Growing Long Term Value Through

Gift Optimization Strategies

Presenters

Angelo LicursiParadysz

Adam HannahParadysz

Philip FertickFeeding America

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Rising duplication rates along with soft performance have been contributing to a lower ROI and less revenue to fund mission.

The State of the Industry: Unbalanced

More nonprofits are competing for the same donor dollar.

Number of new donors down 3.2% in 2013 over prior year.

Number of acquisition campaigns is down 5% in 2013 after being down 3% in 2012.

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Number of acquisition campaigns is down 5% in 2013 after being down 3% in 2012.

Revenue per donor stats increased 3.6% with 82% of organizations reporting an increase in 2013.

Rising duplication rates along with soft performance have been contributing to a lower ROI and less revenue to fund mission.

More nonprofits are competing for the same donor dollar.

Number of new donors down 3.2% in 2013 over prior year.

Number of acquisition campaigns is down 5% in 2013 after being down 3% in 2012.

A More Balanced State

More nonprofits are competing for the same donor dollar.

Rising duplication rates along with soft performance have been contributing to a lower ROI and less revenue to fund mission.

Number of new donors down 3.2% in 2013 over prior year.

Viable 65+ audience – most responsive to direct mail.

Changes in organizational strategy have shifted emphasis to bottom line/ROI and improved donor quality.

Online donors and revenue steadily increasing over last 5 years – online gifts generally 2.5x larger than mail gifts.

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(Acquisition Net Revenue + Subsequent Net Revenue)

Acquisition DonorsLTV

Long Term Value (LTV) is the financial value of a donor relationship in future terms, generally 12 or 24 months from present.

“It is an indicator of how today’s investment decisions affect future revenue outcomes.”

LTV Definition

Cumulative Net Revenue over a set period of time

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In reviewing who your “best” donors are, many times organizations find that the initial acquisition gift level is a big predictor of high long term value and commitment.

The question becomes….How do I get more of them? And if I can’t get

high gift donors in acquisition, can I upgrade them in renewal?

LTV by Gift Level

($50.00) $0.00 $50.00 $100.00 $150.00 $200.00

$0-$14

$15-$19

$20-$24

$25-$34

$35-$49

$50-$99

$100+

12 Mo LTV - Net Rev/Donor

$0-$1417%

$15-$1916%

$20-$2442%

$25-$348%

$35-$498%

$50-$997%

$100+2%

Donors by Acq Gift Level

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HIGH GIFT DONORS COME FROM ALL ACQUISITION SOURCES.

The ability to separate high gift from low gift prospects for improved targeting

is a challenge for many organizations.

LTV by Gift Level: List Source

0%

20%

40%

60%

80%

100%

120%

List #1 List #2 List #3 List #4 List #5 List #6 List #7

$0-$14 $15-$19 $20-$24 $25-$34 $35-$49 $50-$99 $100+

New leadership from commercial sector

Increased scrutiny on Direct Mail

acquisition budget– Largest single expense source

Corporate giving overshadows DM due to

minimal cost of fundraising– Corporate food donors often become funds

donors – DM revenue is unrestricted – DM revenue creates steady stream of revenue

35%

62%

3%

Feeding America (2013)

73%

6%

14%

7%

Industry (2012)

Individuals Corporations

Foundations Other

Feeding America – Our Story

Significant growth of online channel

Online new donor metrics better than that of Direct Mail

initially…– Higher average gift– Ability to acquire new sustainers– Organic contributions further improve online metrics

Asked to invest more in digital than direct mail –

although digital not easily scalable

25%

75%

Digital Sourced DonorsDirect Mail Sourced Donors

Direct Mail vs. Online

CFO considers ROI at 12-month and 3-year views for

investment decisions

Became necessary to understand multi-channel LTV– Built acquisition tool to look at subsequent giving and true

ROI by donor source

Need to shift focus from channel metrics to overall new

donor metrics– Understand online attribution to offline

Investing more to test new channels

with lower costs – success with insert media

LTV and Investment Opportunities

Gift band analysis showed DM-sourced, higher average

gift donors performed better at 3-year LTV than online-

sourced

Goal to find higher value donors upfront

Mail Online$0

$100

$200

$300

$400

$500

$600

Lifetime Revenue by Origin Source

$10-$14 $15-$24 $25-$34 $35-$49$50-$99 $100-$249

LTV Analysis by Gift Band

Focus to increase LTV on Direct Mail acquisition program– A higher cost to acquire is not always bad!

Implemented strategies to improve response, lower costs and

increase average gift:– Shift in list selection based on LTV vs. Net Rev/Donor and Cost of

Acquisition (COA)– Shift to non-premium offer

to generate higher upfront gift– Ask array strategies by list– Gift optimization model

Shifted volume from labels/notepad to simple appeal

LTV Focus

Targeting High Gift

Donors & Prospects

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Targeted Offers/A

sks

Predictive

Segmentation

Marry gift modeling & segmentation techniques with targeted asks or offers that maximize the giving potential of each prospect.

Goal:

Strategy:

Improve prospect campaign performance and the overall quality of the donor acquired (LTV).

Gift Optimization: Acquisition

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HIGH $ MED $ LOW $0

20

40

60

80

100

120

140

160

180

200

91 95

131

172

94

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FEEDING AMERICA GIFT OPTIMIZATION MODEL

RESP INDEX AVG $ INDEX

Combining demographic and lifestyle data variables with campaign response behavior leads to predictive model segmentation.

Gift Optimization: Model Development

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Key Differences Between “High Gift” and “Low Gift” prospects…

Recent Retirees: Ages 65-74 Married Male

Higher Income & Net Worth More likely to donate to Wildlife and Art causes

Older Retirees: Ages 75+ Single Female

Lower Income & Net Worth More likely to donate to Cancer, Children, or

Catholic causes

High Gift

Low Gift

Gift Optimization: Audience Profile

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Panel Audience Test: Open Ask

Test: High Ask #1

Test: High Ask #2

Control Ask

Control Random Nth 20,000 20,000 20,000 20,000

TestHigh Gift

Prospects20,000 20,000 20,000 20,000

TestMedium Gift Prospects

20,000 20,000

TestLow Gift

Prospects20,000

Total 40,000 60,000 80,000

Gift Optimization: Ask Array Testing

A CB D

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Gift Optimization: Ask Array TestingIn addition to the control ask array; two higher arrays and an open ask

were tested across audience segments.

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Panel AudienceTest: Open

AskTest: High

Ask #1Test: High

Ask #2Control

Ask

Control Random Nth $87 $126 $129 $120

TestHigh Gift

Prospects$127 $125 $167 $168

TestMedium Gift Prospects

    $87 $140

TestLow Gift

Prospects      $74

Panel AudienceTest: Open

AskTest: High

Ask #1Test: High

Ask #2Control

Ask

Control Random Nth $17.18 $29.46 $22.77 $20.30

TestHigh Gift

Prospects$51.28 $31.24 $32.05 $31.54

TestMedium Gift Prospects

    $21.60 $24.90

TestLow Gift

Prospects      $10.82

Gross Revenue/M

Average Gift

Gift Optimization: Results

A B C D

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“High Value” segments had a 20% increase in upgraded giving

compared to other donor segments receiving same offer.

Identify NPO’s best donors based on

fundraising value speed of upgrade to higher giving

levels.

Leverage past campaign performances and 3rd party data append to

develop a new donor segmentation strategy that predicts tomorrow’s “Best Donor” upgrade

candidates.

Build out an offer and ask array framework & test plan to increase giving in

“High Value” upgrade segments.

1 2 3

}GOALS• Increase the # of mid-level giving donors on file.

SCOPE & SOLUTION

RESULTS

Gift Optimization: Donor Upgrade

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Reviewing donor upgrade trends also highlighted Holiday/Year End giving

opportunities that could be maximized.

Higher ask array testing around this season is

recommended.

Gift Optimization: Timing

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• The recipe of receiving higher gifts from your prospects and donors requires all the ingredients…– Audience– Timing– Offer– Ask

• Define objective, test strategy & measurement upfront– Should include specific audience that is being targeted– Testing strategy should include creative, timing, offer and ask array

variables– Be very specific about the key performance metrics used to evaluate

success (ex. Avg Gift or # of upgraded donors)

Best Practices & Methodology

Thank you

Philip FertickDirector, Acquisition and New Media

Feeding America

pfertick@feedingamerica.org

Growing Long Term Value Through Gift Optimization Strategies

Angelo LicursiVice President, Research Advisory Services

Paradysz

alicursi@paradysz.com

Adam HannahDirector, Relationship Management

Paradysz

ahannah@paradysz.com