Listen to the Experts Discuss the Future of E-Philanthropy and Technology (Part 1)
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For this week's issue, we've brought together some of our favorite E-Philanthropy and Technology Review pioneers and pundits in a conference call utilizing CharityChannel's voice over IP system to discuss this question: What is the biggest single challenge facing nonprofits in the next decade, and what is the proper role of e-philanthropy and technology in meeting that challenge?
Participants in the eRoundtable discussion, which was moderated by Stephen Nill, CharityChannel, were:
Cynthia Adams, GrantStation
Vinay Baghat, Convio
Colleen Boland, CPA, My Non Profit CPA
David Crooke, Convio
Hillel Korin, Korin Development Associates
Jay Love, eTapestry
Celisa Steele, Isoph
George Williams, Planned Legacy
In this week's Part 1, the discussion was led off by Vinay Baghat and David Crooke of Convio. From their perspective, the biggest challenge faced by nonprofits is how to compete in a more challenging economic environment and how to drive efficiency both in fundraising and in operations.
In Part 2, which will appear here next week, the discussion was led off by Celisa Steele of Isoph. From her perspective, the biggest challenge is how to provide education within the nonprofit sector more efficiently by harnessing the Internet.
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|CharityChannel eRoundtable(tm) June 15, 2004 -- Part I |
Transcript of Session
Stephen Nill: We're going to be addressing throughout this "eRoundtable," if you will, a single question. We're asking our panelists here to contribute their own perspective on the question. As you'll see, they're each coming from an interesting and perhaps different perspective in addressing the same question, and I think it's going to make for a great conversation.
In the first 15 or 20 minutes or so we're going to focus on discussing the question, which I will get into in a second, from the perspective of two of our participants and then open it up during the balance of this to everybody for a true roundtable discussion.
The question is, "What is the biggest single challenge facing nonprofits in the next decade?" and, "What is the proper role of e-philanthropy and technology in meeting that challenge?"
Leading off the discussion will be Vinay Baghat and David Crooke from Convio. Vinay and David, welcome.
Well, gentlemen, what is your perspective on the question? What do you consider to be the biggest single challenge facing nonprofits in the next decade and what is the proper role of e-philanthropy and technology in meeting that challenge, in your perspective?
Vinay Baghat: Well Stephen, I think the challenge at core is how to compete in a more challenging economic environment and how to drive efficiency both in fundraising and in operations. The macro kind of view of the world is that we are living in a busier and busier economy where consumers, constituents, donors are being marketed to very heavily -- frankly, blitzed by marketing messages -- and how does an organization compete for attention in this kind of environment? The Internet represents a new way of doing things and I think David probably would like to share some thoughts on that.
David Crooke: As Vinay pointed out, in the last few years, large media organizations are assaulting everyone's senses from every angle. A new movie comes out and the logo for it is on your paper cup at the drive thru and there're video games and there's television advertising and it is very important for nonprofit organizations to be able to make themselves heard above the noise.
The Internet represents a discontinuous innovation in the way that we communicate -- an example of that being email. A key medium that organizations historically use to reach out to constituents is paper direct mail, direct solicitation. And the average cost of the communication is perhaps 60 or 70 cents and that cost has really controlled the way in which those communications are structured and the way that they service the relationship between that organization and its constituents.
Well, now that you have email, you can send that communication for a fraction of a penny and that discontinuous change in the cost allows us to think about different ways of communicating, different ways of structuring a relationship between the organization and its constituents -- perhaps shifting focus from soliciting financial gifts to more of a relationship-building exercise, the opportunity to touch a wider audience of people before we necessarily try and get them involved in directly contributing to the organization financially or otherwise.
Vinay Baghat: Another key aspect to that is changing the model around acquisition. So, the rule of thumb today for groups that are somewhat direct-response driven in their efforts is you cast the net to constituents that maybe have supported groups like yours before through list rentals.
But the Internet, again, allows much more economic ways to do outreach. New concepts like peer-to-peer fundraising allow you to take your current support base and use them and leverage them to reach out to other prospective donors to support your cause. The opportunity to get younger people involved in philanthropy earlier -- again through processes like involving them in grassroots advocacy or special events -- is possible to a much greater degree with Web-based technology.
So, really, to summarize, the game is going to be one of efficiency -- efficiency both in fundraising and efficiency in enablement of their mission. The role of e-Philanthropy is to help drive efficiency and help build capacity to help them do outreach more effectively, to help them do relationship management more effectively and help drive success in key areas like fundraising more effectively.
And hand-in-hand with the technology will need to come cultural and process changes. Just as a fundraising organization may be very used to a schedule of direct response solicitations going out multiple times a year, with this new communications paradigm and model, they not only need to embrace the technology but shift some of their processes and culture and cultural kind of attitudes towards how they communicate with their donors, to, as David said, focus more in the communications and stewardship aspects of things, and weave the solicitation into the overall aggregate mix.
Stephen Nill: Suppose you were sitting face-to-face with the Executive Director or Chairman of the Board of (let's say) a mid-sized nonprofit organization (whatever that truly is), and they were engaged in the process of strategic planning across the board for their organization trying to figure out where they're heading, how they're going to meet their mission over the next, say, 5-10 years. They're exploring their online assets and challenges. How would you approach a discussion like that? What would you tell that Executive Director or Chair or Senior Development Officer, or, for that matter, whoever it might be sitting there, who has in a decision-making role?
Vinay Baghat: The first thing to do is to step back away from their online strategy, per se, and get a clear sense of what their constituent relationship management strategy is, period. And that means what outreach did they need to do, what marketing did they need to do and that made sense around bringing new donors into the fold but also perhaps volunteers, clients to use their services, referrals if they are a health-based organization.
And then secondly, who are their current constituencies today? Government officials who control state funding? Donors and current customers of their services perhaps? And how do they relate to those customers today from a communications perspective? So, understanding the goals from an outreach perspective to new constituents and understanding our approach around current constituent relationship management and then understanding how the Web can or cannot be used effectively to improve those relationships or improve those outreach efforts.
If I'm a social services organization for example, like an organization serving the homeless, clearly one of my targets is the homeless but they are not going to be, you know, a reasonable target to pursue these via the Internet. Your effort is going to focus more on the funders and contributors. But if I am an animal welfare shelter or an affiliate of National Easter Seals, maybe a really meaningful constituency for me to reach out to is my perspective uses of my services or perhaps local officials who have public policy influence.
So, it really starts with mapping what your constituent relationship management strategy is and then understanding how the Web can be used to significantly enhance those relationships.
Cindy Adams: I am wondering, Vinay and David, does this mean that the language that nonprofits use -- the way they communicate -- needs to change? We used to do direct mail appeals, for example. It was often built around the story or it started off with a little vignette of some sort to draw the reader into the letter. And how does that change or how can we build on that to deliver the message via the net using the net?
Vinay Baghat: I think some elements will remain the same, I think the idea of story telling and building a personal connection with the donor remains front-and-center are very important. But, the opportunity to do more donor service and donor relationship building without necessarily always an appeal, I think is a new opportunity that nonprofits need to embrace.
So for example, say if I am a child sponsorship agency, I am still going to be to my current donor files sending them out gift appeals for work overseas.
The technology allows them to do a few more things. For example if I had sponsored a child in Nigeria, maybe I ought to know that my interests are in Western Africa and that more easily be able to send me updates about what's happening with that child or with that part of the world. The appeals that I'd get might be more targeted to my interests such that maybe there's a school project happening in Lagos and I have already sponsored a child there so it is more pertinent and interesting to me.
So, idea of relationship development and deriving a personal connection and emotion with the donor is still incredibly important. I just think the Web offers further opportunities to do that.
Cindy Adams: And so, do you think that donor service - when you talk about donor service?
Vinay Baghat: Uh-huh.
Cindy Adams: It's almost, in a way, I looked a new term. I mean, I've been doing fundraising for a long time, but - and of course you always treated your donors well. But, when you're talking about donor service, you're really talking about serving them, serving their needs.
Vinay Baghat: Yeah, very much. I mean, think about major gifts. Successful major gift offices are not necessarily going and talking about what the organization needs. I mean, that's part of what they do. But the really great major gift officers parlay that to what the donor's interests are. So, if a donor is particularly interested in seeing their name on a plaque, that's one thing. But if the donor has other kind of personal motivations as to what may appeal to them about, you know, an institution or a cause, it's important to get behind that and really understand that and then map or parlay the needs of the needs of the organization to that donor-specific interest.
Hillel Korin: I wonder, though, if, you know -- and as we do this, as we learn how to do this, in a sense in a new environment -- how we're going to teach ourselves because I think we're sort of learning this as we go. Particularly in the major gifts range and in that venue, how we're going to learn to listen to our donors.
One of the skill sets that I think is so valuable for major gift officers is I certainly know when I was in academia and when I was in the organized Jewish community. You know, we used to try and train my major gift officers to really listen, because just as you were saying, you know, it's really not so much about the organization or the institution but about the donor. I used to give out a sign that said "It's the donor, stupid." And I wonder how we're going to use the Web to listen to what our donors are saying to us. And I'd like to hear how you sort of would address that?
Vinay Baghat: Yeah, absolutely. It's a very important point. Well, the Web offers two things. The ability to communicate a much lower cost such that the objective of sending or communicating an update does not become cost-prohibitive whereas sending a mail, a piece of mail or picking up the phone and involving, sort of, you know, human time to reach, you know, 10,000 people is for so many groups is cause-prohibitive.
So, I mean, a really good example of that is after 9/11, a lot of groups wanted to reach out to the donors and just sort of talk about, you know, we recognize the strife the country is going through and -- but we're still here and we still need your funding. And without doing a direct solicitation, a lot of groups felt it was important to just connect with their donors. That was an expensive decision, but an important decision for a lot of groups.
Now, with the Internet, because of the zero or effectively zero cost of marginal communication, that kind of communicating becomes a no-brainer, where you can just, you know, use an opportunity to connect with your constituency.
Now, from a donor service and relationship-building perspective, one aspect of that is just being communicated to on a more regular basis without being asked for money all the time. Clearly, they are going to be asking for money but having some communications that don't focus when they ask.
The second aspect of it is over time, learning what's important to the donor and using that information to customize both the updates and also the appeals. Now, the way that you do that is as a gradual process. Imagine this is a new constituent who comes and supports you for the first time. Perhaps I'm someone who, you know, I'm someone interested in the cause of diabetes and I go to the American Diabetes website and I subscribe to one of their newsletters. And as part of that process, you notice that I'm always reading articles on diet and nutrition and it seems that I have a particular interest in a particular type of diabetes. You probably want to find out, "Am I someone who has diabetes myself?", "Am I the spouse of someone with diabetes," and, "What's causing me to do this?" And the next kind of phase of cultivation might be asking me to participate in grassroots advocacy and seeing if I am politically motivated or interested in doing that. Maybe there's an event in my region that I could be invited to.
And all of these touch points and interactions, be it me reading an article, responding to a survey that operates online, participating in an event, is a sign of interest and involvement. So, behind the scenes a nonprofit organization with the right technology can learn what is most important to their constituents en masse and to an individual level. And they can also understand how engaged people are in their mission and different aspects of the mission. And they can use that data to then fine-tune what communications they choose to send out, en masse, and how they choose to perhaps segment their communications according to peoples' specific interests.
So, if they've got, you know, 10% of their audience particularly interested in the idea that they haven't constructed the will yet and they are open to the idea of learning more about how to construct a will from the organization, that's a great piece of information that they can then use for a more targeted communique to that specific audience.
If they know that a donor has a particular interest through that process of touching them electronically and building a profile, they can use that data to, again, to do some personalization to drive a stronger relationship.
So, this is gradual process. You're not going to have roots embracing this concept overnight. It's a very gradual process. I mean, one thing that the group that we work with has found out -- the ASPCA, the animal welfare organization -- is that in that constituency, the things that really motivate people are different. So, you have some people who are very passionate about cats and you have some people who are very passionate about dogs. And knowing that little piece of information about the individual has enabled them to drive higher response rates. Where if they actually personalize or segment and communicate based upon someone's animal interest, they get about three times higher response rate.
That's one simple example, but I think all nonprofit organizations at some level want to know more about their donors and want to able to, over time, be able to relate to them in a more one-to-one fashion just like they'd like to do with a major donor. The value of technology is allowing you to do that more scaleably and more cost-effectively. And also, you know, allowing you to actually communicate on a more regular basis without spending the money for mail or picking up the phone.
Stephen Nill: You know, the whole Internet is still, in the overall scheme of things, fairly new although it seems like those of us who are who have been -- all of those who on this phone call are at the leading edge of all of this.
Are there any case studies, independently conducted case studies, or any attempts at independent research that are attempting to track how well nonprofit organizations have been implementing the kinds of tools that many of you are putting into their hands or making them -- making available for them.
The reason I asked is if I'm an executive director, I may not have - I may see the wisdom of going in the direction that we're talking about here. I may even be willing to garner the resources of my organization to strike out or to increase resource into that direction. But I would find that I wouldn't want to learn from other examples of other organizations that have been living in this direction to see how well they're doing. And I suppose I would be a little suspect to see anything that was a bit self-serving if you will, but I mean, I suspect there are plenty of case studies produced by some of the service providers and vendors. And they would probably be perfectly valid ones but I wouldn't give them as much weight or trust as I would, say, in independent studies.
And I'm just curios and I wonder if there is anything out there like that people can look at?
Robert Weiner: I haven't seen much in the way of that but Stanford has updated a study over time -- although the most recent update, I think, is three or four years old -- of the results of people who are subscribers to their online alumni email newsletter. And they have demonstrated through surveys and focus groups and analysis of the hard data that people who receive that newsletter called @Stanford are more aware of the university's issues, the issues that the university wants them to be aware of and more supportive of those issues and also give at higher rates across the board at all class years and all forms of donors -- current ongoing donors, lapse donors, brand-new donors. If they are recipient of the email newsletter, they give.
It is a somewhat self-selected population. It's an opt-out newsletter so everyone automatically gets subscribed when they graduate. But if you've opted out, it does make sense that you would be less supportive of the university and, perhaps, give at a lower rate.
Stephen Nill: But they may be able to lay the results of their opt-out newsletter against many, many years of experience before the electronic newsletter was created, correct?
Robert Weiner: And, also, they have a very low opt-out rate. It was only about 2% the last time I asked.
Vinay Baghat: And just to speak to -- that's a great case study Robert. Some of the specific data shows that the response rate on acquisition, essentially, sort of new alumni participation is in order of magnitude different if they subscribe to the news -- if they are, you know, regular readers of these e-newsletters versus not. And from a retention perspective, if I remember the data correctly, it jumped from 73 to 78% for multi-year donors. So that was meaningful as well from a relationship development perspective.
And there are, you know, an emerging body of case studies. Frankly, most of them are vendor generated?
Stephen Nill: Right.
Vinay Baghat: --but show that outreach is possible and that new donor acquisition is possible and that retention can meaningfully be lifted. Carnegie Museums, for example, had a first-year member retention rate of 40% and through implementing Web-based technology has bumped that to about 58% across their file. They have email addresses for over half of their file. The multi-year retention rates have also gone up about 5% as well, which mirrors Stanford University.
So, we're seeing that work in membership-based cultural groups, alumni groups. From an appeal fundraising-type organization, we've seen data to suggest that constituents with an email relationship are somewhere between three and four times as valuable from a lifetime donor perspective. They give about twice as much; they give twice as frequently as well.
And from an acquisition perspective, if you're able to do successful email file-building and then convert those constituents to donors, clearly the cost of acquisition through that type of programmatic effort is a lot less than renting lists and using the mail.
So we've seen groups like Mothers Against Drunk Driving and the ASPCA achieve good acquisition response rates relative to the mail by first building an email list and cultivating that and then either soliciting that list just via email or through a combination of mail and email.
Cindy Adams: This is Cindy again in Alaska. But the place I've seen -- the organizations I've seen that has been the most successful at this -- and they've been very, very successful at it -- have been the environmental organizations. Everything from, you know, the ones that I've personally involved with has been the Alaska Wilderness League and the Alaska Conservation Foundation and they pretty much have built their membership off of the Web.
And if there's anyone out there who hasn't heard of the Arctic National Wildlife Refuge I'd be surprised. I mean, the campaigns they've run and the fundraising they've done around those campaigns has been incredibly successful. I wish I could give you some figures but I didn't look into that before I called but truthfully, really outstanding results these guys have gotten.
Hillel Korin: I'd be interested in getting -- and also getting a reaction on the political side of the spectrum. You know, so far, we've talked about environment, we've talked about the university world, and I have some questions about that because I think when you look at retention rates and you look at participation rates, I wonder how they skew, you know, graduates of the last decade and, you know, the goal programs that many universities have versus some of the, you know, middle classes, so to speak, you know, the, say 25, 30-year classes.
But I also wonder how this fits into that whole spectrum of the political fundraising. Clearly, we know that Dean has been - was very successful raising money on the Web and we know that Kerry's out there and everyone else as well. And I'm wondering, you know, are there lessons that go both ways?
Vinay Baghat: Yeah. Absolutely.
Stephen Nill: Vinay wrote a great article for...
Hillel Korin: Yes.
Stephen Nill: "E-Philanthropy Review"
Hillel Korin: Right.
Stephen Nill: ...that can be viewed on the website and I commend anybody interested in that to look at the article. Editor's note: See "Lessons for Nonprofits from Howard Dean's Use of the Internet" by Vinay Baghat, and "What the Howard Dean Campaign Gave Us, Some Lessons From the Campaign Trail" by Hillel Korin.
Vinay, what lessons that -- briefly, because I wanted to also give others a chance to jump in because the question really is, "What are the challenges in all this technology going to address those?"
Vinay Baghat: Uh-huh.
Stephen Nill: And someone else -- we may have a different direction to go in here, but what the lessons that you have learned? Perhaps it's time to update your article because that was when Dean was red hot!
Vinay Baghat: The, you know, it walks around differences, you know, in terms of perhaps the public disability and the urgency of a political appeal versus the traditional nonprofit appeal. There are some valuable lessons.
First and foremost, you know, treat the Internet as strategic. The CEO of the Dean Campaign, Joe Trippi, you know, cared about the Internet a great deal. The Internet is usually not a top five initiative for most nonprofit executive directors. So that's first and foremost. Treat it as a strategic tool, recognize that your organization is reliant on marketing to a varying degree and it may be very, very reliant, in the case of an environmental or political advocacy group and somewhat reliant for, you know, a social services group. But marketing is important, and the Web is a marketing tool.
Secondly, you know, if you are going to treat it as important, you need to staff it with the right number and type of staffs. They're not necessarily technical people but people who understand communications and fundraising.
Then on the more tactical level, you know, some of the things that I think were insightful were, you know, focus on building an email file. And that email file can be built through your own current constituency, forwarding messages to friends, in other words, things like viral marketing through just providing quality content that people want to subscribe to.
And three, using every offline touch point you have -- your events, your other media, you PR to drive people to the Web and to register and to give you their email address. Develop an e-communication strategy that focuses on building a connection with your audience, first and foremost, keeping them apprised of your policies and your updates and as appropriately, (unintelligible) the solicitations.
And in the area of solicitations, whereas they had a lofty goal which is, you know, raise enough funds to, (a) Know how to take federal funding, and then (b) If they had been successful in winning the primaries, you know, compete against George Bush.
But they didn't try and fund raise around that big, lofty goal; they broke their campaign into what I call micro-appeals or micro-campaigns, where - if the opposition had done a very successful fundraising event that we can, they would launch a micro-appeal around that. They'd do targeted emails that launch a specific appeal on their Website which had a little thermometer or bat that went up according to how much they've raised.
So, if Bush-Cheney raised $250,000, they would set that as a target and they would tell our audience that they'd smashed the target. A week or two later, they'd find another excuse to do an appeal. And it was through that methodology that they actually yielded a very high average-giving frequency amongst their constituents. The average gift was around $70 but the frequency of giving was two, 3 X of what you'd expect out of a normal kind of political fundraising process, the number of times people may receive gifts.
Stephen Nill: Has anybody seen anything like that in the nonprofit sector?
Vinay Baghat: The Jewish National Fund has actually completely mirrored that strategy. Where, you know, one of the things that they're fortunate about, and I'm not the expert on this but they have, you know, a number holidays that they were able to market around. And when there isn't a holiday, they've created an excuse to kind of market. And they do 12 annual solicitations to their file on top of other updates in communiques.
And they've found that the giving frequency for people who are on their email file is about 3 X to giving frequency of people in their mail program primarily driven by the number of solicitations they get electronically. But their solicitations are blended into a communications program so they don't seem invasive.
And in 2003 their Internet fundraising surpassed their direct mail fundraising, I think primarily because of that micro-appeal strategy.
Hillel Korin: And they've brought the appeal down to - I know a fair amount about JNF. And they brought the appeal down to the regional level.
Vinay Baghat: Exactly. Lots of their communiques, as to your point, are very localized. They realized the thing that people care about is, you know, is seeing news and updates and pictures, frankly, of what's happening in their own community. That was their personalization or their segmentation approach and it has been very successful for them. In 2003, 17% of the people in their email file opted to make a gift and, you know, a good chunk of those were new donors as well as, you know, traditional donors moving online.
Another strategy, back to political fundraising, that is really starting to be embraced by the core nonprofit sector is peer-to-peer fundraising, where it's again, a paradigm shift that is isn't possible very easily through the mail or the telephone, which is having a constituent raise money for friends and family and coworkers.
Now, the special events groups, like Susan G. Komen and Avon and Diabetes have been doing this type of fundraising for years and have moved it to the Web in the last two or three years. But the Dean campaign and others realized that they could use the same concepts for virtual fundraising or for events that aren't put on by the institution but are put on by the constituency.
So, a lot of their constituents organize house parties where Governor Dean would get on the phone for a nationwide conference call but they'd have 1,000 or 2,000 house parties concurrently where each of those individuals running a house party had invited 15, 20 people to their house at $50 a pop let's say, and raise a meaningful amount of money, en masse, through their peers. And then, each of those individuals that was then invited to the house party may have then become either a house party host themselves or a multi-gift donor to the campaign.n.
So, it was a way of philanthropically, kind of growing more people into the fold. And we've seen the same concept work with other organizations. So, for example, Share Our Strength, which is a nationwide hunger-fighting agency, has used the same concept to run a nationwide virtual event they called, "The Great American Bake Sale", where people organized their own local baking events and cooking events in trying to raise money from friends and family.
So, the same concepts are starting to be applied, and what that concept represents is a much more cost-effective way to do acquisition. What I think the JNF example illustrates is a much better way to drive donor stewardship and kind of appeal-based fundraising.
Editors note: We would like to thank Cynthia Adams, GrantStation; Colleen Boland, CPA; Vinay Baghat, Convio; David Crooke, Convio; George Williams, Planned Legacy; Hillel Korin, Korin Development Associates; Jay Love, eTapestry; Scott Merrill, Information Technology Professional; and Celisa Steele, Isoph for helping us make history in this first-of-its-kind eRoundtable.