In what is possibly a world-first, an in-depth study of actual transaction data has been conducted into how internet giving integrates with other direct marketing channels to impact overall donor value. Helen Flannery and Rob Harris file this exclusive report.
In what is possibly a world-first, an in-depth study of actual transaction data has been conducted into how internet giving integrates with other direct marketing channels to impact overall donor value. Helen Flannery and Rob Harris file this exclusive report. Key Findings
A recent study of internet giving data shows that online donors are a valuable emerging constituency for nonprofits. They are a rapidly growing population of relatively young, upper-income people – constituents that nonprofits very much want to attract and keep. They tend to join at higher giving levels, give larger gifts when they renew, and have a higher value over the long term than traditional donors.
But online donors are also less loyal and generally are not effectively integrated into existing marketing programs. And there is evidence that online donors’ high average gifts may mask issues with cultivation and renewal; when controlling for origin gift level, mail-acquired donors actually yield higher revenue per donor over several years than those acquired online.
The study, called the Internet Giving Collaborative Benchmarking Analysis, was conducted by Target Analysis Group, a US organisation that specialises in benchmarking nonprofit fundraising and marketing information.
The study analysed donation transaction data from 12 US nonprofits representing a wide cross-section of causes (see “Project Background” for full list of participating organisations). The scope of the exercise involved analysing more than 17 million gifts worth more than US$654 million. Of these, almost 2.3 million were online donations totalling more than $195 million. The gift data used covered the five-year period ending June 2006.
Online donor numbers increasing rapidly
Online donors currently make up a small proportion of the overall donor file at most organisations, but online donor populations have been growing rapidly in recent years. For 10 of the 12 organisations participating in the collaborative project, fewer than 15% of their 2006 donors gave online, while 4 of the 12 participants had fewer than 5% of their donors giving online.
However, median growth in online donors was 101% over the past three years, compared to 6% growth for non-online donors over that same period (see Fig. 1). And both the numbers of donations made online, and the amount donated online are increasing strongly as well (see Fig 2 and 3).
Aid and animal welfare organisations saw particularly significant spikes in online donations in the past two years due to giving related to the Asian Tsunami and U.S. Gulf Coast hurricanes.
Internet Primarily an Acquisition Source
Acquisitions account for the majority of online donations for many organisations. For all 12 participating organisations, donors to other channels were spread relatively evenly across loyalty populations, while online donors tended to be concentrated in the new donor population. A median 56% of online donors were new in 2006 (see Fig. 4).
Online Donor Demographics
Online donors are generally younger and have higher household incomes than donors who give via other channels.
Online donors tend to be spread relatively evenly through all age groups, while non-online donors are heavily concentrated in the 65-and-older age group. For participating organisations, a median 13% of their online donors were 65 or older in 2006. In contrast, 47% of non-online donors were 65 or older (see Fig. 5).
Although the trend is not as striking as that for age, online donors tend to be more concentrated at higher household income levels than non-online donors. For all 12 participants, the proportion of online donors who had incomes over US$100,000 was greater than the proportion of non-online donors who earned that much (see Fig. 6).
Likewise, the proportion of online donors who had incomes less than US$25,000 was significantly lower than the proportion of non-online donors who earned that amount.
There are not significant gender differences in behaviour between online and non-online donors at most organisations. Men tend to give larger gifts than women, but this is true both for online and non-online donors.
Online Donors Give Larger Gifts
Online donors join at significantly higher giving levels, give substantially more revenue when they renew in subsequent years, and have much higher cumulative lifetime revenue over the long term than donors who do not give online.
2006 median revenue per donor was US$114 for online donors and US$82 for non-online donors (see Fig. 8).
As we have seen, online donors tend to have higher household incomes, which usually correlate with larger gifts regardless of channel. However, online donors still give more than non-online donors even when they earn the same income.
Online Donor Loyalty
Online donors renew at lower rates than donors who do not give online. This is more evident for new donors; as loyalty to the organization increases, renewal rate differences diminish.
For new donors in 2005, those who had given online in their acquisition year renewed at a median 26.5%, while those who had not given online in their acquisition year renewed at a median 30.4% (see Fig. 9). Retention rates were essentially equal for 2005 multi-year online and non-online donors (see Fig. 10).
Long-Term Value of Online Donors
Over time, online donors’ larger initial gifts, coupled with larger upgrades in subsequent years, more than compensate for their lower retention rates; over the long term, online-acquired donors have a higher average lifetime value than mail-acquired donors. This was true for all 12 of the participating organisations.
For example, the three-year median lifetime revenue from donors who were acquired in 2004 was US$125 if the donor was acquired online and US$62 if the donor was acquired through direct mail (see Fig. 9).
2004 (July-June) is a useful baseline because acquisition gifts that year were not motivated by either of the disasters that caused anomalous revenue spikes for several organisations in 2005 – the Indian Ocean Tsunami in December 2004 and the US Gulf Coast hurricanes in the fall of 2005.
Online Giving Not Well-Integrated
The vast majority of nonprofit supporters are established direct mail donors who rarely give online. The longer a direct mail donor has been giving to an organization, the less likely they are to start giving online. Direct mail donors do not renew online, and lapsed direct mail donors do not reactivate online.
The converse is not true, however. A substantial portion of online-acquired donors migrate to direct mail when they renew. For donors acquired online in 2005, only 4% gave direct mail gifts in their acquisition year, but 46% of them gave direct mail gifts in their renewal year (see Fig. 12). The proportion of these donors who gave online dropped correspondingly, from 100% in 2005 to 50% in 2006.
The consensus among participants was that this is more likely a reflection of organisational practice rather than of donor preference. Most said that online-acquired donors fall into their regular direct mail renewal solicitation stream – either as a conscious choice, because they have no online renewal strategy, or because of the lack of proven practices to justify withholding donors from the mail cycle.
Cultivation and Renewal Issues
As we have seen, the average online donor is more valuable to organisations over the long term than the average direct mail donor.
However, when controlling for acquisition gift level, mail-acquired donors actually yield higher revenue per donor over several years than online-acquired donors.
For example, for donors acquired at the US$100-249 level in 2004, the median lifetime value of each online-acquired donor was US$304 in 2006, while the median lifetime value of each mail-acquired donor acquired at the same original dollar level was US$353 (see Fig. 13).
This is due to two factors. When controlling for origin giving level, online-acquired and mail-acquired donors actually tend to give similarly-sized gifts when they renew. And online-acquired donors tend to renew at lower rates than mail-acquired donors. The end result is that a mail-acquired donor generally has a higher average cumulative lifetime value over the long term than an online-acquired donor acquired at the same original giving level.
The reason that online-acquired donors have a higher average lifetime revenue per donor than mail-acquired donors overall is because they join at higher giving levels in the first place, not because they are more loyal. This indicates an opportunity for better cultivation and renewal of online donors.
Most nonprofits have well-established direct mail programs, with which they have been cultivating donors for decades. But using the internet as a vehicle for giving and cultivation is relatively new. Fundraising staffers seldom have more than a few years of online fundraising experience and there are not many proven best practices. Some organisations are unsure of the best way to start an internet program; others are actively fundraising online but have few ways to predict or measure their efforts.
While an air of mystery continues to prevail over the online medium and its effectiveness for fundraising and marketing purposes, it is clear that online giving will continue to grow and become an increasingly important area for nonprofit organisations.
Helen Flannery is a senior research analyst and Rob Harris is the vice-president of analytic products at Target Analysis Group, Inc. Target is a subsidiary of Blackbaud, Inc.
In December 2006, Target Analysis Group held a two-day forum with twelve US-based national nonprofit organisations on the subject of online fundraising. The purpose of the forum was to provide a collaborative environment in which nonprofit organisations could learn from each other’s experiences in developing a successful online marketing strategy that is well-integrated with other fundraising channels.
Organisations participating in the analysis included Alzheimer’s Association, Amnesty International, CARE, Covenant House, Defenders of Wildlife, EarthJustice, Humane Society of the United States, Mercy Corps, National Multiple Sclerosis Society, National Parks Conservation Association, Union of Concerned Scientists, and U.S. Fund for UNICEF.
To provide a factual basis for discussion, Target analysed giving data from the 12 organisations to enable participants to benchmark their own online fundraising program performance against that of their peers. For the five fiscal years ending June 2006, Target analysed transactions totaling more than 17 million gifts worth more than US$654 million.