finding your hidden heroes - good works · the middle class heroes on the other hand give because...

Finding Your Hidden Heroes How 3% of your donors could add 30% to your net revenues

A Good Works Whitepaper by Fraser Green

February 2013

@_GoodWorks_ GoodWorksCo

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www.goodworksco.ca Hidden Heroes |page 2

THE HEART & SOUL OF

PHILANTHROPY

Shapes and Spaces The ancient Indian guru Patanjali once said ‘the beauty in music is the space between the notes.’ This paper is about the empty space in a mind-bendingly competitive philanthropic marketplace. It’s about hundreds of millions of unasked-for dollars that are sitting in donors’ cheque books right this minute.

Imagine you’re at the movie theatre – waiting at the end of a very long lineup to buy tickets. The movie is just about to start and you’re getting very anxious about missing the first ten minutes. Just then, a friendly theatre staffer comes by, taps you on the shoulder, and tells you that there’s another ticket window open (with no lineup) over at the other side of the lobby.

We have found an empty fundraising space – a window without a lineup if you like – for you to go to. And we want to share that space with you here and now.

Shape 1: The Pyramid Every fundraiser knows the pyramid of giving. It’s a simple triangle that represents an equally simple concept. The horizontal axis of the pyramid represents the number of donors, while the vertical axis represents the amount of money each donor gives.

While some pyramids (national health charities for example) tend to be wide and flat, others (like hospital foundations) tend to be narrower but much more vertical.

The pyramid geometry is symbolic though. There’s some sort of steady linear progression inward as the pyramid goes vertical. This seems to be the natural order of things.

Shape 2: The Hourglass Now think of an hourglass. When you look at its shape, it has a narrow waist in the middle. Unlike the pyramid, it has curved sides that start wide going up, get narrow, and then widen out again.

If you were to graph the actual giving patterns of many donor databases, you actually find a:

• Very broad base of ‘ordinary’ annual gift donors at the base. • Narrow band of donors somewhere in the middle when it comes to gift amounts. • Wider band of major and planned gift donors – due in large part because of the serious

fundraising work that happens at these gift levels.


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Back to that Window Without the Lineup Our simple contention is this. If your fundraising program looks like an hourglass rather than a pyramid, it’s not because of some natural behaviour of your donors. It’s because of where you put your fundraising efforts!

And, to take it a step further, our contention goes on to argue that, if you want to grow revenues, you need only pay more attention to that gap in the middle. In just about every case, we’re talking about the area between your annual giving (direct mail, online, events) and the big stuff (major and planned gifts).

Presenting the Evidence Almost a decade ago, my colleagues at Good Works conducted the first-ever quantitative research study of direct mail donors in Canada. We surveyed 500 Canadian direct mail donors who had made two or more gifts to the same charity within the previous three years of the study.

Our study deliberately looked at ‘everyday’ donors. We eliminated donors who we knew were giving monthly, those who had made gifts of $500 or more and those who had shown any interest whatsoever in making a planned gift.

One of our research objectives was to examine that hourglass effect. We wanted to look at whether ‘ordinary’ donors – those who make one-time gifts in the average amount of $35 – could make much larger gifts.

Here’s what we found:

• 17% of these ‘ordinary’ donors had in fact made single gifts in the amount of $500 or more, only to a different charity…not to the charity who had included the individual in their donor data in the first place.

• 11% of these ‘ordinary’ donors had given more than $1,000 in the twelve months prior to being surveyed.

The upshot? Something like one donor in seven on your database is giving a lot more to charity than the $40 or $100 you’re asking for (and getting) now.

In focus groups we’ve done for clients, one message has been repeated consistently over the past decade: donors are proactively shortening their lists of chosen charities and giving MORE


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to the charities who stay on their shorter lists. This means that your donors will do one of two things to you. They’ll either keep you on their list and give more – or they’ll pitch you overboard and stick with someone else who’s giving them a more fulsome experience.

The question is: how can you get a bigger share of their philanthropic envelopes than you’re getting now?

Show me the Money! Let’s assume that you use direct mail as an important tactic in your fundraising portfolio. Here are some statistics relative to direct mail and hourglass giving:

• There are some 27 million adults in Canada today.

• 30% of these people make donations to charity through the mail, or rather, there are roughly 8.1 million direct mail donors in Canada today.

• 1 donor in 6 has made a single gift of $500 or more to charity recently, and 1 donor in 10 made cumulative gifts of at least $1,000 last year, which translates into more than 1.3 million Canadians cutting cheques greater than $500.

• Assuming that each donor only makes one gift of this magnitude, the total value of this big-gift market is more than a half-billion dollars!!

Profiling the $500+ Donor In the Good Works direct mail donor poll, we found that $500+ single-gift donors were different from the crowd in five fundamental ways:

1. More $500+ donors were university-educated than donors as a whole.

2. Women outpace men as $500+ donors at a ratio of 2:1.

3. Household income was (not surprisingly!) the biggest differentiator. The $500+ donors tended to have family incomes in excess of $75,000. To us, that’s a decidedly middle-class income. These are not necessarily wealthy people at all!


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4. Not surprisingly (to us at least) these bigger single-gift donors attended religious services more frequently than $50 and $100 donors. (The Judeo-Christian ethic continues to be a heavy influencer of giving amongst Canadian donors).

5. Here’s the differentiating factor that DID surprise us. The $500+ donors tended to support 20 or more charities to a greater degree than the donors who gave smaller amounts.

Now, let’s step from research findings (the DATA) to conjecture (our OPINION).

We believe (and need to confirm) that age demographics will play a big role in predicting who will give at the $500 and $1,000 level.

In our consulting at Good Works, we advise our clients to be mindful of the four generational cohorts that make up the overall donor population:

1. Civics (also called the WW2 Generation) who were born before 1946.

2. Baby Boomers who were born between 1946 and 1966.

3. Generation Xers who were born between 1967 and 1982.

4. Millenials (a.k.a. Gen Y) who were born after 1982.

It stands to reason that large single gifts will predominantly come from Baby Boomers.

Today’s Boomer is between 46 and 66 years old. That’s the highest-earning time of life and many Boomers have paid off mortgages and gotten their kids through college. Incomes are still high while their cost of living (at least those big ticket items like housing and education) is going down.

The Civic Generation has retired for the most part. It’s asset-rich, but largely cash-poor. While we’ve been evangelizing these folks for years as great legacy prospects, most of them don’t have the disposable cash to start making big gifts now. You’d be smart to keep focusing on these donors for bequests.

There will be some potential in Generation X for bigger gifts, but most Gen Xers (aged 30-45) are still absorbed with mortgage payments and tuition fees.

Millenials are still under 30 for the most part. They just haven’t got the cash yet to start cutting $1,000 cheques, no matter how much they’d like to. (Note: They WILL someday, but they’re just not there yet.)


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Our clients and colleagues have been concerned about age cohorts for years. They know that their Civic donors are retiring (and dying). They know that Boomers are different from their parents. We’re ALL hungry to tap the Boomer market.

Enter the Hero My colleagues and I at Good Works are huge fans of the Bluefrog Agency in London UK. These are very smart and creative people who happen to share our passion for donor research.

In 2007, Bluefrog published a brilliant research report (which you can find on their website www.bluefroglondon.com) titled The Fundraiser’s Guide to Mid-Value Donors. We recommend that you read it in its entirety.

The Bluefrog research studied UK donors who had given multiple gifts of between £100 and £1,000 in the two years prior to the study.

We want to focus in on one element of the Bluefrog report: the typology of these mid-value donors. The Bluefrog study found that this donor group was really comprised of three (beautifully named!) segments:

1. One-fifth of these donors belong to what Bluefrog calls the ‘Noblesse Oblige’ group. This group is older (average age of 73); very well-to-do (they don’t worry about having enough money). They often come from old money or earned a lot of it during their careers.

2. The second segment (also about one-fifth of the group) is called ‘Humble and Holy’. These folks actually don’t have a lot of disposable income, but have (often religiously-driven) hugely philanthropic and generous values. I think of them as traditional ‘tithers’ who believe it’s their spiritual calling to give back 10% (or thereabouts) of what they have.

3. By far the biggest segment (60% of the group) is comprised of donors that Bluefrog calls ‘Middle Class Heroes.’ This group is decidedly younger (half of them are under 50 making this group a mix of Boomers and Gen Xers). This group is decidedly middle class consisting of doctors, lawyers, IT consultants and entrepreneurs.

The motivators for giving in this study are fascinating. Both the Noblesse Oblige (because it’s expected of them) and the Humble and Holy (because God wants them to) give because they feel that they SHOULD. They’re responding to some sort of social or moral imperative.

http://www.bluefroglondon.com/


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The Middle Class Heroes on the other hand give because they WANT TO. They feel empowered enough to make the world a better place and they simply want to make it happen.

(NOTE: The Bluefrog study, like the Good Works research, didn’t find donor recognition or membership in special donor societies as a primary driver in giving. Nor did our research find tax considerations as a primary motivator.)

What’s in a Name We in the fundraising profession aren’t very flattering to this group of sacrificially generous donors. The three names we most often give them are ‘Intermediate Donors,’ ‘Mid-Level Donors’ and ‘Mid-Value Donors.’ In our opinion, to describe these donors as being ‘in the middle’ fails to recognize and respect the depth of their commitment and contributions to philanthropy.

So, in the spirit that imitation is the sincerest form of flattery, we’ve decided to give these donors a new name: HERO DONORS (inspired by Bluefrog’s Middle Class Heroes classification).

So, What Exactly is a Hero Gift? There is no absolute or singular definition of a HERO gift. In broad strokes, we’d define it this way:

• Typical direct response upgrades attempt to generate increased gift amounts of 25% or 50%. A HERO upgrade involves a MULTIPLE increase over recent gift amounts. So, a HERO gift might be ten times what that donor usually gives. A typical example might be a ‘regular’ $60 direct mail donor who is asked to upgrade to a $500 investment in your cause.

• A HERO gift implies that the donor has selected you to be among the top echelon of the charities they support, which in many cases could be 20 or more. There’s an unspoken contract here that you’re taking the relationship to a new and more serious level.

• The HERO gift level will vary from one organization to another. A small social service agency might consider the HERO range to be in the $100 to $500 level, while a large hospital foundation or university might consider that mid-range to be in the $5,000 to $25,000 range. You don’t have to measure up to someone else to find the neglected HERO range that’s right for you.


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Are HERO gifts a stepping stone to major gifts? Sometimes yes, sometimes no…

Some donors will have capacity well beyond the new giving level you’re asking for. As their commitment to you grows, you can test further stretch giving. Many however, will feel that their HERO gift is the most they can manage.

The Big Why Question Author Simon Sinek is right. The most important strategic questions always start with WHY.

WHY would someone give a large amount to one charity rather than spreading the love around to many worthy causes?

First of all, let’s go back to the Good Works research and find out what DOESN’T motivate these donors to make the big gift. Many (if not most) of us in the fundraising profession think we have to offer all sorts of special recognition to get donors to give more. Yet, our own in-house research has uncovered that:

• Fully 90% of Canadian donors are well aware that they can receive special recognition for gifts in excess of $500.

• Yet, only about 14% of these donors say that this recognition would be an important element in their decision to give at this level.

• Only 4% of the donors surveyed said that they’d increase their giving to this level in order to receive some sort of special recognition.

So, if donors won’t upgrade just to get their names published in your annual report, or to get their names on your donor wall, what WOULD motivate them to step up and give a lot more to you? We’ve found three:

1. TO DO GOOD The first motivator behind HERO giving is philanthropy – and altruism – pure and simple. These donors give a lot because they want to do the right thing. Whether they want to please God, set an example to their family and friends or just feel better when they look in the mirror, their motivations are based in empathy, compassion and generosity.

This motivation is directly in line with what we at Good Works call 3D Philanthropy. HERO giving comes from the heart and the soul every bit as much as it comes from the head. We


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fully suspect that a powerful HERO giving proposition must contain strong elements of these three components.

Remember, it’s not about special clubs or tax returns. It’s just about doing good for good’s own sake.

2. TO DEFINE THEMSELVES (AND FEEL SPECIAL IN THE PROCESS) HERO donors consider their philanthropy to be an integral part of their fundamental identity. Their giving is an important part of who they are. They give because it feels good to give. They want to be known as generous and they want to see themselves this way.

To them, giving (perhaps unlike expensive cars or clothes) is what separates them from the crowd and makes them special.

3. TO ACHIEVE GREAT OUTCOMES At Good Works, we’ve been asking donors about their giving behaviours in focus groups for years. We’ve listened to more than a thousand Canadian donors in conversation around board room tables – and they’ve told us very clearly what they’re hungry for.

They want to know that their money will achieve great outcomes and advance your charity’s mission.

To the Canadian donor, it’s NOT about ego. It IS about achieving mission and advancing the cause. It doesn’t matter if you heal the sick, feed the poor, educate the unfortunate or rescue puppies and kittens. Donors will give more when you demonstrate to them that their money will really achieve what they want it to.

(As an aside, the biggest complaint these donors ALWAYS have in focus groups is that you don’t tell them what you did with their last donation before you ask them to give again. Our collective stewardship efforts really suck. In fact, in a Good Works online survey of 700 Canadian donors we found that 68% of donors are dissatisfied with the way charities report on how their money was spent!)

Hero-Nomics Let’s take a minute to look at the economics of HERO giving and what it might mean to your fundraising program.

Let’s imagine a charity with a direct mail donor file of 25,000 active annual giving donors. These donors give 1.3 gifts of $35 per year on average. The gross revenue from this charity’s annual program would be $1.14 million.


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Now, let’s say that this same charity can convert 2% of its donors to annual giving at the $500 level – and 1% of its donors to the $1,000 level. The new HERO donor segment would give $500,000 per year. That’s a 44% increase in gross revenues per year.

Now let’s take it a step further. This same charity converts 10% of its HERO donor segment to major gifts at an average amount of $5,000. These 75 major donors would be worth another $375,000 in annual revenue.

By converting 3% of your ‘ordinary’ donors to HERO donor status, you can increase your charity’s net revenue up to 30%. That’s astounding growth.

Is it possible to convert ordinary donors to this magnitude of giving? Of course it is!

Will it be easy? Probably not. Will it be worth doing? Absolutely. We’ll bet the farm on it.

Some Thoughts on Making Hero Giving Happen These are still early days for us at Good Works when it comes to HERO giving.

We’re still in the lab with our test tubes and Bunsen burners. We’re still arguing and debating amongst ourselves as to the best way to segment, cultivate, ask and steward. We’re still scanning the world of philanthropy to see what others already know. We’re also doing some HERO giving work with some of our (braver!) clients.

Having said that, we do have some pretty firm ideas as to what it takes to plan and execute a successful HERO program. Here are ten thoughts and ideas to get you started:

1. YOU NEED TO INVOLVE THE HEAD. Those of you who know us are familiar with our rants about heart and soul, emotions and storytelling. Those elements are important here too, but they’re not enough for our HEROES. You will need facts and figures to back up your emotive stories. Kathy Swayze (of Impact Communications) calls this the investment approach. She argues that, in order to leverage donors to investors, we must provide a more thorough offer (more detail), write copy at a higher educational level and give more detail about mission and program.


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2. USE A COMBINATION OF MAJOR GIFT STRATEGY AND DIRECT RESPONSE TACTICS. There probably needs to be some cultivation communication before you come right out and ask a donor to stretch her gift by a factor of ten or more. (For you direct response types who need immediate gratification – remember – major gifts can take 18 months to materialize between a first donor discussion and the cutting of the cheque).

3. GET YOUR PROPOSITION (OR OFFER) VERY CLEAR! Stephen Pidgeon of the UK is the master of the fundraising proposition − study it like Holy Scripture. Get your hands on his AFP International Conference presentation (April 2012) on the proposition. You’re going to need to spend some serious time and mental bandwidth getting this right.

4. DON’T FORGET TO INCLUDE MONTHLY DONORS IN YOUR HERO PROGRAM. There’s no reason whatsoever why you shouldn’t ask a $20/month donor to stretch her gift to $84/month (or $1,000 per year). When it comes to single-gift donors, the analytics brainiacs at Blackbaud say that the average HERO donor makes the giving jump after 9 lifetime gifts (Fundraising Models for Mid-Level Giving, March 2011.)

5. WAGE THE INTERNAL BATTLES TO GET YOUR PROPOSITION TO BE SOMEWHAT TARGETED. Don’t get lazy and in effect ask your donors to stretch their giving so that you can pay the rent and keep the lights turned on. You don’t need to ask for designated gifts, but you’re going to have to straddle the line somewhat, and move in the semi-designated gift direction.

6. BE PREPARED TO INVEST SOME MONEY. If you’ve been sending a HERO prospect annual giving mail appeal that cost $1.15 apiece, get your head around the idea that your new HERO packages might cost $3 or $4 apiece. (No window envelopes or metered postage please!)


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7. GET READY TO SPEND AS MUCH TIME, MONEY AND MENTAL BANDWIDTH ON STEWARDSHIP AS YOU DO ON CULTIVATION AND SOLICITATION. What a shame it would be to persuade a donor to magnify her gift tenfold, only to have her drop back down to her old giving level the next year because you left her feeling ho-hum about the process.

8. MANAGE YOUR OWN TIME. If you’re planning to grow your net revenues by 20% or 40% with a HERO giving program be prepared to put a serious slice of your time into it. Half-cooked won’t do. Your donors will see through it and you’ll lose their trust and loyalty in the process.

9. START DECONSTRUCTING YOUR INTERNAL SILOS. The reason this revenue gap exists in the first place has little if anything to do with donors and everything to do with how we fundraisers organize ourselves. We must do a SUPERB job of making HERO giving a seamless transition from annual to major gifts rather than creating what Cathy Finney calls a ‘jarring donor experience’ (Bridge the Giving Gap, Fundraising Success, October 2007). This deconstructing applies to departments (annual, major, planned giving) as well as tactics (mail, online, in-person, social media).

10. ENGAGE. We strongly suspect (although we don’t yet have enough hard data to offer proof) that HERO donors aren’t content to just give you the money and step back. Most of these people are going to want to stay connected and engaged – with you, your cause and the people you’re cause is built around.

Here are four ideas to create and maintain that connection:

• Some HERO donors will be satisfied with more thorough stewardship and education. Tell them lots about the program they’re funding. Give them more depth and detail. Invite them to ask questions and give them places, perhaps your website, where they can go and learn more.

• Others will want to evangelize your mission to their friends, families and networks. Research conducted by DonorTrends in the USA has found that some 14% of American donors are missionaries. They regularly talk up their favourite causes and charities whenever they get the chance.


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• There’s an old fundraising saying that says ‘If you want advice, ask for

money – and if you want money, ask for advice.’ We think it makes a ton of sense to survey HERO donors and seek their input on a wide variety of issues. Tell them that their voices are important and that their opinions really matter (which, by the way, they do!)

• Finally, give your keenest HERO donors involvement opportunities. Maybe they can visit a project, come to an information night or participate in a telephone town hall meeting with your organization’s leadership. Be creative. Find meaningful room for them in the work you do.

And Now It Is Your Turn A white paper is, by definition, a draft of a work in progress. It’s a trial balloon if you like. Putting the beta out to the market to see what happens.

We’ve shared our thoughts, findings and ideas with you to the degree that we’re able at this stage of the game. HERO giving is very much a work in progress for us.

We would devour and appreciate anything you can contribute to the conversation. Your criticisms, ideas, research findings, experiences are all valuable raw material for us – so we invite you to share.

Please, please, please holler at us and let us know what you’re thinking. Nothing great gets built in silos anymore. We want HERO giving to become a great way to raise money for great causes like yours. We’ll only make it great together.

Thanks for taking the time to read and think your way through this!

Fraser Green is principal and chief strategist at Good Works, a consulting firm that works with Canadian charities to engage donors at a truly human level and build donor loyalty and

commitment. Fraser welcomes your ideas, comments and criticisms about HERO giving. Please email [email protected] with your reactions and thoughts.

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