Consider one of the most popular childhood tales, Cinderella, the story about a chore girl’s transformation from neglect to fairy tale success. Cinderella lived her life in obscurity, abandoned and often mistreated by her “family,” her best attributes going unnoticed. Despite her circumstances, she still aspired to greatness. It was not until she received significant support and attention, however, that she came to achieve her dream of living a better life.
Similar to the Cinderella story, annual giving programs have become the chore girl of nonprofit fundraising. Like Cinderella’s mean step-sisters, major gift programs and large events are in the limelight, demanding valuable attention and all the best efforts a development office has to offer. Granted, they are important elements of the story and result in very real and meaningful contributions toward an organization’s revenue goals, but the focus on the visible and demanding major gift and event programs often results in neglect of annual gifts.
It doesn’t have to be this way!
With attention, support, and a little strategic planning, you can transform your annual giving program from the chore girl to the belle of the ball that it should be.
The Crux of the Story
Annual gift programs should be a strategic and valued source of revenue for your organization. End of story.
If every organization believed that, obviously Cinderella’s story would be a pretty weak metaphor.
But since not every organization prioritizes annual gifts, and in fact many organizations flat out neglect their annual gifts programs, we’re fairly safe in our metaphor and will continue on.
What is an annual gift?
First, here are a few definitions of an annual gift:
- Gifts intended for immediate use
- Unrestricted or restricted uses
- Usually from donors’ income
- Can range from small to leadership levels
- Gifts intended for current special purposes
- Usually at leadership annual gift level or greater
- Usually from donors’ assets
- These donors usually arise from the pool of donors making the smaller gifts given for immediate use.
Where do annual gifts fit in?
Your annual gifts program should act in concert with your other fundraising programs, and the goals of your program should align closely with annual objectives outlined in your strategic plan, as well as the overarching mission, vision and goals of you organization.
But why are annual gifts so important? After all, not every overlooked, underappreciated attendee at every party has the potential to become the belle of the ball.
When carried out effectively, and when your annual gifts program is given the respect it deserves, the annual gifts program will result in growth in overall gift revenue, and in sustainable relationships with lifetime value. There is a continuum of giving with annual gifts that leads to greater and greater giving. The annual gifts program brings donors closer to the organization over time, cultivating donors who may make major campaign or planned/estate gifts later in the relationship.
Cinderella: The Plot
The four sections below will walk you through the process of transforming your annual gifts program from chore girl to belle of the ball:
- Plan: get ready for the ball
- Execute: dance with all the right people
- Assign: don’t go (or dance) by yourself
- Assess: does the shoe fit?
Get Ready for the Ball
Before getting ready for the ball, Cinderella shared her aspirations and expectations with her friends. Together they anxiously planned the big night. What dress would Cinderella wear? How would she get to the ball? What time would she arrive? More importantly…what time would she leave?
For your annual gifts program, this means defining the program parameters, goals and the story of your organization and impact.
- Start by defining your case: Connections to your organization’s donors are made in part by your stories: they reveal mission and purpose, tell stories of your constituents’ success, and convey your organization’s hopes and dreams for your community. These stories contribute to a nonprofit’s annual fund by connecting people to your cause and inspiring them to invest in your vision. Cinderella did this in sharing her aspirations with her friends and fairy godmother. Her supporters were so invested that they sought to make her dreams a reality by providing her with the means to get to the ball.Your case should be an inspirational story for your donors about how your organization is fulfilling its mission, what its intended impact is to those it serves and the needs its meeting, and what actions and resources are required. Donors want to know that their gifts are being used and affecting real impact and success. Sixty percent of donors surveyed by Software Advice said “impact and success stories” were the kinds of stories they wanted to hear. Be sure this is a good story – give it some longevity (you won’t accomplish most things in one year), update every year to chronicle progress, and seek to elicit emotional and rational engagement from donors. The case is the source document for all of your communications, from website, social media, newsletters and solicitation letters to group and individual presentations about your organization.
- Next, define your annual fund goals: the easiest way to do this is to participate in the organizational budgeting process to set realistic goals. Set three types of dollar goals for annual gifts – same as last year, incremental growth, and exceptional growth. Ensure your goals are supported by realistic tactics and budgets. Remember: goal attainment is not completely controlled by your organization or development staff – donors make the final decision! If you’re finding resistance from donors, revisit your case!
- Think big: focus your goals and efforts on leadership level annual gifts that require highly personalized engagement. Encourage smaller gifts through direct mail, phone, website, etc. Find a way to nurture relationships with every donor!
- Identify progress: create a gift table to identify leadership prospects. Blackbaud has developed a great gift range calculator that can come in handy here.
- Segment and analyze: categorize your prospect and donor pools according to tactics. Once segmented, set goals for each based on the three types of dollar goals (same, incremental, exceptional)
- Finally, define your program parameters: parameters for your program will include timelines, methods needed to reach each goal (personal visits by whom, personal letter signed by whom, phone call from whom, mass direct mail), and estimated costs for each segment, budget and track.
Dance with All the People
Cinderella’s goal at the ball was to meet the prince; she focused on that and achieved it. However, in reality the prince or princess of your donor base may be incognito. In this case, your annual fund program should be interested in meeting EVERYONE at the ball.
Assuming you have your plan and tactics in place, all that’s left is implementation. But you may still have your work cut out for you.
Job number one is renewal and retention, keeping last year’s donors. Acquiring a new donor costs six to seven times more than it costs to retain a donor. Your single biggest fundraising cost savings could come from focusing less on acquisition and more on retention. But that is a story for another time.
The other jobs of your annual gifts program are to
- upgrade selected donors (retained donors tend to give bigger gifts year over year),
- acquire/attract new donors (though relatively expensive, still necessary!), and
- reactivate/re-engage lapsed donors (reactivated donors tend to return to the organization at higher gift levels than their last previous gift).
So how are you supposed to retain, attract, upgrade and reactivate donors simultaneously?
- Stick to your established case for your messaging to donors. Your case is part of establishing your brand and an important element of branding is consistency in look, feel and messaging. Make sure everyone with you at the party (see the next section) knows the key messages and can clearly articulate them in their own way.
- Choose realistic tactics for your program. If Cinderella had never danced the quick step, she certainly wouldn’t be wise to just wing it at the ball. Similarly, if you have never utilized a specific annual gifts tactic, don’t just jump into it. Get it into your plan and prepare for its launch, ensuring it fits with the full mix of tactics you plan to use.
- Remember that your goals are focused on leadership gifts that require highly personalized engagement and on smaller gifts. This segmentation will help in developing tactics for identification, cultivation, solicitation and stewardship of donors throughout the year. Depending on sizes of gifts, you can automate some parts of your process to ensure that follow up and ongoing cultivation is taking place.
- Say “thank you.” Just as you wouldn’t simply walk away from your partner after a dance without saying “thank you,” you have to find a way to thank each and every donor for their contribution. Regardless of its size, each donation is significant to the donor. Research from Penelope Burk shows that donors want “timely notice their gift was received and that you are pleased to receive it.”
- Be in frequent communication with your donors. Not only do donors want to hear about the impact their gifts are making, but they continue to give because of the relationships you cultivate with them. This piece from Cynthia Gibson and William Dietel provides more insight into what donors want.
- Delegate stewardship. Showing donors that you genuinely appreciate their participation in pursuit of your vision is not the role of one person; it is everyone’s responsibility. The Board, CEO and development staff can all help. In fact, this can be the most rewarding part of the whole fundraising process. Identify in your plan the ways in which each role will contribute to stewardship.
- Have fun! Relationship building really is the fun part – what could be better than connecting with people who share your vision for the future?
Don’t Go to the Ball by Yourself
While Cinderella bravely attended the ball solo, this is not the appropriate place to emulate her to the letter. When it comes to annual gifts, your whole entourage is invited, though each person in your party may have a different role.
Your staff should be responsible for the day-to-day execution of the plan, ensuring that it is carried out effectively and within the set parameters. Staff should:
- Prepare the case
- Set informed goals
- Create the tactical work plan with specific revenue goals and cost projections
- Create and keep a master timeline with assigned responsibilities
- Manage donor information
- Acknowledge and steward donors
- Analyze and evaluate metrics to track costs, revenues and donor participation rates
- Report net results in a timely manner
Board and CEO involvement is equally important. Your board and CEO should:
- Ensure organizational processes are in place to document impact
- Ensure they comfortable articulating the case for support
- Make annual giving a visible priority
- Give personally
- Invite development to participate in budget discussions for goal setting
- Allocate sufficient resources to support annual giving staff and activities
- Participate in cultivating and soliciting leadership annual donors
- Say thank you and steward donors
- Evaluate performance of fundraising program
See if the Shoe Fits
At this point, ask yourself: Have we transformed annual giving from the often neglected “chore girl” into the strategic “belle of the ball” that it must be? Data and analysis can help you answer this question. What should you measure? First, analyze donor sustainability. These rates are important because of declining trends – you need to know what your rates are and take steps if they, too, are declining. The fifth year threshold is important in identifying donors who are engaged and invested for the long-term, and may be open to upgrading their gift level.
- Retention rates: % of donors from last year who repeat their gift this year
- Participation rates: % of all donors from the past five years giving this year
- First year conversion rates: % of last year’s new donors who gave this year
- Fifth year threshold rates: % of new donors from five years ago who gave this year
You should also analyze net revenue growth. Simply tracking total gifts received from year to year doesn’t tell you enough to manage your annual giving program for maximum organizational impact.
You need to know where you are making gains, losing ground, or marking time. To measure net revenue growth:
- ADD: the number and dollar value of
- New gifts
- Upgraded gifts
- Renewed gifts (retention of gifts from last year)
- Reactivated gifts (lapsed)
- SUBTRACT: the number and dollar value of last year’s gifts not repeated this year
Finally, calculate spendable (net) revenue. This equation will show you gift revenue—over and above fundraising costs—that is available to support mission-driven purposes. The result is important because you need to maximize the amount of money available for mission impact. For example, if you raise more dollars than last year but spend even more to raise those dollars, your organization will actually have less to use for mission-driven purposes. Net gift or spendable revenue is simply total gift revenue minus direct costs. This calculation does require you to track fundraising expenses as well as gift revenue (which you should be doing whether or not you make this calculation!).
These calculations and reports together should give you a good idea of whether or not the shoe fits. Once you have a baseline calculation from your year one analysis, you can set goals around donor sustainability, net revenue growth and spendable revenue for year two and beyond, getting you closer and closer to fitting into that shoe!
Cinderella became the belle of the ball by preparing, sharing, getting her friends involved in the process and getting in front of the right people. Your annual gifts program deserves the same attention, and a reprieve from its usual neglect. Annual gifts programs contain incredible potential, but only if you’re willing to put the right investment in place to see a return this year and in future years.
If you take nothing else from this, remember:
- Annual revenues are of strategic importance.
- Everyone has an important role to play.
- Tell an inspiring story.
- Make donor relationships your top priority.
- Employ best fundraising practices and analyze your performance.
- Mission impact is the ultimate measure of success.
Here are some questions to start the conversation about annual gifts at your organization:
- Does your organization think about annual giving in a strategic fashion?
- Do you know what proportion annual giving contributes to your organization’s yearly revenue stream?
- Would an increase, decrease or no change at all over time in annual giving impact your organization?
- Do you include leadership-level gift strategies in your annual giving planning?
- Is there an understanding about and appreciation for the complementary roles that the Board, CEO, and development staff should play?
Good luck! Let us know if you start the process of transforming your annual gift program and how it goes.