conducted in July, 2005 by Craver, Mathews, Smith & Company and the Prime Group, found that donor retention is becoming more of a challenge, centering "on those fickle first time donors."

Troubled by the increasing incidence of one-time donors or "premium buyers," nonprofits are more often requesting donor list selections with a greater propensity toward loyalty, said Girard. "We're looking now for a lot of our clients at the long-term value of a list," she said. "So you're trying to budget up front: What in five years will this donor be worth?"

The long-term value, or LTV, metric can be incorporated into the list selection process to better enable an organization to segment its donors into high- and low-value lists and determine how to most effectively appeal to each list. According to Girard, this metric is finding an increasingly receptive audience in nonprofits.

In July, 2003, the Epilepsy Foundation of America kicked off a five-year plan to transition from premium mailer to non-premium mailer. "It was very revolutionary," Daniell Griffin, senior director, individual giving at the Landover, Md.-based organization, said of the move.

The impetus for the shift, said Griffin was a desire to break away from those donors who "weren't really going with us into the future." According to Griffin, EFA sought to build a direct mail program where donors were committed to the mission of the organization. "We have found that these donors are donors who will stay on file longer, and donors who are upgrade-able into the major gifts program and renewable as well."

Three years into the transition, the organization has seen its donor file "almost hemorrhage," said Girard, who works with EFA. "That's a huge change, a huge change," she added. "You're used to having a renewal of 100,000 names, and suddenly you've got 35,000. Granted, they're more profitable, but it's definitely scary for some organizations."

For EFA, the attrition it experienced was no shock. "We planned our attrition. We prepared to lose the donors that we lost," said Griffin.

With its attrition now at around 17 percent, whereas on a premium file attrition hovers around 30 to 35 percent, Griffin said EFA is pleased with the shift. "When our file was twice the size than it is now, it was generating the same net income that it's generating now. So we're actually raising in terms of net income the same money, and we're spending less," said Griffin.

Still in its infancy as a non-premium mailer, Griffin said EFA is gradually putting more emphasis on LTV when selecting its lists. "Oh most definitely, LTV is important," she said. "Right now, LTV is really evaluated in terms of the continuation: How's the list performing for us? It'll probably be a couple more years before we can really sit down and look at the LTV."

Of those low-dollar donors, "I don't think you can make a blanket statement" that they're not making money for organizations anymore, she said. "Because if you have enough low-dollar donors, you probably can have a very profitable program. The difference is, they're probably on a lot of files, and once again you're always having to send them a better premium to get the renewal."

Is it art or science?

According to CDR's Grace, list selectivity and finding lists is more art than science. "A lot of it is literally knowing who your donor is well enough to try to impose that demographic on other people's lists."

To better predict a donor's potential affinity for and longevity with a particular organization, Grace identified two variables, gender and political lean, as indicators. While nonprofits have been testing on gender for years, Grace said it's a matter of combining the variables. "When you can define your donor as predominantly female, more liberal and moderate than conservative, then you can start to take that information to commercial lists that are more expensive with better results."

Not just controversial, the 2004 presidential campaign was the most expensive such contest ever. One campaign finance expert described it as, "The most expensive and concentrated political advertising campaign we've ever seen in American politics." For this reason, said Grace, the political skewing of a donor could matter more now than in recent memory.

Still in the testing phase with three large, national charities, Grace said overall results have yet to be tallied. "But, we're finding some things that are surprising to us," hinted Grace.

Fundraising software companies for years have offered charities predictive analytic technology, or rather modeling, to be incorporated into their list selection processes. Limited to the larger nonprofits that could afford the service, modeling was more of a pipe dream for the small or mid-level charity.

Modeling services agency Genalytics, in Andover, Mass., provides predictive software to nonprofits, and charges only for the names they net. According to Janelle Casella, senior account executive for the agency's nonprofit clients, netting out the best names can be done for approximately $50 per 1,000 names. Nowadays, most donor lists are offered for one-time use at a fee of $50 to $150 per 1,000 names, an average of $75/1,000.

The major difference: the names provided by Genalytics are new ones, not found on typical donor lists. "We're pulling names from the entire nation. We have over 120 million households in our database," said Casella.

While Casella describes her nonprofit clientele as "a good mix," she noted that more often small and mid-size organizations are signing on.

"There's a lot of list fatigue, donors are being over-tapped," said Ray Kingman, CEO of Genalytics. "Nonprofits are having to get much more sophisticated and scientific in their approach. They're testing everything. It's all about ROI."

The $5 gift might soon be a thing of the past. "Nonprofits are moving toward the higher value donor, and what steps can be taken to identify who they are," said Kingman. Exacerbating list fatigue, Kingman noted that an organization will typically not exchange a donor list with a high value. "So you end up with little grandmas being recycled."