The Fine Art of LEVERAGE

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The Fine Art of

LEVERAGELeah Eustace, CFRE

Jérôme St-Deniswww.theflagroup.com

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Let’s Start with Strategy

According to Mal..

you’ve got 5 choices

1. Growth

2. Involvement

3. Visibility

4. Efficiency

5. Stability

You can only choose one!

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Food chain exercise(rank these on efficiency)

Special events

Monthly giving

Product sales

Legacy gifts

Major gifts

Telemarketing

Direct mail

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The Efficiency Food Chain

Planned giving

Major gifts

Monthly gifts

Direct mail

Telemarketing

Events

Product sales

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So if direct mail’s in the middle of the pack, why does it matter?

• Judith Nichols has been telling us for years….

• GO DEEP MORE THAN WIDE

• cuz wide ain’t there anymore (for most of you, anyway)

• direct mail’s your best bet for going deep

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Who Gives?

• we polled 500 Canadian direct mail donors

• results accurate +/- 4.1% 19/20

• for the first time (in 30 years) we found out exactly who gives through the mail

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Meet Jacqueline

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Age

0

10

20

30

40

50

60

70

< 45 45-54 55-64 65+

Canada

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Gender

0

10

20

30

40

50

60

70

Male Female

Canada

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Employment

0

10

20

30

40

50

60

70

Full-time Part-time Homemaker Retired

Canada

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Education

0

5

10

15

20

25

30

35

HS or less College Undergrad Grad/Prof

Canada

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Household Income

0

5

10

15

20

25

30

35

< $25K $25-50K $50-75K $75-100K $100K+

Canada

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Marital Status

0

5

10

15

20

25

30

35

40

45

50

Married Never Married PreviouslyMarried

Canada

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Dependent Children

0

10

20

30

40

50

60

70

80

90

Dependent Children No Dependent Children

Canada

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Attend Religious Services

0

5

10

15

20

25

30

35

40

45

Regular Occasional SpecialOccasions

Never

Canada

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The Formula

Four simple steps

to direct mail success.

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Step 1 – the problem

• we all love to talk about our problems

• (Dr. Phil’s become rich off of them)

• direct mail is no different!

• if there’s no problem, why should I care?

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Step 2 – the solution

• I’ll care about the problem

• I’ll give to the solution

• no solution? no gift..

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Step 3 - Credibility

• I care about the problem• I’ll give to the solution• but why should I give to YOU?• does your letter have credibility?• does your organization have credibility?• then use it!

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Step 4

• in fundraising, what does the letter “A” stand for?

• Clue: what’s the most common reason that people give to charity?

• let’s go to your letters again• have you: asked? asked directly?

asked specifically?

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What is leverage?

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Leverage

Market research can help a charity

upgrade single gift DM donors

to higher orders of giving.

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Integration = Leverage = More Revenue

Who can name three

types of ‘higher order’

gifts that can eventually

come from direct mail donors?

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Let’s compare ‘lifetime value’

• average direct mail donor is worth about $250

• monthly donor is worth ($13 x 12 x 6) = $936

• ‘mid-level’ donor is worth ($500 x 6) = $3,000

• ‘legacy’ donor is worth $20,000 (in ten years or so)

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our big hairy idea!

• leveraged giving comes from a small minority of your donor file

• yet, leveraged giving can more than double revenue from direct mail giving alone

• fundraising is not democratic!

• Pareto principle 80/20 90/10 95/5

• wanna make a name for yourself? Go Pareto!

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And how does

leverage work?

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Leverage – Monthly Giving

• lifetime value of monthly donors is a multiple of single gift donors

• lower cost to maintain• good legacy prospects• we’ve proposed a mail/phone/mail & phone

test – with the potential to roll out• our research shows 60% give on the phone• you should target 5% to 10%

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Monthly Giving

• according to our poll, 95% of donors are aware of monthly giving

• 34% have given monthly

• 37% say monthly giving is a good idea

• the phone is more effective than mail – best approach is mail/phone together

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Leverage – Major Gifts

• our poll indicates potential among direct mail donors for major gifts

• despite modest income/education, civics are generous & loyal

• 27% have made single gifts $500+• we’re recommending branding a giving

club and soliciting current $500+ donors• our poll tells us that they’ll give to the offer

– not for the recognition

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Leverage– Legacy Gifts• 97% are aware of legacy giving• 92% of donors have a will• 18% say they’ve already named a charity• 17% likely to do so within five years• these donors are older empty nesters – kids are

grown and gone• long on assets, short on income• majority have never been asked• they’re also civics (will boomers die broke?)

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Legacy Gift Potential

• average Canadian estate is $350,000

• average charitable bequest is $20,000

• modest $35 direct mail donors are capable of large legacy gifts because of their assets

• Andrea’s story - $75, twice a year

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Once upon a time…

A client success story

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Where they started in 1999

• thought they had 80,000 donors

• database mess

• no strategy

• no reporting/analysis

• didn’t know what worked or why

• no donor focus – or donor choice

• off the rails

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Setting Goals - Direct Mail

• grow file to 100,000 actives

• average gift $37

• gift frequency 1.2

• gross annual revenue $3.33 million

• revenue to cost ratio of 4:1

• net revenue $2.5 million

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Where they are today

• donor base has doubled

• net revenues have doubled

• they know what works and why

• put donor first – lots of choice!

• segmentation, analysis, precision, efficiency

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Where they started – monthly givingIn short, nowhere!

• but got serious and started working monthly giving throughout the program- segmented mail - web

- segmented phone - email

- door to door - newsletters

- back end - staff

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Setting Goals -Monthly Giving

• 7.5% file conversion

• average gift $13 per month

• gross revenue $1.17 million

• revenue to cost 10:1 (or better)

• net revenue $1.05 million

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Where they are today - monthly giving

• 4,200 active monthly donors

• recruited from a variety of tactics

• putting program in place (devil’s in the details – like expiring credit cards)

• program today is worth $655,000/year

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Setting Goals – Major Gifts

• 3% of the file leverages up

• 2/3 at $500, 1/3 at $1,000

• gross revenue $2 million

• revenue to cost ratio is 10:1

• net revenue $1.8 million

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Where they are todayMid-level

• active program to 1,500 donors, 5,000 prospects

• branded program, segmented appeals

Major gift

• also campaigning face to face

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Legacy gifts – where they started

• no program at all

• no staff or resources

• one brochure and nothing to do with it

• receiving bequests by surprise

• and yet, this HUGE potential

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Setting Goals - Legacy Gifts

• 100 bequests per year (1/1000th of file)

• average bequest $20,000

• gross income is $2 million

• revenue to cost is 20:1

• net revenue $1.9 million

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Where they are today

• created a staff position

• committed to a legacy marketing plan

• Integrated legacy marketing into direct mail program & other media

• early stages – 53 expectancies

• $1.06 million

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5 Years Out – Adding It Up

Direct Mail $2,500,000

Monthly Giving $1,050,000

Major Gifts $1,800,000

Legacy Gifts $1,900,000

Total Net Revenue $7,250,000

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Guess what?

Leverage works

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Wanna be a star?

Employ a leverage strategy by following a few simple steps

• run a kickass direct mail program • keep the base strong• use market research to target segments and tailor

messages• stick to the strategy • give it five years to work

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Remember…

“Deep more than wide”

Call us in 2010

and name your price!

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Leah and Jérôme’s ten tipsto successful direct mail

“Demographics is two-thirds

of everything.”

(never forget Jacqueline)

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Tip 2

Mail is a program – not a

project. You must build on

previous experience.

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Tip 3

“Fancy-schmancy”

It’s okay to keep it simple!

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Tip 4

Everybody – and I mean

everybody – loves a good story.

So tell one!

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Tip 5

Don’t get too many grubby

fingerprints on your copy!

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Tip 6

There’s no substitute

for research and analysis.

(invest a little money)

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Tip 7

Always remember the formula

• Problem

• Solution

• Credibility

• Ask

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Tip 8

Don’t do direct mail in a silo..

Integrate with monthly, major, legacy

stewardship, events etc.

(seamless, baby)

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Tip 9

Test something

every time.

(sloth is a deadly sin)

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Tip 10

Marry art and science..

…and you’ll win

BIG TIME

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For more information visitwww.theflagroup.com