Give More Tomorrow

The last post talked about the vital financial impact that an Opt Out Auto-Upgrade can have on an organisations finances, and the potential bad feeling that can arise from them. I also mentioned that I’d talk about alternatives, better ways of maintaining the value of your data base, so I better keep my promise.

One of the biggest innovations in this space over the last few years has been the variations on the donor opting in to an Auto-Upgrade. At some point, often the point of recruitment, the donor makes a pledge that their donation will increase by x amount at y point. The y could be either 12 months from now or a specific month; the x comes from a number of potential systems of which I’ll outline some below. Before that lets look at why it works so well.

–          It means that they know their gift will retain its power in relative terms over the length of the donation.  Without prompting, most people won’t think about their gift loosing impact over the years, but if you suggest it to them, most will easily understand this.

–          Delaying the increase appeals to people’s knowledge of their own procrastination. In the main people know their lazy, this is a way of giving people the nudge to their future selves to do something their future selves will like, but which they wouldn’t get around to off their own back.

–          As long as they are not a born pessimist, people tend  think that they’ll be in a better position this time next year than they are today (note, I’m basing this on the sunny outlook of Australians). They are likely to get a pay rise of some sort,  they may think they’re in line for a promotion, they may have paid off a bit more of their mortgage etc… A delayed increase works with enthusiasm for the future.

–          It gives the donor control.  They may be a pessimist, they may be thinking of retiring the beauty of the opt in auto upgrade means that the opt in allows for people to be individuals. There is very little chance that the donor will feel negatively toward the organisation as a result.

–          For the charity receiving the increase, not only is there the increase in monthly revenue, but also this is predictable.  You can predict with greater certainty what the monthly income will be.

For the donor and the charity, there are very few negatives.  However, public facing fundraisers and agencies will need to do some extra work.  It takes time to explain the donation increase and to collect the data and to train on doing these things. .  Most cases I’ve seen have not involved an extra payment for asking for an opt in Auto Upgrade. Mainly this is because it would mean paying for something speculative rather than easily quantifiable (the donor could cancel the donation or the upgrade). Even if the increase does eventuate there will be no return on investment for over a year.  In addition any reward passed down to the public facing fundraiser would mean that the PFF is more likely to talk people into doing it who don’t really want to, thus skewing and success rate/ROI estimate. That said, keeping an agency too accountable for something that you don’t directly reward them for  is both difficult and questionable.  Uptake rates in particular are hard to manage if you can’t provide a financial incentive.  For any agencies reading this though, especially those I work with, I would make the point that the increased revenue and ROI is only going to be positive for them in the future.

In terms of what this increase is, a number of approaches are being used. The initial idea was to link the yearly opt in upgrade to the rate of inflation. This is certainly the clearest way of demonstrating that a donation needs to increase to retain its impact, it’s also the most future proof allowing for any unexpected inflation levels.  The unusual the amount by which it increases lends itself to a rounding when the donor is asked for a one off upgrade (eg. If they are increasing their donation from $25 to $25.78, why not just increase it to $26?)  There are some issues with this approach.  Firstly, not everyone finds it easy to understand.  Although the idea of inflation is generally understood, explaining it comprehensively and accurately can prove harder especially in the brief amount of time we get with donors at point of recruitment.

A second idea of an opt in auto upgrade was to have a set amount that the gift increases by each year.  Say a dollar or two.  This is certainly easier to communicate at point of recruitment, but it suffers in that it doesn’t take into account the initial pledge level – a dollar on $30 is half the percentage increase that a dollar on $15.

My personal preference is to allow the PFF negotiate an increase with the donor, this gives them control of the upgrade as well as ownership of it. If pitched correctly, this should not only minimize the number of people who get annoyed by the increase, but potentially also maximise the amount by which they upgrade. One of the added bonuses of this final method is that many donors are actually suggesting they increase their donation by more than inflation.  If they are optimistic about their personal circumstances and believe they will be better off in 12 months, especially those who have recently finished studying. Many will pledge 15-20% increases in the future and it perversely becomes important to limit the uplift amounts to ensure they don’t let themselves in for a nasty shock in three or four years time.

The opt in approach to an Auto Upgrade will always give you a lower uptake level than the opt out approach.  Although there isn’t any clear data to benchmark, figures I’ve seen have varied there has been anything from two thirds opting in to just 20%. Although product and proposition play a role here, by far the biggest influence on uptake seems to be making sure everyone gets asked. But it contains far less risk both in terms of both retention and reputation.  It also should not replace the specific upgrade ask (by phone or DM) as this gives a greater increase per donor and hypothetically better retention.  However due to it’s balance of cost efficiency, low risk and high potency, it’s seems likely to be a part of many RG programs moving forward.

PS.  As fundraisers I’m pretty sure you’ll all be reading this PS. I really appreciate all the feedback from the last article, on my Facebook page, through email and especially from those of you I don’t know well in the comments section.  It’s obvious that opt out upgrades are still controversial and stir up a lot of passions. I welcome any thoughts or comments you have, wether you agree with me or not so please don’t be shy: Comment below, share on your networks drop me a line.

PPS. Apologies for the more irregular updates of late.  A heady combination of End of the Financial Year workload, moving house etc… has held me back.  I look forward to being more regular in the future (I can’t believe it’s taken me this long to make that joke).

Why I stopped hating the opt out Upgrade (and why I probably won’t be doing it again)

A few years ago a fellow fundraiser told me a horror story.  He had heard that another charity had just increased all their donors’ regular gifts without asking them. I was appalled as I liked this charity, but I made a mental note never to support them.  Flash forward a few years and it turns out , that like all good horror stories, although there was some basis in fact most of what my friend told me was not really true.  What the charity had done was an opt out upgrade, sometimes called an auto-upgrade.  They had informed a number of their donors that their monthly donation would increase, unless they asked them not to, then increased the donation of all the non-responders.

Although this may have been the first opt out upgrade conducted by a charity in Australia, its certainly not the last. But even with a number of organisations conducting these programs over the years, it remains one of the most controversial tactics  of Regular Giving programs. When discussed among fundraisers a good proportion of them believe opt out upgrades to be the work of the devil whilst a similar number believe it to be literally a life saving retaining value against inflation.  Personally I started out being extremely against the idea, but over the last year or so I have changed my mind.   Although I didn’t initiate the first one, the program I look after has run several opt out upgrades.  I’ve run a couple of these programs now  I’ve seen the outcomes first hand.

Before I give you the reasons why I’ve come around to the idea of opt out upgrades  I’d like you to ask yourself a couple of questions.

1. If you were to die unexpectedly and your heart to be used to save someone else’s life, would you agree to the transplant?
2. Are you registered as an organ donor?

The difference in the number of people who respond positively to these questions tells you why opt out upgrades have a place in fundraising.  I consider myself to be an engaged, organised and responsible person, but I am also one hell of a procrastinator.  Anyone who’s seen the half finished planter boxes in my back yard can attest to this.  Most people won’t make these decisions unless they either really, REALLY  care about the outcome or they are put on the spot. To continue with the organ donor analogy above, Germany has an opt in system of organ donation, and around 12% of their population have agreed to save someone’s life after they die. Austria on the other hand has and opt out consent to organ donation, meaning that  that 99.98% have agreed to give their organs after death.  I’ve known enough Austrians and Germans to realise that they are not exactly the same, but there aren’t 87 degrees of altruism between them either.  By contacting donors and telling them that their donations will increase if they do not contact you, then you are asking them to say if they really care enough NOT to upgrade.  If they do then they will tell you. If you phrase it correctly, they are unlikely to be angry with you.  An opt out upgrade is not an increase in the gift whether the donor likes it or not, but it is making sure the question is heard and asking if they really don’t want to increase their gift.

The ethical arguments against an opt out upgrade are usually around idea that it’s removing the donor’s choice. But asking them to opt out, still gives them a choice which we are not usually granted in other areas of our lives.  My electricity company doesn’t give me the opportunity to opt out of their price increases. The government doesn’t ask me to contact them if I choose not to increase my taxes.  Cooper’s brewery are yet to give me a heads up about the increase in beer prices and give me the chance not to pay extra if I don’t want to. The option of opting out keeps the choice  in the donors hands, which in turn reflects the optional nature of a donation.

One flaw in this theory is that there will always be a number of people who you haven’t see your communication and therefore are unaware that they had the option not to increase the donation.  They only see that it has increased when they look at their statement. There are two basic situations where this could have arisen.  It could either be because they received, but chose not to read the email or letter or you have their details wrong and they didn’t receive it.

A number of these people will be upset at the increase and a number will tell your incoming call team in no uncertain terms how upset they are. The percentage of these people is comparatively small, but they more than make up for it in their volume. The important thing, as with any complaint, is to listen to them and explain what has happened. Be ready to offer refunds at the drop of a hat. Tell them that you’re sorry that they feel that way, that they have missed the communication or that you didn’t have their correct details. You shouldn’t be sorry for the program of opt out increases.

All of the stats evaluations that I’ve seen on opt out increases show that the increased income far out-weighs the slight increase in attrition. This can be improved by making intelligent who is upgraded based on tenure, gift, age etc…  So  there can be no question that it is very effective and ethical, but I am unlikely to run an opt out upgrade again.

The problem with an opt out upgrade is that some people, even if they understand it, will not necessarily like it.  They won’t cancel their donation, certainly not immediately.  They won’t call you and tell you that they’re upset, but there will be a feeling of negativity there. Fundraising works on a very base level; it’s all about emotions and our lizard brain. If there is a feeling of negativity then there it makes getting people to agree to things later on, much harder.  They may say no rather than yes when you next ask them to upgrade. They may be more likely to cancel when that big bill comes in or that holiday comes up.  We’re not talking about big swings in emotion here, but they may only be 3% more likely to say “no”.  But a successful RG or indeed any wide scale fundraising program is about getting as many of the small percentages work in your favor.

The problem is now you’re aware that there’s one way of making an RG database retain it’s value at low cost, there must be another way which doesn’t colour you negatively.

I’ll save those ideas until the next post.

Balancing average pledge

As a fundraiser working for an agency I was very concerned with retention.  Our efforts for recruiting a higher percentage led us to looking at the effects of pledge amount.  We found what most of you reading would expect, that generally. The more you give, the more likely you are to cancel sooner. As we prided ourselves on giving our donors the best return on their investment we then worked hard and successfully on reducing our average pledge.  The followed a positive impact on retention and our clients were generally happy; on top of the improved retention a drop in average place in F2F generally also means a cheaper cost per donor.

However one thing that I didn’t realise at the time was medium term effect of a lower average pledge. The first, most important and perhaps most surprising that a lower average pledge means it takes longer to break even on a cohort of donors. There are a number of assumptions that are involved in this statement, and feel free to challenge any of them, but the evidence I’ve seen for myself plus the anecdotal evidence, backs it up. Assuming that the recruitment cost is based on donation amounts with a retention clawback or built in, assumed discount. Assuming that the reduced gift means that there is a relatively consistent attrition level across all donation rates. And assuming that the improved attrition isn’t more than say 10% better at year one. The reason for this is that there is less money coming in in “profit” from the donors who passed the break even point. The reduction in pledge is necessarily caused by a lowers targets across the board, meaning it stops donors signing up for more than they can afford or care to give, but it also lowers the amount that people who could afford to give more, give less.

On top of this, the reduced pledge means reduced overall income and, to rub salt into the wound, less financial gain from upgrades.  As an RG fundraiser, the frustration felt from these issues is only topped by the knowledge that this is only a medium term problem and you’re actually getting better value for money. Regular giving is all about the long term. It may take you six months longer to break even and be running a $10,000 under budget, but you know in two years time this will have paid off, probably several times over.

So what’s more important here? Higher initial income or more donors down the track. The slightly dull answer is somewhere that you need to find balance that works for you and you’re suppliers. They know that a high average pledge will mean higher attrition and less work for them in the long run, so they’re likely to work with you to try and keep it in boundaries that work for both you and them. It’s also important to remember that constantly pushing the pledge amounts down won’t increase retention after a certain point.