Five Areas of Focus in 2021
Our job at NextGen is to forecast upcoming trends for our industry and help nonprofit marketers and fundraisers prepare, execute, and thrive—no matter what. Like everything else in our lives, the outlook for fundraising relies heavily upon the pandemic and vaccination, local and national economies, and the global path to recovery.
Additionally, social unrest amidst political turmoil can have an impact, though its full effect will remain largely uncertain based on how the next few weeks and months pan out. Market volatility in response to these issues and events may drive some short-term philanthropic giving up or down. It’s true: coupling this uncertainty with that of the pandemic makes forecasting for 2021 is a much bigger challenge than in other years, but herein is our best estimate.
Many non-profit organizations did better than anticipated in 2020 and we are optimistic this pattern of philanthropy will continue in the coming months. With so many unknowns in our world, to best prepare our clients for the unpredictable path to the “new normal,” we’re focusing on fundamentals.
Below are five focus areas for your fundraising program for 2021 to help you maximize revenue for this year and beyond:
1. Stay aggressive with new donor acquisition
Successful nonprofits in 2021 will be those that remain aggressive in acquisition investment (particularly digital acquisition) and stewardship of donors, thereby increasing both retention and LTV. The growth of monthly donors can significantly lift the value of the overall donor base, too.
Many sub-sectors in the nonprofit industry actually saw year over year increases in the number of new donors acquired. With all that transpired last year, people were looking for a way to help others and supporting nonprofits was one of the most important ways to do that.
We expect philanthropic sentiment to remain high at least through the first half of this year so organizations should aggressively work to continue to acquire donors at a high rate.
As they do, nonprofits should look to bring on new donors of the highest value. This can be accomplished by using analytics to identify the best prospects, using more digital channels to acquire new donors, and making monthly giving the primary option for supporting your organization.
Online giving typically yields higher average gifts and strong retention rates. Nonprofits should be using more than just email and their website to generate online gifts. Search advertising (through Google grants and paid search) and social media advertising focused on fundraising, not just marketing, are important components to increasing online gifts.
Monthly giving lifts retention (and net revenue) significantly. Monthly giving continues to grow at a rapid pace for most nonprofit sub-sectors so mine prospects to find those who have the best propensity to give in this way. Even if you acquire fewer monthly donors than annual ones, the value over time is far greater.
The bottom line is that the more channels and more options for giving that nonprofits offer to prospects the less reliant they need to be on any one channel and the greater the overall response.
2. Did we say invest in digital?
More money was spent on online shopping this past holiday season than ever before and the large shift to digital retail spending is not likely to go away. Nonprofits, too, saw much higher online giving rates than ever before, so those that are best positioned to continue to serve donors through seamless digital means will perform better than those at an earlier point along the digital fundraising continuum.
Sure, maybe we sound like a broken record, but there is no doubt that organizations that were better prepared to deploy digital content, steward prospects through digital channels, and offer more options for digital giving weathered the challenges of 2020 better than those who were not.
To help with benchmarking your program, we have reached the point where your organization should be striving to reach double digits in terms of the percentage of revenue that comes through digital channels. If your nonprofit is already achieving this metric, work to grow it by a minimum of 5% in 2021. Setting goals by using these types of metrics may force your organization to think differently than just setting overall revenue goals.
As mentioned above, digital advertising is growing in both usage and success, but varies by platform. Paid search has been better for direct fundraising, while social media has less potential for direct revenue, but is a good place for building prospects and email addresses.
Successful organizations will be those that build a comprehensive digital plan with specific goals for each channel and create a seamless stream of communications across those channels, reinforcing both mission and impact as well as the impact of the donor’s gift.
3. Build the value of your donor base
Think of your donor base like an investment fund. There are many segments, some of which bring you short-term revenue for cash flow and some of which are important to the overall health and stability long-term.
In 2021, we recommend paying special attention to the value-driving segments. This means upgrading and adding to major and mid-level donor segments, monthly giving segments, and multi-year donors. It also means investing in retention efforts.
To varying degrees, each of these donors has made a significant investment in your organization. Find the ones who can give more and make the case! Building more value as much as you can in early 2021 will ensure you have the stability on your donor base to weather a potential downturn later in the year.
Lifting retention rates by as little as 3%-5% will also mean significant revenue and long-term value for your program. Growing your monthly donor program will go a long way toward making this a reality.
Mission and impact-oriented messaging will continue to drive results in Q1 and Q2, giving nonprofits an opportunity to build a cohesive, multichannel messaging platform across both marketing and fundraising efforts. The more structured and coordinated these efforts are, the stronger the message of the organization and higher the value of the donors.
4. Manage your lapsed donor investment
Recapturing former donors is a low-cost alternative to acquisition when it comes to file building. That’s only true, though, when the investment in lapsed segments is managed well.
At NextGen we have been noticing a trend in direct mail where larger lapsed volumes mailed deeper into the lapsed file are producing fewer and fewer returns. Some of this is because donors are being recaptured through digital and other channels. Some of it can also be attributed to higher retention rates and growing monthly donor files, leaving a smaller lapsed prospect pool or one of lower value.
While it’s okay to be close to breakeven in your lapsed program and in some cases even generate a net loss on a lapsed campaign (if the net cost to recapture is lower than your net cost to acquire or lower than other channels), you will likely see better success using RFM and A.I.-based optimization models that create a smaller lapsed pool that you can mine more frequently and still see positive revenue results.
Additionally, with all that has transpired over the past year with the pandemic, social injustice, local and national elections, etc., those who no longer give to your organization may be distracted or may be giving to other causes that rank higher on their priority list.
There is a reason these donors lapsed in their giving to your organization. Don’t make a general assumption that it will be easier to recapture them than it will be to find new donors.
Pay close attention to the metrics and manage your investment accordingly.
5. Align marketing and fundraising communications
As nonprofits employ the use of more digital channels for communication with donors, it is increasingly important for both marketing and fundraising departments to coordinate and align touchpoints.
They also need to align goals and work cohesively to help each other achieve them. Marketing’s job may be to use content to build email addresses and digital and social audiences, but none of that matters if those audiences cannot be monetized. Similarly, if marketers are pushing out content, fundraisers must leverage and build upon that to convert the audiences into donors.
In today’s world this requires a much more structured and coordinated planning process. As more nonprofits and more digital and social content come into existence, organizations must work harder to ensure their brand story cuts through the clutter.
Shared ownership of digital assets and properties is also critical. If fundraisers can’t run paid search ads because they don’t have access to the organization’s Google account, for example, money is being left on the table.
Donor expectations continue to evolve, too, and aligning your brand’s communications with donor preferences across both marketing and fundraising campaigns can assist in revenue, retention, and lifetime value.
Our recommendation is for organizations to work very hard in the first half of 2021 to continue to build multichannel communication programs that entice prospects, steward them toward high-value giving, and retain them so as to build as much value in the donor base to weather a potential year-over-year leveling off or downturn for Q3 and Q4.
Prepare your program to be nimble and flexible in 2021 because the world will continue to change at a rapid pace. Remember to always drive home your case for support to your most valuable supporters and integrate more channels: it may mean the difference between merely surviving versus thriving in the year ahead.