Don’t Waste Money on Wealth Coding for Donors
Posted on December 29, 2012
The myth is this – if we target our regular appeals at a wealthier audience, we will raise more money. Just one problem… it doesn’t work that way.
Recently I delivered the results of a Donor Engagement Profile to a large national charity. We examined almost 200 million interactions of more than 3 million donors and almost 8 million gifts. The client charity was shocked to learn that the wealth of the donor and the wealth of a particular geography had absolutely no relationship to gift size or lifetime donor value. We see this repeatedly in our Donor Engagement Profiles.
A few years ago, when I was with the American Cancer Society, an interesting thing happened. We had an annual direct mail donor in the Chicago area. He stroked a check for $100 every time he received the year-end appeal letter. This pattern had been well established for half a dozen years. Then, for no apparent reason, he sent a check for $1,000. Fortunately, a staff member in Chicago noticed the change and called the donor.
Turns out this gentleman is a billionaire… and an established philanthropist who has given more than $100 million to a variety of causes. He gave those $100 checks because he had friends who had been affected by cancer and because $100 was the amount requested by the letter. But, when his wife was diagnosed with breast cancer, this issue became intimately personal for him. Since being personally cultivated and involved, he has given millions to the Society.
The donor lives in one of the wealthiest zip code areas of Chicago and had the ability to write checks for millions but was consistently sending $100. His wealth had no relationship to his level of contribution – until the issue became personal for him.
I, like many of you, have spent lots of money and time during my years as a practioner to assign wealth codes to donors on file assuming (wrongly) that people with more money will give more money. Interestingly, I don’t ever remember testing later to validate the results. Now I know that I would have been embarrassed to have spent all that money only to find out that the hypothesis is incorrect.
To get a certain payback on your donor data, examine how donors engage with the organization and how they behave after they give their first gift.
The best investment you can make is in a well worded, well understood, concise mission message. This is the foundation on which all successful fundraising appeals are based. The next best investment is in a highly personalized gift acknowledgement that is sent within 48 hours of receiving the gift and followed with a thank you call or personal note from a staff member or volunteer. Make the donor feel valued and recognized and your retention rates will increase immediately.
Other data provides the information needed to raise more money. Focusing attention on donors who have a history of making multiple gifts within a short period of time is extremely productive. Increasing the amount of the ask for repeat donors pays solid dividends. Making an investment in getting donors to give through multiple channels increases gift size, gift frequency and lifetime value. Converting a donor into a volunteer is also a winning tactic. Trying to convert a volunteer into a donor doesn’t usually work well.
Wealth codes do have an appropriate function. If you are using wealth codes as the basis for face to face appeals for mid-level gifts, major and campaign gifts, and planned gifts… the coding is vital in prioritizing targets for staff and volunteers. Otherwise, spend the money you would have spent on wealth coding on retaining and upgrading your current donors through better mission messaging, better gift acknowledgement, and multi-channel donor involvement strategies.