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By Roger Hiyama
The fundraising landscape is changing in ways not imagined during the COVID-bump of 2020-21, when donor generosity seemed at its high point. In 2023, however, the nonprofit sector saw a decline in individual giving with revenue down by 6% and the number of donors declining by nearly 8%.
The sector bounced back in 2024 with a revenue increase of approximately 3.2%, fueled by 8% growth in donors giving $500 or more. However, a more alarming statistic is that the number of donors declined by another 6%.
On average, nonprofits started the 2025 calendar year with approximately 15% fewer donors than they had in January 2023.
It’s been a volatile year, with the presidential executive orders eliminating most USAID funding for international development and the threatened elimination of many federally-funded projects which were earmarked for distribution to nonprofits across the country. The on-again, off-again international trade tariffs have sent financial markets reeling to losses of nearly 20% before recently recovering.
And, consumer confidence levels are at their lowest levels in decades, creating an uncertain environment where people are clearly worried about their financial futures in both the short term and especially long term.
Finally, on July 13th, postal rates were increased nearly 8% overall, with the cost of a first class stamp now at a staggering 78 cents. More concerning is that nonprofit postage rates increased nearly 11% for marketing letter mail and nearly 27% for nonprofit marketing flat/over-sized mail. These postage increases are requiring nonprofits to reduce mailing volume by approximately 4% and 6% through the rest of the year.
Yes, nonprofits are in a real “fundraising pinch” for the foreseeable future. Leveraging data is a way to help overcome some of the challenges. Data is cheap/inexpensive in relative terms to what you’re spending in your fundraising program but can play an out-sized and significant role during the next eight to 12 months.
Here are 5 ways that you can leverage data in your marketing programs to help solve the current fundraising pinch:
- Optimize house file contact cadence and frequency. With the declining number of donors and flat or reduced acquisition budgets, you need to optimize your marketing spend in every part of your fundraising program.
An donor (who is not a monthly sustainer donor) makes on average of 2.3 gifts per year. However, many fundraisers still utilize RFM (recency, frequency, monitary) segmentation. That active donor with two or more gifts is almost guaranteed to be mailed every single time.
In an era where most active donors are solicited 20 or more times per year, that means that donor is not responding to 17 or 18 of those 20 appeals. They tend to give to the same appeal or during the same time period to a specific organization.
In recent custom optimization modeling of house file campaigns for three different nonprofits, it was founf that a donor’s seasonal giving patterns are a significant predictor of whether that donor is likely to respond to a given appeal. Each donor tends to have seasonal periods where they make most of their gifts.
With a little bit of internal database work, you can create “seasonality” variables that would allow you to modify cadence for donors during specific times of the year. A simplified approach would be to create three or four seasonal periods — for example, January 15 to April 30, May 1 to July 31, Aug 1 to October 31, November 1 to January 15. Then look at giving for each individual over a three-year period to determine the percentage of gifts or revenue made during those four time periods.
Let’s say that you’re mailing each donor five times during each of the four monthly periods — a total of 20 appeals. By incorporating the seasonal indicators in your RFM selects for the January 16 to April 30 season, you could intelligently reduce the number of mailings to only two or three for those specific donors who have never or very rarely have given during that time period.
You would mail them the best performing package during that time period but save the additional $1.20 to $1.80 for not mailing them. In other words, you will continue to mail them throughout the year but reduce contact frequency based on your new data-driven tool during seasonal periods when a donor has never or very rarely donated.
- Review the make-up of Suppression files in your acquisition program. It is amazing that some fundraisers don’t understand what’s on their suppression files.
In modeled audiences for acquisition, it is routine see the suppression files killing off a sizeable percentage of prospect names scoring in the top segment. Those are the best prospects that you’re eliminating.
If you’re wondering why you’re acquisition response rates are falling off, your suppressions are killing off your best prospects.
An alarming number of fundraisers continue to suppress any donor who has ever made a gift to their organization. That’s wrong. A better approach is to suppress the names you’re not actively promoting in your house file fundraising programs (and, of course, those names who’ve asked not to be solicited).
Your suppression should only include the following:
- Do Not Solicit. Honor the wishes of those who have asked to not ever be contacted
- Active Donors. These are the donors who you’re actively promoting in your house cultivation, membership renewals, sustainers, and mid-level major donors.
- Lapsed donors who are actively being mailed. Repeat, only those exact lapsed donors who you’re actively promoting.
- Any special files of board members and other high-touch cultivation names.
Any other name should not be part of your suppression file.
- Find “Hidden Gems” within your existing donors. As referenced earlier, it’s the $500 and more donors who have outperformed during the past year. In addition, organizations with developed monthly sustainer programs have been able to achieve revenue growth despite a shrinking overall donor file.
Finding those “hidden gems” within your existing donor file should become a 2025 imperative. It’s likely you’re going to need external data.
There several companies that have built “wealth” indicators and prospect research tools that allow you to learn about employment, board positions, home ownership, closely-held stock, and ownership of luxury cars and boats.
In addition, there are at least seven nonprofit database cooperatives that have amassed hundreds of millions of donation transactions in combination with a huge collection of demographic, lifestyle, social media and other consumer consumption data. These databases provide an expanded view of a person’s preferences, profile and especially philanthropic behavior beyond what you know about your donor.
Most importantly, the nonprofit transactional data provides you with more accurate predictors of future giving behavior. That’s very different from traditional demographics or wealth variables.
The use of these external data providers can help you identify that smaller subset of “hidden gems” that you need to focus your donor upgrading, donor recognition, and high-touch cultivation and stewardship efforts. These companies can help you identify the donors who will become:
- Monthly sustainer donors
- Mid-level donors
- Major donors
- Planned giving donors
- Donor Advised Fund donors
The offerings of various providers vary greatly as does the methodology and underlying data assets. But when you consider that you might be already spending upwards of $12 to $15 per donor each year, spending 15 cents, 25 cents or even 50 cents to identify that group of donors who can provide much higher lifetime value is something you must consider. With a shrinking donor base that won’t be resolved easily, it’s time to identify the “hidden gems” among your existing donors who will help drive increased revenue not only in the short term but especially long term.
- Match-backs to Understand Channel Attribution. Many years ago, list brokers began running a process where the acquisition mail file was matched-back to the entire donation file within a 30 to 60-day window from the mail date to identify online donors who received a direct mail piece but transacted online when making their donation.
The match-back process would identify an additional 5% to 7% lift of those donors not captured in their standard list results. About five years ago, that number had grown to about a 15% lift in donors. The reason this metric is so important is that as donors change the way they transact, it’s imperative that marketers understand and attribute that revenue back to their origin marketing source as they evaluate the efficacy of all marketing channels.
Today, the cost of a first-class stamp is 78 cents to mail back their check or credit card donation. That’s assuming that the prospective donor could even locate their checkbook or find a stamp. In addition, consumer behavior continues to shift to more online shopping, online banking, and use of mobile payment solutions.
Hence, a growing number of donors are using a search engine, clicking on the sponsored ad link at the top of their browser and then making their donation. And, with so many nonprofits still using “last touch” attribution, it is only reinforcing their increased advertising spend in paid search.
Back to the match-back process — during the past two years, the match-back is now showing a lift of 30% more donors for most organizations and even up to 50% more donors for some organizations. This means that unless you’re running these relatively simple match-backs you’re dramatically under reporting the true efficacy of your direct mail campaign.
And, while there will always be internal debates on whose revenue budget those gifts get reported in, it’s clear that if you’re not at least giving a “soft credit” and using those gifts in determining your channel investment strategies, then you’ll likely be under-investing in direct mail and over-spending in paid search.
- Digital marketing including peer-to-peer texting and programmatic ads — As mentioned above, the number of online donors emanating from a direct mail promotion continues to increase. At the same time, marketers are finding additional ways to leverage data to drive cross channel marketing and to reach these same donors with a mix of digital media.
- Co-targeting with digital ads – For a few pennies of additional spend, you can deliver digital ads in a variety of formats to lift the performance of your overall campaign. Static banner ads, social ads or even more media-rich CTV ads will reinforce your fundraising offer and drive website traffic and conversions.
- Peer-to-Peer texting – One of the growing platforms in digital fundraising is the use of peer-to-peer texting where delivery rates usually exceed 90% and recipients are actively engaging and responding.
The leveraging of data makes the use of these digital marketing tactics possible. They can be used in conjunction with your direct mail campaigns or especially in the case of peer-to-peer texting can be implemented as a standalone. These tactics are easy to implement, measurable and can be turned on or off quickly when needed. Finally, you can deploy these digital tactics on house appeal, sustainer invitation, lapsed reactivation and new donor acquisition campaigns.
Raising more with less has become the imperative for most organizations. Leveraging data can help solve the current fundraising pinch. Data is cheap/inexpensive in relative terms to what you’re spending in your fundraising program but can play an out-sized and significant role for fundraisers in the next eight to 12 months.
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Roger Hiyama is community leader for Delve Deeper. His email is [email protected]
