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PCI White Paper

Optimizing Peer-to-Peer Fundraising in an Online World

by Elaine Gantz Wright

February 2010

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Contents

Executive Summary

I. Introduction

II. Giving Trends

III. Online Giving and the New Demographic Frontier

IV. The Impact of Social Media

V. The “Long Tail Theory” and Fundraising

VI. Maximizing Word of Mouth

VII. Fundraising 2.0: The Peer Factor

VIII. Conclusion

About PCI and Fundraisers in Action

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Introduction Technology can be a powerful, pervasive tool—potentially optimizing all aspects of your operation. At times, it can seem overwhelming. What should you? When? And how? As an alumni or development professional, your time is precious and your decisions impactful. How should you spend your precious resources to maximize the gifts of time, talent—and particularly, treasure from your alumni? In terms of best practices, where does it make sense to insert a technological solution? Giving Trends First, understanding the key socio-economic and cultural trends that affect giving behaviors is essential. The Giving USA Foundation/Giving Institute released its formal Annual Report on Philanthropy for the year ending December 31, 2008 in June of last year. Notably, despite the impact of the recession and arguably the most challenging economy since the Great Depression, total giving to charitable causes in 2008 in the United States reached an estimated $307.65 billion. And a preliminary analysis of the past 36 months of online giving continues to show positive growth despite challenging economic conditions. Online revenue grew 46% in 2009 compared to 2008.1

1 Giving USA Foundation/Giving Institute,2009

Executive Summary Fundraising for schools, colleges, and universities is more complex than ever. Times are tough; budgets are tight, and staffs are stretched. Still, you much achieve your institution’s fundraising goals. That’s why it is so important to make strategic choices that optimize our resources. Today’s alumnus is bombarded with a burgeoning landscape of media message, technological innovations, financial challenges, time demands, and appeals for philanthropic support. Your alums are looking for more substance and meaning in their giving relationships, as well—deeper engagement, authenticity, transparency, and accountability. Given these new imperatives, this paper will explore the major demographic, psychographic, behavioral, new media, and other environmental factors impacting the deployment of peer-to-peer fundraising campaigns—defining a new frontier of fundraising best practices for the education sector.

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The key finding here is that individual giving continues to account for the largest percentage of overall giving at 75 percent of the total. Individual giving is an estimated $229.28 billion, (down by 2.7 percent over 2007 with a -6.3 percent adjustment for inflation). Education organizations received an estimated $40.94 billion, or 13 percent of the total. Gifts to this type of organization decreased 5.5 percent with a -9 percent adjusted for inflation. As fundraisers, the path is clear. Individuals represent are our greatest opportunity for recovery and growth. That said, our methods of securing individual donations definitely deserve some scrutiny and consideration—especially in light of rapid-fire technological changes impacting the landscape. Just how can we maximize individual giving? And what are the fundamental trends and challenges influencing the proven solicitation process? Consider the time-tested fundraising adage: “People don’t give to institutions; they give to people.” It is the essential nature of one-on-one solicitation at the very heart of fundraising. The process of one person asking another to give is what fundraising is all about. One-on-one meetings and conversations are the moments where the school’s case for support is made most effectively with a blend of passion and hard facts. It is the personal relationships between volunteer solicitors and donors that generate funding and continuing support for institutions across the street and across the globe. Research, cultivation and stewardship are all part of the solicitation process, but nothing happens until—we ask.

“People don’t give to institutions; they give to people.”

As we learned from the game-changing success of Internet fundraising in the last presidential campaign, we know that the days of closed –door handshakes and smoke-filled rooms are changing. One of the most remarkable aspects of the Obama groundswell was the return of grassroots participation – the return of people. That is, people reaching out to ask other people. The automation of the contact process was nothing short of amazing—downloaded phone scripts to kitchen and dining room computers all over the nation and people giving up their Sunday afternoons to attend calling parties with cell phones in hand. Real-time tracking reports updated calling party progress as it was happening—thus enlivening the competitive spirit along with the political passion for change.

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Online Giving and the New Demographic Frontier Online giving channels are growing rapidly and becoming an important source for new donor revenue and cultivation—especially among Generation X and Millennials. As “The Great Generation” passes away and “Baby Boomers” reach retirement age, “Generation X” is stepping forward to take the lead in communities and nonprofit organizations. Given these social realities, schools must develop targeted strategies and offer the appropriate tools to help their advocates and volunteers maximize their success. GenXers are people born between 1965 and 1976 – 1980, depending on the source. They are independent, enjoy Informality, are entrepreneurial, and seek emotional maturity. They want to build a repertoire of skills and experiences they can take with them if they need to, and they want their career path laid out in front of them – or they’ll likely move on. Gen-Xers seek balance in their lives now – not when they retire. They seek time to raise their children and don’t want to miss a minute – as their parents did. Gen-Xers also want immediate and honest feedback. Joanne Fritz, Nonprofit Consultant at About.com suggests, “Gen-Xers tend to be highly responsive to online marketing.”2 Therefore, it’s likely that we can optimize the performance of the Generation X volunteer, as well as the donor, through automated fundraising tools that help optimize efficiency and streamline efforts Interestingly, with regard to philanthropy, Northern Trust’s third annual Wealth in America survey3 reports that affluent individuals who were born between the mid-1960s and the mid-1980s actually give more to causes than their “Baby Boomer” and even senior, “Great Generation” counterparts. Generation Xers reported different philanthropic goals than their predecessors, including a desire to leave a family legacy. In addition, they indicated a stronger global philanthropic view. They also like to give during their lifetimes and are more involved in organizations on a hands-on basis than Boomers or seniors. The Northern Trust report indicated that 80 percent of Gen X millionaires did “at least some volunteer work in 2007.” Several recent studies have revealed that online donors are younger and have higher incomes than traditional direct mail donors. Typically, they make larger gifts and, as a

2 Fritz, About.com, http://nonprofit.about.com/od/marketing/a/onlinemarketinghub.htm

3 Northern Trust Wealth in America Survey http://www.northerntrust.com/wealth/08-summer/wealth-in-

america.html, 2008

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result, have a higher overall long-term value than donors to more traditional giving channels like direct mail. However, they are less loyal in terms of repeat giving.

“Tools maximizing the power of the Web are becoming more and more critical to fundraising success.”

As more and more donors turn to the Web for information on the nonprofits, access to interactive stakeholder communities, as well as tools for giving, independent schools, liberal arts colleges, and universities must position themselves competitively to maintain a strong online presence and engagement strategy. Tools maximizing the power of the Web are becoming more and more critical to fundraising success. Thus, combining the power of peer-to peer solicitation with web management tools will provide the most powerful platform for fundraising success. The CASE Survey of Online Fundraising (2009) reported, “The Chronicle of Philanthropy survey of online fundraising in 2008 found no fewer than five universities in the top 10 of all kinds of nonprofit organizations for growth in Internet giving over the last 5 years.” 4 The CASE Study went on to say that “almost two-thirds of the (562) institutions surveyed have been raising funds online for five years or less.”5 The opportunity is significant—as education institutions focus on developing online giving strategies that are increasingly sophisticated, appropriate, and relevant to alumni donors.

The Impact of Social Media Enter, the interconnected Web world of real-time, online peer-to-peer fundraising. Social media is providing a whole new milieu for the time-honored one-on-one transaction—or ask. Think about Facebook CAUSES with more than 33 million monthly active users and social action sites such as www.change.org or www.care2.com. Everyone is trying to figure out how the inject electronic sizzle with the authentic human emotion. Photos, audio,

4 Chronicle of Philanthropy, May 7, 2009

5 CASE Survey of Online Fundraising, 2009

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video—innovations are expanding exponentially. Charity:Water has used video as the medium for its organization’s message very effectively. Social media is becoming a critical dimension of peer-to-peer solicitation—as well as all fundraising and business, across the board. In fact, in a study conducted by Cone Inc. in 2008, “76% of nonprofit donors contacted said they are motivated by friends and family.” 6 The concept of “social proof” has become the new marketing and sales imperative. It’s the trust that extends throughout social networks of friends, colleagues, and alumni. “Online social network users are three times more likely to trust their peers’ opinions over advertising when making purchase decisions and less than 20% trust advertising when it comes to making decisions.” 7 The 2009 Business Social Media Benchmarking Study from Business.com stated:

“Nearly 65% of respondents reported using social media as part of their normal work routine, including reading blogs, visiting Business profiles on sites like Facebook or LinkedIn or using Twitter to find information and/or communicate about business-related matters.”8

This is powerful information—particularly in a world with so many demands on time and attention, we as fundraisers will be more successful if we can appeal to the behaviors and preferences of those making the asks—our volunteers and ambassadors. We cannot ignore the impact of social media, which is literally changing the way the world looks at itself and functions. This trend, initiated by the ubiquity of communication technology, is driving such radical change, because social media is really more of a mindset than a channel.

. . . “social media is really more of a mindset than a channel.”

As advancement and alumni engagement professionals, it is imperative that we identify and deploy effective tools and strategies that will leverage this dynamic, new mode of

6 Cone Inc. http://www.coneinc.com/, 2008

7 SXSW Panel Discussion, “Social Media: If You Liked It, You Should Have Put a Digg on It,” March 2009.

8 2009 Business Social Media Benchmarking Study from Business.com

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communication and satisfy the expectations of our constituents for the benefit of our organizations. And the recent explosive growth of mobile technology is just as critical. Many predict that that all media communication will be pushed to the phone—or “ambient device,” such as tables and walls, in the coming decade. Over the past two years, mobile technology has emerged as the key driver of social media engagement and innovation. The massive popularity of the iPhone and Smartphones has served as the perfect catalyst to converge web and mobile applications and services. IDC analysts predict more than a billion mobile devices connected to the web by year-end, 2010. That's almost as many mobile devices as Internet-connected PCs, the latter which will total 1.3 billion.9 As an example, the American Red Cross raised more than $5 million in two days though text messaging for survivors of the Haiti earthquake in January. 2010. Texting is yet another channel which must be incorporated in to your fundraising tool kit. It represents the new intimate and impulse-driven triggers for giving to serve a generation for which technology is more of a behavior than a tool.

The “Long Tail Theory” and Fundraising

In his epoch-defining book, The Long Tail, WIRED editor-in-chief Chris Anderson explores the statistically rooted theory of the same name. He suggests, “Our culture and economy are increasingly shifting away from a focus on a relatively small number of hits (mainstream products and markets) at the head of the demand curve, and moving toward a high number of niches in the tail.”10 He romances this theory in the context of dominant market forces, including the diminishing physical requirements of distribution and the proliferation of individual content producers empowered by the Internet and new media technologies. His clarifying point is critical, “The Long Tail starts with a million niches, but it isn’t meaningful until those niches are populated with people who want them.”

9 IDC, http://www.readwriteweb.com/archives/analysts_predict_1_billion_mobile_web_users_by_2010.php,

2008 10

Anderson, The Long Tail, 2008

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Maximizing Word of Mouth

Everything really comes down to the basic economic concept of supply and demand. The difference now is that the cost of reaching niches is reducing dramatically—thus driving the democratization of production and distribution. In his addendum chapter, Anderson addresses the “the Long Tail of marketing.” The premise of this chapter is that the fragmentation of markets is requiring the fragmentation of marketing. More important, the user-driven Web is turning the paradigm of traditional marketing communication on its ear. It’s more critical than ever to customize the approach, the method of communication, and the appeal to each individual donor. A sophisticated online donor interface tool makes deploying a personalized, targeted fundraising campaign must easier.

“(With) individuals trusted more—institutions trusted less— the most effective messaging comes from peers. Nothing beats word of mouth, and as we’ve seen, the Web is the greatest word-of-mouth amplifier the world has ever seen.”11

For alumni and development professionals, customized online solutions can help leverage, streamline, and even empower the increasingly important role of word-of-mouth. Technological tools can help increase donations, communicate more effectively with your volunteers and supporters, and strengthen relationships with high-value donors.

For alumni and development professionals, the medium is really not about the message. It’s about the relationship. Therefore, businesses and institutions must shift focus away from managing the message and move toward relating with the influencers. This means leveraging personal affiliations, relationships, and their voices.

11

Anderson, The Long Tail, 2008.

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Fundraising 2.0: The Peer Factor

Given this new focus on the influencer, we as fundraisers could not be in a better place. The development “sweet spot” has arrived. We know that that people give to people. And now, the cultural evolution of communication is giving our volunteer fundraisers more power and influence than ever before. We need to use the right tools to make our alumni more successful “askers”— and us the most effective “impresarios” of generosity.

Fundraising 2.0 is all about relationships—building the right donor relationships at the right time and in the right way. It integrates everything organizations have learned about effective fundraising and classic business customer relationship management (CRM) techniques. This new paradigm allows constituents to participate in the way they want, when they want. So if what's old is new, what's new? In a word: method. Cutting edge, online software and social media technologies provide a host of ways to polish traditional campaign principles and tactics.

“We just need to use the right tools to make our alumni more successful ‘askers’— and us the most effective ‘impresarios’ of generosity.”

Peer-to-peer is one of the most powerful fundraising methods available, and lessons learned have demonstrated that we cannot typically turn a prospect into a major donor overnight. Whether we are working online or in person, cultivating meaningful relationships takes time and attention to convert target audiences into true ambassadors and investors. By following these best practices for integrating peer-to-peer, online CRM tools, fundraisers will increase donor participation, expand donor pools, and drastically reduce campaign launch time, administration and overhead.

Here are a few key recommendations to enhance your class agent fundraising programs:

Integrate peer-to-peer fundraising into your current campaign strategies. Inventory your current communications and solicitation tactics (volunteer solicitation, e-mail, direct mail appeals, Web site, etc.), and examine the messaging. Through automated peer-to-peer campaigns, you can maintain the core messaging but enable your donors to personalize and customize the message for their own networking and recruitment efforts.

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Leverage social media relationships. Facebook, Linked In, and Twitter are rich resources for your volunteers. They provide an excellent way to initiate relationships based on your school’s affinity. Here are some specific ways to use these sites in your campaigns:

1. Encourage your class agents to search for connections—reaching out to “friend” or “follow” classmates as part of the prospecting phase. Social networks are a goldmine of social media relationships. This a great way to bolster your research/assignment efforts, capitalize on established rapport, and propel your institution’s cultivation process to a new level. (Can even bring a whole new dimension to stewardship.)

2. Create Facebook groups/pages, LinkedIn groups, or Twitter

lists/#hashtags (#Brown04) to focus class-year interest and affinity. You may even want to experiment with creating a Facebook CAUSE as part of the gift processing application on Facebook. Simply link to the CAUSE to your institution’s official 501 (c) 3 account as it appears in the CAUSES/Network for Good database and provide instructions to indicate the appropriate Class Year in the gift designation.

Class Year CAUSE Page:

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Institution CAUSE Page:

Motivate and thank your volunteers and donors. In peer-to-peer fundraising, you can easily focus on keeping your participants involved in the campaign by sending them timely personalized, automated e-mails that provide fundraising tips, solicitation reminders, encouragement, training materials, and your gratitude. Traditional methods of communicating with donors are costly, time intensive, and slow, but online campaigns allow you to automate all of the messages that will be sent on your behalf, even your motivational messages.

Identify campaign “champions,” and give them the tools to rapidly expand the donor networks. Empower your top supporters with automated peer-to-peer tools. Traditional fundraising practices often tie leadership to the amount of money given; however,

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using peer-to-peer fundraising, you can create new leadership opportunities based on involvement and passion for your institution.

Create friendly competition, and build individual and team incentives into your campaigns. Create accurate, real-time responsive leader boards that allow campaign champions to see how their fundraising efforts stack up against fellow champions. Offer prizes to the top fundraisers and top teams. Encourage team captains to motivate their team members, and offer them easy ways of communicating within their team.

Reduce time-consuming campaign administrative efforts. Peer-to-peer tools, such as Fundraisers in Action from PCI, automate many functions of fundraising programs and fundraising management. Trigger gift notifications and updates; standardize training and communication; strengthen volunteer relationships; hone constituent fundraising skills, and record offline pledges instantly. Peer-to-peer offers all of the benefits of our traditional programs that reach out to the community but removes so much of the administration, training and coordination.

Harness proven CRM tools to streamline campaigns.

Peer-to-peer technology allows you to capture current donor information and donation habits. Alumni donors can also identify a network of like minds beyond their own class year or city. Select a solution, such as Fundraisers in Action from PCI, that can achieve the following:

o Segment campaigns by Ask Amount, Region, Class Year, etc. o Assign prospects or allow agents to choose prospects with your approval. o Create customized emails, phone scripts, and letter templates o Encourage competition through built-in goal tracking o Provide current pledge fulfillment and giving history to agents o Empower agents to submit real-time prospect data changes and comments o Provide class agents instant access to prospect contact histories

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o Provide access to campaign progress statistics o Upload reference materials directly into agent interface o Automate data exchange

Conclusion Proven cultivation and solicitation techniques, combined with the most robust online tools and new media strategies can bring together alumni from around the corner or across the globe. Each donor and each network can unite as a community sharing the same campaign message and successes. Fundraising 2.0 requires integrating innovative fundraising strategies with CRM solutions that maximize the potential the Web offers. Re-evaluating donor solicitation strategies and volunteer management techniques can help you reach new levels of class agent engagement and campaign success.

About PCI: PCI has been in the business of engaging alumni, publishing directories, and accelerating contributions for educational institutions and associations for more than 80 years. With a rare combination of proven experience and pioneering expertise, PCI delivers seamless technology and best-practices execution—with the added value of personalized service. Clients never feel like just a number.