Thursday, July 8, 2010

Fund Raising Performance

As most institutions of higher learning begin a new fiscal year, I thought it might be important to look at a report by Target Analytics, a Blackbaud company, looking at higher education fund raising performance (as measured through annual funds) from July 2008 to June 2009. I predict the fund raising performance of the recently concluded fiscal year will be eerily similar and represent a continuation of these trends. Excerpts from the Target Analytics report are in italics.

Donors are continuing to give and be retained at comparable rates... Overall retention rates were relatively flat compared to 2008. The two year trend shows only slight erosion, down from 64 percent in 2007 to 62 percent in 2009, despite the tough economic climate. In fact, in 2009 retention rates increased by one percent for private institutions. Translation: Loyal donors remained loyal.

The overall median reactivation rate of 16 percent is the lowest recorded in recent history and marks a new low for programs’ ability to recapture lapsed donors. Overall the median change in the number of new donors was down another 11 percent in 2009. Translation: Recently reactivated donors didn’t stick; new donors were very hard to come by.

Overall, the change in median revenue was down 13 percent. For retained donors this median change was 12.9 percent, and for reactivated donors an even starker decline of 15.9 percent. Translation: The total amount given by loyal donors declined less than that given by reactivated donors.

As further evidence of just how challenging 2009 was for annual fund programs, the median change in revenue per donor was down 8 percent, with private schools dipping 5.5 percent and public schools down 9.2 percent. Translation: Graduates of private institutions reduced their giving less than graduates of public institutions.

Target Analytics’ data was accompanied by a set of observations and recommendations, again in italics.

During recent tough budget cycles many programs decided to invest heavily in retaining donors as a primary goal of the annual giving programs— these efforts appear to have worked. My observation: Amen. Secure your base, especially in tough times. Spend disproportionately on the loyal.

Institutions will need to recommit significant resources to recapture lapsed donors in the future. They will also need to refresh the case for support by creating a more compelling message and sense of urgency that will convince these lost donors to renew their giving. My advice: You should invest in market research that will help you understand why donors lapsed. Pouring more money into recapture techniques -- new, old, soft or aggressive -- is a terrible waste if you don’t know why they left. You can’t develop a more compelling case for support until you understand what didn’t work in the last one.

Some institutions reported using softer ask levels in 2009. But even those institutions that continued to be aggressive with ask levels, for the most part, still saw decline in revenue per donor. Again, with revenue per donor measures increasing every year in recent memory, this trend is alarming. Institutions should return to aggressive ask strategies in the current and future years to begin regaining ground from these losses. My observation: Their advice is not supported by their own facts. If the evidence shows that “aggressive ask strategies” resulted in less revenue per donor, why would you recommend returning to them? Again, it would be far wiser to find out why revenue per donor declined. Research conducted by Engagement Strategies Group, which I cited in an earlier post would suggest that donors are not responsive to “aggressive ask strategies” especially if they think their alma mater hasn’t done enough to establish an emotional connection with them.

The report makes a powerful case for the importance of loyalty but doesn’t do enough to stress how important it is for us to understand how it is created and and how it can sustained. There’s a reason that privates in general do better than publics; quite simply, they provide more personal attention to, and create a more intimate learning experience for their undergraduates. This is why most of the colleges and universities enjoying the highest rate of alumni participation are private. All to often we focus on the fund raising technique and not what makes the alumnus receptive to a fund raising request, or not, to begin with. We need to learn far more about the character, emotional make up and student experience of the loyal donor, the occasional donor and the never giver. The more closely we look at those issues, the more we will come to understand that the roots of alumni generosity lie largely in family values and student experiences. If the root system is strong, any and all fund raising techniques will prove successful. And if they are not, none will work well for very long.

In the face of these continuing trends, we should commit ourselves to a deeper examination of these roots and a closer assessment of our families of support.

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