“Rightsizing” Your Development Operation

2004 NCDC Annual ConferenceOrlando, FL

September 2004

Kevin Whorton, Director Direct Response FundraisingCatholic Relief ServicesBaltimore, Maryland

kwhorton@catholicrelief.orgphone: (410) 951-7491

Overview

Catholic Benchmarking

Other Charity Benchmarking

Our Market

A Self-Assessment

Operations: Catholic Charitable Organizations

Proportion of Total RevenueNCDC Comparative Giving Survey: 2003-05

58% 28% 14%

56% 28% 16%

56% 23% 21%

0% 20% 40% 60% 80% 100%

2005

2004

2003

Direct mail MG/PG Other

“Other” includes e-giving (1%), events (5-8%), and unsolicited.

Proportion of Total Revenue: Larger Organizations

60% 31% 9%

58% 32% 10%

64% 25% 11%

0% 20% 40% 60% 80% 100%

2005

2004

2003

Direct mail MG/PG Other

“Larger” indicates revenue of at least $2 million. “Other” includes e-giving, events, and unsolicited.

Proportion of Total Revenue: Medium-sized Organizations

39% 37% 24%

39% 38% 23%

46% 35% 19%

0% 20% 40% 60% 80% 100%

2005

2004

2003

Direct mail MG/PG Other

“Medium-sized” indicates revenue between $500k and $2 million. “Other” includes e-giving, events, and unsolicited.

Proportion of Total Revenue: Smaller Organizations

66% 16% 18%

63% 16% 21%

54% 14% 32%

0% 20% 40% 60% 80% 100%

2005

2004

2003

Direct mail MG/PG Other

“Smaller” indicates revenue of under $500,000. “Other” includes e-giving, events, and unsolicited.

Average Organization: Revenue Growing 14% Past 4 Years

4.57%

2.98%

1.64%

4.37%

0% 2% 4% 6%

Yr: 04-05

Yr: 03-04

Yr: 02-03

Yr: 01-02

Overall

Average Organization: Growth By Size Range

3.6%

1.0%

-1.4%

-0.2%

7.1%

8.0%

2.5%

2.9%

4.7%

1.4%

6.2%

10.9%

-4% -2% 0% 2% 4% 6% 8% 10% 12%

Yr: 04-05

Yr: 03-04

Yr: 02-03

Yr: 01-02

Small

Medium

Large

House File Activity: Number of Mailings to Active Donors

14.6

14.4

14.3

12.9

12.6

8.0

7.8

7.6

7.5

6.9

5.9

5.8

5.7

5.6

4.8

0 5 10 15 20

2005

2004

2003

2002

2001Small

Medium

Large

Total pieces mailed: average 4.4 million overall, 7.3 million among large (19% increase over 3 years).

Operations: Other Charities

Activities Reported by DM Programs

79%

21%

79%

58%

68%

11%

26%

32%

100%

38%

85%

54%

100%

31%

69%

8%

88%

28%

81%

56%

81%

19%

44%

22%

0% 25% 50% 75% 100%

Mail acquisition donors

TM, acquisition donors

Mail, house file

TM, house file

Website/microsites

TV/radio spots

Print ad campaigns

Other projectsOverallNationalOther

Activities within the Department

Overall National OtherMailings (internal) 31.2 39.5 25.8Mailings (external) 12.7 15.8 10.7Email projects 17.7 17.1 18.1Other mktg projects 4.5 1.5 6.4Total marketing projects 66 74 61

Online survey conducted among DMA Nonprofit Federation member and prospect organizations, July 2004. A total of 35 organizations completed the study.

Charity Benchmarking: Staffing, Vendors, Revenue, Gifts

   Overall National OtherTotal FTE DM/FR staff 7 9.1 4.7Total other staff 15 22.8 6.5Total vendors 32 54.1 9.9Revenue per staff $665,500 $768,800 $503,000

Overall National OtherRevenue per name $39.70 $42.50 $35.20

Gifts per name 1.4 1.3 1.5

Average gift $90.47 $93.04 $85.34

Results: Charitable Org. Study:Revenue, Efficiency, Size, Effort

   Overall National OtherMarketing/DR expenses $4,825,800 $7,684,546 $1,331,778

DR revenue $13.487,019 $17,932,216 $7,374,875

Net DR revenue $8,661,000 $10,248,000 $6,043,000

Cost/raise dollar $0.34 $0.41 $0.23

Size of Program Overall National OtherSize of active file 327,263 495,636 95,750

Total gifts per year 494,306 612,955 233,280

Pieces to typical donor 13.4 14.4 12.1

Acquisition campaigns 8.3 11.3 4.8

Satisfaction with own DM Program

3.97

3.53

3.45

3.66

3.19

4.17

3.38

3.31

3.62

3.23

3.83

3.65

3.56

3.68

3.16

1 2 3 4 5

Making mail dates

Ease of makingdates

Lead time built intoschedule

Time spent trackingprogress

Monitoring progress

OtherNationalOverall

Key to Benchmarking: Every Organization is Unique…

Internal projects 50 15 35 35

External projects 10 - - 20

Email - 10 - 100

Other projects 15 - - 25

Marketing/DR budget 5,000,000$ 450,000$ 300,000$ 1,000,000$

Gross revenue 12,000,000$ 2,300,000$ 1,204,368$ 20,000,000$

House file 400,000 46,000 150,000

Mail active donor receives 25 12 12 25

Acq campaigns 15 3.5 3 2

FT staff 4.5 6 3 9

Other depts 1 1 8 5

Vendors 10 3 4 20

Characteristics of “Our Market”

We Have a Massive Audience

More people, larger congregations: 63.3 million members, 19,356 congregations Southern Baptist (40,000) & Methodist (35,100) more

congregations Southern Baptist (15.6m), Methodist (8.3m), Lutheran

(5.0m), Presbyterian (3.4m) all much smaller Catholic members per congregation very high (3,270) Compares to Lutheran (470), Baptist (390), Methodist

(235), Presbyterian (310) But do they attend? 715 on average for Catholic,

compared to just over 120 among Protestants

Source: Bryan Froehle, PhD: presentation at 2004 NCDC Fundraising Summit; United States Congregational Life Survey, 2001

Total US - 273 Million

Total Catholic - 65 Million

Typically Attend Mass - 20 Million

Donors - 400,000

CRS Aware –14 Million

Market Penetration

Market Concentration

Donations by Diocese

1 Washington, DC 5.6%

2 Boston, MA 3.9%

3 Arlington, VA 3.7%

4 New York, NY 3.0%

5 Fort Wayne, IN 2.7%

6 Chicago, IL 2.3%

7 Baltimore, MD 2.3%

8 St. Paul & Minneapolis, MN 2.1%

9 Philadelphia, PA 2.0%

10 Seattle, WA 2.0%

Next 10 16.0%

Next next 10 10.3%

All other diocese 43.9%

Where is the bulk of your support coming from Geographically Generationally By source

And, does it make sense? Can you do things

to change it: Improve the top Rectify the bottom

Issues Among Young, Diverse Constituencies

60+: I pray daily (90%) or seldom (3%)20-39: I pray daily (53%) or seldom (15%)

60+: I attend weekly (63%) or once a month or less (27%)20-39: I attend weekly (24%) or once a month or less

(58%)

“Church is important”: 59% say yes 60+; 29% yes 20-39“I would never leave the Church”: 83% 60+; 50% 20-39

Source: Bryan Froehle, PhD citing Search for Common Ground, by James Davidson et al.

Message Challenge and Opportunity: Increasing Ethnic Diversity

Pre-Vatican II: 88% white, 9% Latino, 3% other Vatican II: 83% white, 13% Latino, 4% other Post-Vatican II: 70% white, 23% Latino, 7% other Today’s Teens (Jubilee Generation):

56% white, 35% Latino, 9% other Latinos more likely born outside U.S.:

15% pre-Vatican II, 23% Vatican II, 32% post-Vatican II

Findings reported in CARA Special Report, Fall 2002

The Congregational Life ofCatholic Mass Attenders

Percent of Mass Attenders involved in: 10.2% prayer, discussion, Bible study 18.9% clubs or social groups 6.6% evangelization or outreach 13.3% community service/social justice groupsDoes this parish have clear vision, goals, or direction? 25% unaware; 11% “ideas but no clear vision” Yes, but 23% strongly, 26% somewhat, 15% not

committed

Source: Bryan Froehle, PhD: presentation at 2004 NCDC Fundraising Summit

Good News: Potential Generational Transfers of Wealth

$41b generational transfer by 2052 (Paul Schervish, Boston College Social Welfare Research Institute)

2/3 of this total comes from 7% of estates (collaborator John Havens, Boston College)

Boomers more benefactors than beneficiaries (only $7b directly to boomers as heirs)

Golden Age of (Catholic) Philanthropy

Source: Bryan Froehle, PhD presentation at 2004 NCDC Fundraising Summit

Self Assesment: Analyzing Challenges

What Common Obstacles Do We Face:

Awareness How well recognized with your target audience? How clearly do donors understand you and your

mission? Perception

How legitimate is your mission, relative to other causes one can support?

Affinity For how many individual donors are you sole charity,

primary charity, or just “among the top 5” What is your trend (slipping lower, rising, stagnant)?

Common Obstacles: Competition, Atittudes

Competitive Environment Claim to the affinity of best donors Successful positioning in niche Layers of review, autonomy, and priority Diseconomies of scale

Current attitudes Greater public skepticism/antipathy toward charities Scandals and negative press

Need What if you’re already the right size relative to your

program?

Internal Challenges: Where Are Your Limits?

Internal Culture Speed of decision-making and market response Layers of review, autonomy, and priority Diseconomies of scale

Flexibility Ability to be aggressive Acceptance of varied media Willingness to invest--lose money to make money later

Latitude Relative positioning: “negative campaigning” How aggressively can you follow: a license to boast Tendency to homogeneity, inoffensive/indistinct messages

Internal Challenges: Knowledge, Structure

Structure How restrictive are budgets, vendor relationships?

Do they inhibit experimentation--diversification into potentially more successful techniques and tactics?

Are you able to incorporate successful new ideas over the year as they occur to you?

Able to discontinue things that simply aren’t working Knowledge

Surveys, focus groups, and learning conversations What do you know about your donors--their candid

perceptions, their history

Making Changes: Rightsizing the Operation

Tactical Improvements

Evaluate, implement changes at key leverage points: Improve synergies between DM and MG, PG Improve frequency, timing of renewal efforts New vehicles: creative use of radio/TV/e-/events Acknowledgement program: speed, second asks Improve timing, appeal of new donor conversions Increase acquisition programs: long-term benefit

Strategic Choices

With benchmarking/self-assessment of program metrics:

Understand your ‘business model’ Effective fundraising and alignment with mission

Determine if operation needs to be ‘new and improved’ If so, identify resources to make ‘new and

improved’ possible Implement key points of improvement

More Tactical Improvements

Mid-level programs: improved upgrading, more personal service and special treatment

Other segments: low dollar, Hispanic, etc. Better segmentation Monthly giving/sustainer programs Improved creative: more personal, new inserts Parish programs, brochures, lead Other viral, peer-to-peer marketing Personalization: use of variable copy and personal

data

Resources: Staff and Vendors

Evaluate your internal/external operations Senior management positions Production management

Special projects Web marketing Events management Advertising/marketing

Technical staff Data management, marketing analysts

Creative Editor/Copywriter, design

Administrative Financial, budgeting, general admin assistance

Creative Human Resources

Position and changes in management Adding, eliminating external suppliers Working creatively with part-time positions

Shared resources Retainer arrangements with freelancers Interns from colleges

Collaboration with other parts of organization Cross-training, career ladders/lateral movement Flexible work teams, building bridges with other depts

Working with suppliers Maintaining self control over strategic direction

Supplier Relationships

Evaluating balance between internal/external: Mailing list brokers

Arranging exchanges, new list recommendations, techniques (multiple use agreements, omit priors)

Creative Freelancers and agencies who can bring strategic

vision Striking a balance consistent with organizational

needs and your image Data processing

In house systems Periodic analysis of file: hidden patterns

Improving Donor Acquisition

Avoid bias toward control packages in test evaluation Changing rules to allow “ties” to be remodified

Re-tests, multiple iterations may yield differing results Often results are not statistically significant: confidence

intervals suggest equal performance Understanding second-gift performance Resting and rotating controls Modifying the next step Creating new buckets/segments/tracks Adding media: e-, phone

More Changes to Acquisition

Variations with testing, sometimes without Logo, color scheme, attention-getters (token) Anything that gets it opened The price of rigidly following testing “rules”

Seeking Kaizen—non-incremental change “Local optimum,” not the overall best

Thank You!