I’m serious.  Here’s why.

Moneyball, the 2003 iconoclastic bestseller by Michael Lewis  — now  a very popular and acclaimed movie starring Brad Pitt — is an entertaining and effective study in successful and counterproductive behaviors. I recommend it as ‘must reading’ or ‘must viewing’ for all fundraisers, development committees, boards and executive directors.

“It’s the biography of an idea,” says Moneyball author Michael Lewis. It deals not only with wins and losses, but also with the quest of a man who wanted to revolutionize a sport; someone who, in Lewis’ words was willing “to rethink baseball: how it is managed, how it is played, and who is best suited to play it, and why.”

That man was Billy Beane (charmingly played by Brad Pitt) the provocative general manager of the Oakland A’s with unconventional ideas about what a team with limited resources could do to compete with wealthy powerhouses like the New York Yankees. Billy takes on the system by challenging the fundamental tenets of the game. He looks outside the conventions of baseball with its cherished dependence on the intuition of scouts and hires a brainy young number-crunching Harvard-educated economist to help him figure out a better way.

Together they tackle conventional wisdom with a willingness to reexamine everything. Armed with computer-driven statistical analysis long ignored by the baseball establishment, they go after players overlooked and dismissed by the business-as-usual baseball world for being too odd, too old, too injured or too much trouble, but all of whom have key skills that are universally undervalued.

As they forge forward, their new methods and roster of misfits rile the old guard, the media, the fans. Using ‘sabermetrics’ (data analytics) the Oakland A’s found the good players they could afford, while successfully challenging many tenets of baseball’s hallowed conventional wisdom.

And just as in every other specialized field of human endeavor the detractors, the old-guard and the high priest experts argued that this focus on numbers dehumanized the game and ignored the intangibles that only ’trained scouts’ could see.

Although data analytics is an element in the story, that’s not really what Moneyball is about. More broadly it’s a real-life story of innovating to succeed, or as Billy Beane puts it in the movie, “Adapt or die.” Beane the entrepreneur innovating out of necessity.

And so it is in today’s world of nonprofit fundraising, communications and management. More than ever survival depends on innovation, the willingness to challenge old assumptions and, to no small degree, the ability to discover and use better measurements, benchmarks and other metrics that are based on more than myth and convention. Metrics that help us more strategically, accurately and competitively steer a course into a successful future.

It’s more than coincidence that Moneyball begins with a quote from Yankees star Mickey Mantle:  “It’s unbelievable how much you don’t know about the game you’ve been playing all your life.”

Ain’t that the truth. And for this reason over the next few posts in our “Flat Earth Fundraising” series, and with your help and suggestions, I want to focus on challenging some of the conventional wisdom and  fundamental tenants in our craft, while also introducing  you to some innovative approaches that might help us all change the game for the better.

What sacred cows would you like to challenge?

Roger

P.S. Interested in innovation? Then try the webinar I’m moderating that will present a new approach and tool for pre-testing packages, developed by DonorVoice. Seats in the February 9^th  (11:30 EST) Direct Mail Testing Webinar are going fast. Agitator Readers can register here FREE.

The purchase of Convio is the most recent acquisition Blackbaud has made to expand and solidify its position at the top of the nonprofit software and CRM market. It is also its largest acquisition to date. Previous deals, such as Blackbaud’s 2007 purchase of Target Analytics for $60 million and its 2008 purchase of Kintera for $46 million, were significantly smaller.

A similar pattern of acquisition – and market concern about the acquisition – emerged last year in the higher education space when Datatel, a company that provides software and online management services to colleges and universities acquired SunGard, its major competitor.

The most consistent expression of concern among Tweets and emails I reviewed is the fear that when a single company controls so much software and online applications, the nonprofit is at the company’s mercy in terms of new features, bug fixes, service and price.

Historically, there’s some basis for concern. Consolidation within a market indeed often decreases innovation and increases price. And in the world of online fundraising, in a few short years we’ve gone from Kintera/Convio/Blackbaud, then to Convio/Blackbaud and yesterday to just Blackbaud.

In higher ed, the SunGard/Datatel merger impacts the entire institution, because it’s not just about fundraising, it’s also about managing the operation of the universities and colleges themselves. Right now their customers are wondering, is it going to be Datatel’s campus management and SunGard’s fundraising systems … or what? Similarly, Convio and Blackbaud customers are wondering if it’s going to be Raiser’s Edge, eCRM, Common Ground, Luminate … or what?

Stop worrying. Why? Because thanks to technology and the cloud there is a fast growing number of alternatives.

Even assuming that Blackbaud or Datatel behave like Big Bad Monopolists – an assumption I’m not even remotely willing to make – the fact is that there are more and more enterprises focused on effectively meeting nonprofit needs.

In fact, we are beginning to enjoy the benefits of an app economy where we are free to choose best of breed, instead of best of vendor, solutions. Beyond the magic of Apple’s App Store you need only do a cursory search in the Salesforce’s AppExchange to see the hundreds of nonprofit apps available … many free or nearly so.

Between today and the App Economy of tomorrow there are also plenty of alternatives available right now! Take for example online CRMs and donor database systems. Viable alternatives now range from the inexpensive online donor management systems like DonorTools ($30 a month), to the highly sophisticated new cloud-based system Affinaquest ($99 per month for up to 10 users) designed and built by Jeff Shy, the creator of Sage Millenium.

You can quickly get an idea of all the alternatives available to you and your organization by downloading the free report on donor databases prepared by nTEN, the Nonprofit Technology Network.

And the same holds for email, donation and constituent engagement platforms. Plenty of alternatives like Stay Classy, CauseVox, and Constant Contact.

My first point in all this is that I don’t believe for a second there’s anything sinister or particularly foreboding about the acquisition of Convio by Blackbaud. Both companies have done much for our world, and both companies fully realize in the new cloud-based, app-driven world of tomorrow their very survival is at stake. Time to man the oars and move into the future together. Smart thinking as far as I’m concerned.

My second point is that given the wealth of existing and emerging alternatives, you have nothing to fear from the consolidation of major fundraising vendors except fear of change or the inertia that blocks exploration of the many alternatives.

Roger

P.S.  Here is a link to yesterday’s video of Marc Chardon, Blackbaud’s CEO, explaining the acquisition and why he believes it will help customers.

P.P.S.  For all the evangelists at Blackbaud and Convio, but especially for Vinay Bhagat, Convio’s Founder and Chief Strategy Officer, my thanks for the ground you’ve broken.

So we thought it fitting to give the last word of the year to an Agitator Commentator.

We picked this recent comment from Steve MacLaughlin at Blackbaud, who talks about the imperative for nonprofit fundraisers to embrace multi-channel fundraising. Use of multiple communication channels reflects the real world of donors … if not yet the real world of some nonprofits!

The bottom line: Different strokes for different folks (donors) is not just some ideal … it’s vital to fundraising success. And the chief obstacles to capturing its fundraising benefits are operational and data silos within organizations.

Here’s what Steve has to say:

“Is it channel conflict or cognitive dissonance? It is sometimes very hard to tell.

There is way too much philosophical debate on which channel should get the credit for the gift. This is mostly fueled by organizational silos or incentives that nonprofits have put in place.

Here’s the reality: Donors are multichannel. They receive messages across multiple channels and they give across multiple channels. They don’t care about your org chart or who gets credit for the donation.

The problem is that many nonprofits are still organized around single channels each doing their own thing, with their own strategies, their own data, their own donors, and their own systems. That’s broken and really costly.

Ultimately, you want to use the right number of channels to drive the right people to take the right action using the most effective and satisfying giving mechanism as possible.

If that means a direct mail piece and a check, then great! If that means a phone call and an online donation, then fantastic. If that if a tweet, an email, a QR code, a website, and a donation for, then so be it.

And if you’re looking at donor behavior across channels, then you will begin to see some trends in what channel mix works best for different types of donors. Oh yeah, did I mention that donors don’t all respond the same way to the same channels? One size fits all approaches are as doomed as single channel tactics.

Statistically speaking, online donors are much more likely to switch to become offline donors. About 32% of online donors will become offline donors compared to only about 3% of offline donors switching channels. Your results may very. Always be testing.

No one channel should get all the credit or all the blame. You succeed or fail based on how well you do these things together.”

Amen.

Happy New Year!

Roger and Tom

P.S. And here’s our New Year’s Resolution … Resolved: No Silos!

As we head for 2011’s fundraising finish line The Atlas of Giving on Friday reported that overall giving this year will finish 7.4% ahead of last year.

Key takeaways from the Atlas of Giving November report:

• In terms of sectors, ‘Education’ was the biggest gainer (up 9.3%) and ‘Religion’ posted the greatest decline (but still 6.5% greater than 2010). All other sectors remained posted gains in the 7% range.

• Corporate and foundation giving up 6.2% and 6.1% are forecast to account for the least growth, while individual giving will increase 7.7% and bequests +7.4%.

• There are some signs of weakening. Giving in November (+0.4%)  and the December forecast (+0.2%) are worrisome portends for 2012.

• We’ll know more when The Atlas of Giving releases its 2012 Forecast in mid-January.

Much like the CIA once monitored the wheat harvest in the old Soviet Union, Ethan Boldt over at DirectMarketingIQ reports the top 5 fundraising direct mail trends in 2011.

Using the remarkable database of direct mail contained in the Who’s Mailing What Archive  that includes 14 different types of fundraising mail, ranging from social action, through international relief, culture, health, politics, religion, sports, animal welfare and wildlife, Ethan summarizes the key trends as follows:

• Controls showed a slight uptick in 2011. This year 45% of all fundraising mail was with a control package (by his definition a package that appeared in the Archive for at least 1 year); that’s an increase of 1.8%.  This means that 55% of all packages were ‘new’—a hopeful sign that there’s considerable testing going on. [Or, asks Tom cynically, does this merely reflect desperation?!]

• Personalization and Variable Data Printing Hit Record Levels.  Today, according to Ethan, 60.3% of all fundraising mail is personalized either by copy or imagery—the highest point since the Archive began.  And, it increased by a full 8% over 2010, the previous record high.

• Surprising Increase in Larger Formats. Ethan examined all direct mail in the Archive and reports that the usage of envelopes smaller than 6″ x 9″s stayed constant over the past two years. “The only change was an increase in larger-sized formats (bigger than 6″ x 9″s), by 9 percent, with larger formats taking up a quarter of the mailstream with a big contribution from the fundraising industry.”

• The Self-Mailer is (probably) Out! In 2010 self-mailers accounted for only 4% of fundraising mail, but that represented a 12 percent increase over 2009. Bad economy? Bad thinking? Whatever the reason Ethan reports that the use of self-mailers declined by 21% in 2011, a trend also reflected in the commercial sector.

• Mailings with Premiums showed a 14% increase. In the commercial sector the use of premiums increased by 7% in 2011. Is the fact that premium use doubled in the fundraising sector significant? We’ll explore premiums in future Agitator posts, but the reality is that today 1 in 5 mail pieces contain a premium. [Again, Tom asks, a sign of pure desperation? He'd be more comfortable if he thought fundraisers were serious about measuring and evaluating the lifetime value of these premium responders.]

Your ‘premium’ for tomorrow?  Agitator posts that rang our readers’ chimes in 2011.

Meanwhile, what giving or technical trends caught your attention in 2011?

Roger

Done by Epsilon, the Consumer Channel Preference Study (registration required) focuses particularly on consumer preferences with respect to direct mail and email. But it also looks at social media and mobile. (One disappointment … nothing on telemarketing.)

Some findings:

• 50% of U.S. consumers and 48% of Canadians said they pay more attention to postal mail than email;
• 60% of U.S. consumers and 64% of Canadians said they enjoy checking the mailbox for postal mail, highlighting an emotional connection;
• The least trustworthy channels are social media and blogs, achieving only 6% trust among U.S. consumers and 5% among Canadians.

And specifically, as between direct mail and email, 30% of consumers prefer receiving solicitations for donations in the mail, versus 9% via email.

The reasons for preferring direct mail are (in rank order):

• More private if sent through through the mail
• Already get too much email
• Would prefer not to have to print the info
• A lot of online info can’t be trusted

The reasons for preferring email are (in rank order):

• I can print the info to keep if I want
• Can choose which info I want sent to me
• Can read the info when it is convenient for me
• To save on paper
• Can more easily share the info with others

Epsilon makes this recommendation (among others):

“Use personally addressed direct mail to provide information as well as an emotional lift for consumers. Recognize that more targeted communications are becoming the norm for consumers as they are engaging media on terms they prefer. Every opportunity to express more knowledge of the consumer in the channels they prefer is essential to building a relationship and driving action.”

Amen.

Tom

Kevin’s infographic (click image to enlarge) distills the essence of the landmark National Donor Commitment Study conducted this fall. It identifies the seven key steps an organization (not the donor, but the organization itself) can take to improve donor commitment/loyalty and thus increase its bottom-line dramatically.

In short, it is the actions an organization takes that affects a donor’s attitude; and it is the donor’s attitude that affects – positively or negatively – the donor’s behavior.

On the surface this all seems simple enough. And, in fact it really is, EXCEPT our old, bad habits keep getting in the way. One of those bad habits, of which I’m as guilty as the next fundraiser, is mistaking myth for truth.

Myth:  If a donor give us their email address they’re a more loyal/committed donor.

Fact:  There’s absolutely no proof of this.

Myth:  The more online activity donors participate in, the greater the likelihood that they’ll be better, more committed donors.

Fact:  There’s absolutely no proof of this.

Myth:  If a donor makes the effort to send in a change of address, they’re a more committed donor than someone who doesn’t.

Fact:  There’s absolutely no proof of this.

BUT….REGARDLESS of facts and reality, countless fundraisers continue to segment donor files based solely on donor behavior, hoping to somehow improve the bottom-line. Sadly, it’s not gonna happen, at least not in a reliable consistent manner.

Why? Because of an immutable law of science, statistics and logic:  “Correlation does not imply causation.”  This ‘law’ emphasizes that correlation between two variables (for example, sending in a change of address and being a more loyal donor) does not automatically imply that one causes the other.

Stick with me please, and I’ll treat you to ice cream – and murder. Only as an example, of course.

Historically the murder rate has always trended positively with an increase in ice cream sales. In Poli-Sci 101 this is known as a “false causation” — i.e., correlation does not imply causation.

It is known that throughout the year murder rates and ice cream sales are highly correlated. That is, as murder rates rise, so does the sale of ice cream. There are three possible explanations for this correlation:

Possibility #1: Murders cause people to purchase ice cream. One could imagine a world where this is true. Perhaps when one is murdered, they are resurrected as zombies who feed on ice cream.  (Or go online, or send in their changes of address.)

Possibility #2. Purchasing ice cream causes people to murder or be murdered. Again, one could imagine a world where this is true. Perhaps when one eats ice cream those without ice cream become jealous and murder those with ice cream. (Or frequently fill out petitions and take other online actions.)

Possibility #3. There is a third variable — what statisticians call a “confounding variable” — that causes the increase in BOTH ice cream sales AND murder rates. For instance, the weather.

When it’s cold and wintry, people stay at home rather than go outside and murder people. They also probably don’t eat a lot of ice cream. When it’s hot and summery people spend more time outside interacting with each other, and are more likely to get into the kinds of situations that lead to murder. They are also probably buying ice cream, because nothing beats the sound of an ice cream truck on a blazing summer day.

In this example, the weather is a variable that confounds the relationship between ice cream sales and murder rates. Sometimes this is also called the “third variable problem”, which refers to the fact that anytime we observe the relationship among two variables there’s always the possibility that some third variable which we don’t know about is responsible for ‘confounding’ the relationship.

Setting the ice cream and murder example aside, the confounding variable in behavior-based fundraising correlations — e.g., providing change of address and giving more — is usually donor commitment … how donors feel about your organization that causes them to care enough to alert you to their new address in the first place. And unlike the extremely limiting tactic one might employ in a “correlation only” world — in this case, making it easier for people to tell you about their new address — you should instead focus on the cause and, more specifically, actions your organization can take that directly impact commitment levels, to get the corresponding behavior-based benefit, whether donors move or not!

For example, perhaps you thanked the donor in a timely manner, or told a great story about someone you helped, or otherwise reinforced the notion that your organization is right on top of its mission.

I use ice cream and murder to illustrate why it’s important to always be on the lookout for confounding variables. They can make us reach conclusions that are wrong. Confounding variables can make us miss enormous opportunity. Or, to use slightly more technical language: Confounding variables = BAD.

So, how does this apply to what we fundraisers see and what we do? Sure, we see that we get better performance from people who spend a lot of time online, but that’s probably not what’s spiking their performance. The question we need to be asking and answering is “what did we do (what actions did we take) that created a positive attitude on the part of the donor to participate more?

It is the actions we take, not the donor, that cause or create the confounding variable called commitment. 

‘Donor commitment’ is the equivalent of ‘the weather’ in our ice cream/murder example. But unlike the weather, your organization can create and destroy Donor Commitment. Just don’t try to measure or determine true Commitment by behavior, because, like love, it’s an attitudinal construct. 

The problem with simply relying on donor behavior is that it points to no causal path. That’s one of the problems with the conventional segmentation that most fundraisers use. Traditional segmentation generally leads to identification of a false causation pattern.

If you take a look at Kevin’s Infographic and go to the section that summarizes online behavior it is easy to draw the conclusion that the more folks are online, the more likely they are to be more financially valuable. But, as Kevin points out, this is a false or confounding variable.

And therein lies our mistake. We look at our behavioral segmentation patterns and draw faulty conclusions. E.g. we should try to get more e-mail addresses or we should encourage people who are good donors to also provide e-mail addresses. Or, since many good donors provide change of addresses we should mount a change of address campaign. NOT!

Don’t get me wrong, it is important to look for patterns and it’s not outrageous to assume that people who are providing e-mail addresses are likely to be better and more committed donors. But unfortunately, one doesn’t follow the other. On its face this pattern may not seem as outrageous as the ice cream/murder scenario; but at the end of the day, both have confounding variables.

What is so wonderful is that in the case of fundraising – unlike murder and ice cream and the weather– you can control this one.

Why?  Because you can measure and manage commitment and determine what you do that impacts it. Behavior matters – yours! It causes commitment (or kills it) and the resultant donor commitment causes their behavior.

The fact that you send people 10 or 12 direct mail pieces as opposed to four in a year may lead to more money, but that’s not why the response is better. The response is better for attitudinal reasons––you may be providing more information, you may be informing the donor more frequently, etc.  Your actions are affecting their attitude and that, in turn, determines and drives their behavior toward you.

To paraphrase: the question we all need to ask and answer is not what our donors’ behavior can do for us, but what we can do to improve our donors’ attitudes.  When we do this, the good behavior of a committed donor will follow.

Roger

So we’re happy to jump on the opportunity to alert you to the CoolData blog, which specializes in advice on making the most of your alumni data for fundraising purposes.

Here’s an example of their analysis of alumni website behavior.

Happy to receive your feedback on the blog.

Tom

The year was 1970. Computers – big mainframes, not PC’s and The Cloud – had just begun to edge out the heavy, old metal Addressograph plates and the traditional shoeboxes filled with 3×5 index cards posing as donor records.

That year my friend Richard Viguerie, the right wing fundraiser and organizer of all things evil, and I began experimenting with the possibilities of actually using a donor’s past behavior to create what became known as the ‘ask string’. And since we didn’t compete for business – he represented those horrible right wingers, I focused on the more noble and progressive left – we compared notes.

Over dinner in a Japanese restaurant in Rosslyn, Virginia we agreed that the most effective ‘ask strings’ were 1.0 Highest Previous Gift (HPC), 1.5 HPC, 2.0 HPC and Other $_____. Medieval fundraising (the leech-equivalent) was born. To the detriment of almost everyone, generations of direct response fundraisers have followed it ever since.

Shame on us. And shame on the consultant priesthood for not challenging the theology.

In pursuit of atonement and expiation for my fundraising sins (Richard will have to seek his own), I repent that generations of direct response fundraisers have slavishly copied those ‘formulae’. For that I’m truly sorry.

Fast forward 45 years. It turns out the fundraising gospel we preached was quite faulty. It simply won’t get you into fundraising heaven anymore.

Why? Research. That’s why.

Despite the revulsion folks like my friend Jeff Brooks at Future Fundraising Now harbor for meaningful research, there’s a whole body of behavioral science and solid academic research, not to mention live testing data, that should lead you to dispose of the leeches and turn to more modern fundraising medicine.

Kevin Schulman, my colleague at DonorVoice in a brilliant post on his blog summarizes the most appropriate and effective ways to calculate ‘asking amounts’.

• For Acquisition and Reinstatement – use the most recent contribution (MRC), not the highest, contribution [HPC]  Kevin explains why in his post.

• For Active Donors on Your File – average gift beats MRC and, in fact, MRC is actually detrimental. Again, Kevin explains why.

Kevin’s post also includes a fascinating academic paper on asking amounts produced by economists and statisticians at Ghent University.

Now that I’ve confessed and steered you toward a more ‘round Earth’ view of fundraising in this year-end period, when asking amounts and ask strings really matter, I can only encourage you to read Kevin’s post, with the white paper he’s attached.

And yes, please demand an explanation from your consultants and copywriters as to why they’re still using leeches.

Kevin, you deserve a raise.

Roger

The call is out for UK charities who would like to participate in the study, which will be conducted in association with Ken Burnett and SOFII. Here is what Ken said about the US study, as well as an Executive Summary describing what that well-received work revealed.

There are two elements to this project. The first will study a representative sample of recent, frequent UK cause donors. This work provides the national benchmark.

The second element looks at the same issues using samples (with transaction histories) from house files provided by participating UK organizations. To ensure adequate sample sizes, the study is best suited to larger charities operating on a national scale.

UK participants will be charged a £1,000 fee each to cover direct costs of the work.

If you would like to consider participating, the DonorVoice information and sign-up page is here.

Tom

And so I’m going to subject you to this ‘endorsement’ from fundraiser Ken Burnett, who champions donor relationship building more ardently than anyone.

Says Ken, in an article titled The real meaning of commitment … And why it matter more than anything for fundraisers:

“Roger and Kevin have treated donor relationship development to the rigorous assessment that its massive importance deserves. For this, they deserve our gratitude. Only a fool will ignore their findings (OK, I’m getting old. I haven’t got time to pussyfoot around on this issue any longer. Nothing costs our fine voluntary sector and all the good works it does more than fundraisers’ neglect of donor relationship development. I no longer care who I insult in getting that point across.)

Is this kind of thing likely to be of value for the serious fundraiser? You bet. It’s worth at least Roger and Kevin’s combined weight in precious metal. It’s not the first such effort of course and it won’t be the last. But it’s a sophisticated step forward and it does show, convincingly, why any fundraiser today would be simply certifiable to fail to understand and act upon these findings.”

Thanks Ken.

Tom

P.S. Here’s the Executive Summary of the DonorVoice Donor Commitment Study. For further info contact Kevin at KSchulman@thedonorvoice.com.