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How Can the Internet Help with Fundraising?

    Summary: By lowering costs and improving retention.

Emily Nelson, Manager, Special Gifts, Dallas Symphony Association, wrote to CYBERGIFTS on September 22, 2000:

I am looking for statistics to support my case that online fundraising is profitable, that it increases renewals rates and the volume of new donors. Does anyone know where I could find such statistics? Do any of y'all have anecdotes or statistics you could share? Any information is appreciated!!

Vinay Bhagat, Founder & CEO, Convio, Inc - the Online Partner for Nonprofits, http://www.convio.com, replied:

A study by PBS stations doing a web research initiative showed that 49% of online donors were new. I personally believe this is because of the added convenience of giving online.

In terms of retention/renewal rates, there is not much data that I have seen on the market for organizations yet, though many groups we have spoken to have done the math to show that a small percentage increase in retention rate drops straight to the bottom line, and has a huge impact. An organization that we interviewed in Boston cited that they calculated that a 4% increase in retention rate from their current 56% would have close to a 30% impact on their bottom line. Citing James Greenfield (author of Fundraising, and contributor to the AHP journal), typical direct mail based donor acquisition rates are $1-1.50 per dollar raised, vs. retention costs of $0.20-0.25 per dollar.

Internet based fundraising not only allows renewal/retention at a much lower cost than the traditional 20-25 cents per dollar, but more importantly changes the equation - by increasing retention, and therefore the profitability of dollars raised. Renewal is made even easier for returning donors/members on-line, if you do not make them re-complete their contact information - in other words present a blank donation form, but can remember who they are and prefill the form - this is what commercial websites like Amazon.com do. For an example of a nonprofit organization who is now doing this, register and try to give online to this Children's Museum - www.austinkids.org.

Renewal is also more effect when the Internet (both your website and email) is used as a cultivation, relationship management and stewardship tool vs. purely for solicitation. Studies consistently show that donors want to see where their funds are being spent.

An economic study that I read also empirically showed that renewal rates are higher when donors receive "thank-you" acknowledgements. Most organizations do this by paper, but it often takes weeks, is costly and requires people. Giving immediate, personalized thank-you's online and via email gives immediate gratification to the donor and enhances the propensity for donors to renew.

Additionally, some studies have shown that response rates on email or mixed email/direct mail campaigns is higher than pure direct mail. A study run by Stanford University showed that in 2 test cells of 500, the response rate when using email was 2x that of purely direct mail. In their case, they personalized both the direct mails and emails with the donor name and last year's gift. We all know the benefits of personalization and impact on response rates. In their case, they had to do this manually, but there is now a simpler, more cost efficient way to do so with Convio's Email Marketing technology - part of our Relationship Management System.

Moreover, there are many lessons to learn from the "for-profit" space on the subject of loyalty and retention. My favorite book on the subject, is the Loyalty Effect by Fred Reicheld.

(Order The Loyalty Effect from Amazon.Com. A royalty will be paid which will help support the Internet Nonprofit Center.)


Posted 9/22/00 -- PB


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