Maximizing Net Income

Seven strategies for success.

Rory Starks | posted 4/03/2009

You may or may not be struggling with income in your organization. In spite of the poor economy and bank crisis of early October 2008, as of this writing, most of our clients are still finding success in income development. However, many will have to answer board members' questions about their plans if income drops off.

We all strive to be good stewards of the resources God has entrusted us with to achieve the greatest kingdom impact possible. No one intentionally sets out to waste precious resources.

Sadly, however, many Christian ministries are wasting money under the false assumption that their goal is to create maximum income. But maximum income is not the same as maximum net income for ministry. Tough economic times can be God's gift to us—a time to look carefully at our stewardship of the resources we are responsible to deploy for his kingdom.

Most fundraisers focus almost all of their attention on generating income. They often don't apply the same creative energy to reduce expense. I made that mistake myself for many years as I directed World Vision's marketing programs. When we turned our creative energy to the expense side, it was amazing what we were able to accomplish.

The following are several specific ideas you can employ to help create more net income for your ministry this year.

Donor Giving Patterns

You have donors on your file who only give at certain times of the year, or only give to newsletters but not appeals, or don't give during the summer.

I would like to elaborate here on the summer suppression strategy recommended below, the results of which can be seen in Figure 1.

Figure 1 shows actual data from a test conducted in which donors who had a history of not giving during the summer were suppressed from all mailings during the summer months. The graph shows the cumulative giving from donors who received all the mailings, compared with a matched group of donors who received no mailings during the summer.

We learned three things from this test. First, the ministry saved all the money they would have spent mailing nonresponsive donors. Second, virtually no income was lost in the summer because the donors who were suppressed had a history of being nonresponsive. Third—and this was a surprise—the subsequent giving from donors who had received fewer mailings was greater than the group that had received everything.

Not only did the suppressed group pull ahead in the fall, but they also continue years later to outgive those who were not suppressed.

Your ministry can readily apply this principle. You already have the necessary data in your computer system to implement the following strategies:

Strategy 1: Identify donors who only give at the end of the year, and reduce the number of appeals and newsletters they receive during the rest of the year.

Strategy 2: Identify donors who only give to newsletters, and reduce the number of direct-mail appeals they receive.

Strategy 3: Identify donors who have a multiyear history of not giving during the summer months, and suppress them from all impacts during the summer (Figure 1).

Segmentation for Appeals and Newsletters

Most ministries determine an "active" donor based on an arbitrary date-of-last-gift. For example, they will mail direct-mail appeals to any donor who has given a gift in the last 24 months. The problem with this approach is that it results in mailing small donors for too long and cutting out larger donors too soon. To be specific, ministries have donors who give $5, $10, and $20. Mailing those donors for 24 months is wasting money because smaller donors cannot be cost-effectively mailed for more than 3-12 months since their date-of-last-gift.

On the other hand, donors who give gifts of $100 or more can cost-effectively be mailed for up to 60 months since their date-of-last-gift. By cutting them off at 12 or 24 months, net income is being "left on the table." It's a simple mistake to repair.

Strategy 4: If you have been mailing donors based on an arbitrary date-of-last-gift, reduce the smaller donor segments (not mailing out for 24 months), and increase the larger donor segments (mailing "deeper" than 24 months).

Older Donors

Most ministries have a segment of older donors on their file (I'm speaking of the age of donors, not their length of time on the file). They may even be the majority of your donors. Do you treat your older donors the same as everyone else?

The concern here is we know that 60 percent of individuals change their wills in the last few years of life. Often, they change the beneficiaries from ministries they have long supported and leave their money to pet organizations (their last best friend was a dog or cat), hospitals (the people who cared for them before they died), and health organizations like the American Heart Association or the Cancer Foundation (to help someone in the future).

Strategy 5: Reduce the number of impacts to older donors (70-plus years old). Use their last gift amount, not their largest gift amount, to determine how much to request. Be sure to ask them for prayer, not just money, and provide them with planned gift opportunities by including inserts with their appeals and newsletters. (If you don't have the donors' ages appended to your records, it's surprisingly inexpensive to do so.)

New Donors

Many new donors don't intend to become ongoing contributors to your ministry. They were moved emotionally to give through a new donor-acquisition campaign of some kind, and their first gift is their last.

It is worth noting that most ministries are experiencing increasing donor attrition, losing as many as 75 percent of their donors after the first year.

Strategy 6: As part of a "welcome package," which donors should receive about two weeks after you receive their first gift, provide a card that allows the new donor to select how often he would like to hear from your ministry: quarterly, once a month, or never again, for example. Of course, you should implement this as part of a controlled test.

New Donor Acquisition

Nearly all ministries determine the effectiveness of their new donor acquisition efforts based on the initial results, or "first gift." The problem with this approach is that the long-term value of donors being acquired is not being considered. Long-term donor value varies by acquisition source (direct mail, space ad, radio, and so on). In the case of direct mail, donor value varies by rental list, offer, creative approach, and first gift.

For example, some rental lists used for direct mail acquisition produce more long-term donors than others. Through long-term value analysis, we have discovered that mailing lists that produce good first-gift results do not necessarily produce good long-term donors. Conversely, some mailing lists that appear not to work actually produce good long-term donors. Think of the implication: Ministries all across the country are making major decisions about what's working and what's not based on the wrong metrics!

Strategy 7: Evaluate all your acquisition efforts based on long-term donor giving. Even looking back at donors acquired last year will yield better results going forward. Better yet, look back five years.

Einstein defined insanity as "doing the same thing over and over again and expecting different results." By implementing some or all of the seven strategies above, you can get out of the rut of doing the same things over and over again, and establish a new trajectory for your ministry and achieve even greater kingdom impact. You might even thank God for the economic downturn, because it made you a better steward.

Rory Starks is the senior vice president of strategic development for Masterworks. He was formerly the director of marketing for World Vision and executive vice president for Food for the Hungry.

The following is located at: http://www.christianleadershipalliance.com/outcomes/2009/febmar/6.8.html

Serious Fun

Computer games encourage social action.

Laura Leonard | posted 3/27/2009

For many people around the world, survival is a way of life. For others, survival is a computer game.

Social-action games, a burgeoning genre in the computer gaming industry, confront players with complex situations that simulate real-life decisions faced by people in Asia, Africa, and Latin America.

At the center of the movement is Games for Change (G4C), a nonprofit that helps other organizations develop and support social-action games. The organization features games dealing with human rights, economics, public policy and health, poverty, the environment, global political conflict, and more.

Participating organizations are tapping into a ready-made market. According to a study by the Pew Research Center in September 2008, 97 percent of teenagers are playing video and computer games. While G4C is not a Christian organization, it has developed games for Christian Aid and Heifer International, among others. Using role playing and decision making, both games teach the importance of goats to rural village families.

Suzanne Seggerman, president and cofounder of G4C, told Outcomes that the games help users explore some of the complex issues that confront poor people. The games move beyond theory and information to action and personal investment.

While the cost of creating and supporting online games might prove problematic for many Christian nonprofits, simple games can be made for as little as $3,000, says Seggerman. However, $100,000 is the average cost.

The genre of social-action games is still in its infancy. Attendance at G4C's annual festival has doubled for each of the past five years.

World Vision New Zealand is one of the first Christian nonprofits to introduce its own games online. On its website, gamers can simulate delivering emergency aid to the survivors of an earthquake in India, and eliminate child labor as they play the role of a social worker.

"It's not possible to do a field trip for most to learn about these kinds of issues," Sharon Addis, global education writer at World Vision New Zealand, told Outcomes. "We're always looking for ways to make it real for young people, ways that help them connect with the issues, to understand the complexities and not just think, that's their problem and it's got nothing to do with me and my world. These young people grow up to be the next generation of supporters [and leaders] of our organization."