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Monday, January 22, 2018

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LET ME GUESS: You don't like the idea of telephone fundraising
Mal Warwick

March, 2007

Chances are, you've got five or six objections to using what most people in the industry so clumsily refer to as "telemarketing." Calling your donors on the phone seems intrusive. It's a technique widely known to be used by fraudulent charities. It puts your organization's reputation at risk because you may not be able to exert direct control over the individuals who make the phone calls. And, besides, you just hate it when somebody calls you at dinnertime to ask for money — and so does everyone you know!

Then why do so many organizations use the telephone so extensively in their fundraising programs?

The answer I give to that question is precisely the same as my response to those who ask why so many nonprofit groups use direct mail:

It works!

Now, please don't confuse telephone fundraisers with bucket-shops peddling tickets by phone to charitable events or the people who call you out of the blue at dinner to raise money for the police or the sheriff's department. These high-pressure operations — most of them local, and some of them fly-by-night ventures that skip from one city to the next — are responsible for the lion's share of the public's complaints about telephone fundraising and for most of the fraud. Doubtless, some are honest, hardworking, and sincere. But many such operators exploit their employees, their clients (if in fact they're legitimate), and the public. To me, telephone fundraising means using the telephone as a communications tool linking a public interest organization with its supporters, almost always its current and previous donors.

It's impossible to estimate with any accuracy how much money legitimate nonprofit groups and political campaigns raise by telephone in a year, but I'm certain that the figure runs to many billions of dollars. (The Direct Marketing Association estimates that the total in 2002 was $61 billion.) So explosive has been the growth of telephone fund-raising in recent years that what was a mere handful of firms offering these services at the beginning of the 1980s has become a large industry involving many hundreds of companies. And countless public interest groups and charities — most notably colleges and universities — have established in-house phone banks operated either by volunteers or by professional staff, including students.

Ten ways to use the phone

Whether conducted by a specialized telephone fundraising company, a commercial telemarketing service bureau, or an in-house phone bank, telephone fundraising has 10 principal applications in fundraising for nonprofits:

(1) Conducting emergency campaigns — This is the most obvious use of the telephone in a fundraising program, because it's usually faster to get on the phones than to send a mailing. The phone is also an ideal communications channel in an emergency, because phone callers can test alternative messages easily and quickly and can adapt their conversations with donors to fast-changing events.

(2) Converting petition-signers, event-goers, and online activists into direct response donors — Like it or not, direct mail is rarely effective in persuading attendees at special events or activists such as petition-signers to contribute money. Using the telephone can be much more productive.

(3) Maximizing return from an annual renewal series — After you've reached the end of your rope through direct mail, and one more renewal notice simply isn't cost-effective, your best shot at recapturing lapsed members or donors is by phone. Normally, this is a breakeven proposition, but only in a short-term perspective. After all, now you know how much your donors are worth! Some groups find they're worth enough — and telephone reactivation is effective enough — that it pays for them to call early in the renewal cycle, as the second or third effort in a series. (Keep in mind, though, that donors who are "recaptured" by telephone tend to be more responsive to future telephone appeals than to mail.) It's not unusual for a telephone renewal effort to persuade one of every four or five donors to renew their support.

(4) Reactivating lapsed members or donors — While direct mail can be cost-effective in reactivating near-lapsed donors or members — say, those whose last gift was received no more than three years earlier — the telephone may be an even more efficient means to recapture their support, and it's often effective with donors whose last gift was received much earlier — sometimes even many years previously.

(5) Recruiting donors into High-Dollar annual giving clubs — Just as my colleagues and I use specialized direct mail for High-Dollar donors, we also sometimes use High-Dollar telefundraising. This requires employing especially talented, articulate, and knowledgeable callers and permitting them to spend longer on the phone. The higher level of the gifts they produce — often $1,000 or more — makes the effort worthwhile.

(6) Recruiting monthly donors — In the United States, direct mail has proven to be an unreliable method to recruit monthly donors. Sometimes it works well. Usually it doesn't. Telemarketing has proven much more effective. On the phone, between 5-12% of donors contacted are likely to enlist as monthly givers in a well-managed telefundraising campaign.

(7) Upgrading donors, especially monthly donors — I've successfully used direct mail in specialized donor-upgrade campaigns, but I've found over the years that telemarketing yields a higher proportion of upgrades — and often a higher average gift as well.

(8) Special appeals — To vary the rhythm and the medium of your contact with your donors, you'll probably find it very profitable to conduct one or two special appeals each year by telephone. (Contact more frequently than every six months may be ineffective or even counter-productive.) But if your donors pledge to contribute, it's important to follow through with several reminders to hold them to their word — and not let them easily off the hook with direct mail appeals, which may request a lot less money than they've promised on the phone.

(9) Donor acknowledgments — It may well be worth your while to call at least the more generous of your donors to thank them for their support — without asking for additional gifts. A thoughtful gesture of this sort may increase donor loyalty over the long term. For many groups, gifts of $100 or more are big enough to justify this type of red-carpet treatment.

(10) Combined mail/phone appeals — Especially for your most generous donors, the considerable expense of combining one or more direct mail contacts with at least one telephone call — all for a single appeal — may pay off in a very big way, if it's wisely planned and well executed.

The economics of telefundraising

Assume your organization has 30,000 current donors on file — contributors who, in this case, have sent you at least one gift within the past 12 months. You've contracted with a professional telephone fundraising firm to conduct a special appeal designed to maximize net revenue and upgrade as many of your donors as possible. Here's what the numbers might look like:

Of your 30,000 donors, the telephone fundraising firm you've hired feels that only 20,000 qualify as good prospects for telephone contact. The rest haven't given large enough gifts at any one time.

A service bureau retained by the telephone fundraising firm will run a computer-match against your remaining 20,000 donors to find their telephone numbers. With a little luck, it will find 50%, or 10,000 — a decrease from previous years because of increased use of unpublished phone numbers, especially on both coasts.

Working on the basis of a script that you and the firm should devise together, paid callers will use low-cost, long-distance lines to contact those 10,000 donors, generally between the hours of 10:00 AM and 9:00 PM. Most telephone fundraising agencies today use a computer-regulated system called "predictive dialing," which allows human callers to avoid reaching busy signals, answering machines, or no answer. Let's be generous and assume that eventually, after several tries with numbers that don't answer, the callers reach about 60-65%, or 6,500.

It's reasonable to expect that between 30-50% of these 6,500 current donors will pledge a contribution of a specific amount. (The qualifier is important, because many will also make vague promises or drop hints but not agree to specific pledges. Nonspecific pledges are much less likely to be fulfilled.) In an active donor resolicitation program, a 35-45% pledge rate is typical. That means you'll have, say, 2,600 pledges.

The "fulfillment rate" — the percentage of donors who actually send in checks — may range from less than half to more than 100% (in which case the number of non-payers is equaled or exceeded by the number of nonspecific pledges that are fulfilled). For a well-run telephone fund-raising program, a 70% fulfillment rate is acceptable. For you, this means 1,820 gifts.

If the average contribution to all your direct mail resolicitations is $30, removing the 10,000 least responsive donors should raise that average by at least 10% — and the "warmth" and innate persuasiveness of telephone contact should add another 10% to the average gift. This means an average of about $36 for each of the 1,820 gifts you receive from this telephone fundraising project, or a gross of $65,520. (Naturally enough, the average gift almost always depends on whom you call.)

But don't expect all $65,520 to come in at once. Telephone contact may take time — between three and six weeks, generally, to contact all 6,500 donors. Your telephone fundraising firm then has to mail out pledge cards — within 24 hours of the call, if it's good! — and you have to wait for the donors to respond. Many don't. Most programs follow up once or twice by mail, and sometimes by phone as well. Generally, 70-80% of the proceeds from a telephone fundraising program will be received within 120 days of the date of the first contact with donors. The last contributions should be received within 120 days of the date of the last contact. As you can see, telephone fundraising is rarely a quick way to raise a buck.

While the length and character of the script will determine how much time each phone contact requires, it's likely that callers will average anywhere from 9-13 contacts per hour. The median is almost squarely in the middle of that range, or about 10 or 11 contacts per hour. (At that rate, it will take about 620 hours of calling to complete the job.) If the firm is charging you $4 per contact (including direct mail follow-up costs), the cost of the effort will be $26,000. At $5 per contact, the total cost would be $32,500. Eventually, you'll net somewhere between $33,000 and $40,000.

The ratio of revenue to costs in this hypothetical project is between 2.0 and 2.5 to 1. In other words, you'll double your money. In addition, the chances are you'll be getting gifts from many more than the number of donors who would respond to a direct mail appeal. You also get larger gifts from many of them than they've ever given before by mail. And you'll have established personal contact with more than one-third of your best donors, which will educate them and build their loyalty.

Like other direct response fields, telephone fundraising has become increasingly complex. Many telefundraising firms now maintain contact records of who pledged and who didn't. In subsequent calling programs, they eliminate donors who have repeatedly refused to give in the past, thus lowering program costs and increasing pledge rates.
An especially effective telephone fund-raising program — one carefully segmented to deliver the most powerful message to each segment or type of donor — can upgrade the average contribution by more than 10%. Some programs successfully generate major gifts: Single contributions of $10,000 or more are not unknown. Careful direct mail follow-up can substantially raise fulfillment rates.

But don't be mesmerized by dollars and cents. Telephone fundraising can play a strategic role for your organization by converting many of your one-time "donors" into genuine supporters, by generating real enthusiasm among many of your reliable donors and coaxing them to give much larger gifts, and by conveying the message to your supporters in the most intimate way available to you that their support really matters.

Fees charged by telephone fundraising firms vary greatly, and each firm seems to have its own peculiar list of inclusions and exclusions from the base rate. They tend to run from about $3.50 per donor contacted to $6 or more (to as much as $12 per contact in a High-Dollar program. Experience and levels of talent also vary. Chances are, you'll get what you pay for. You're not likely to find any bargains.

Cost is only one of a great many issues to consider about telephone fundraising. Normally, you can lower the cost by limiting the duration of the contact (the "script"), by cheapening the quality of the printed materials sent to those who pledge to contribute, by avoiding "lead letters" or postcards to the donors you're going to call, and by simplifying the methods and terms of collecting payments. It may or may not be smart for you to do any of these things.

When you look around the telephone fundraising field, you should also find out whether a firm you're considering is properly registered to do business in the states where your donors live. More than 40 states require fundraising firms to register. Many also require that firms file advance notices of scheduled solicitations. Regulation of telephone fundraising has become a controversial issue of considerable staying power, and I'm sure you'll agree it's essential to conduct your affairs with scrupulous regard for both legal and ethical standards.

This Special Report was excerpted from Revolution in the Mailbox, Revised and Updated Edition, by Mal Warwick, to be published January 2004 by Jossey-Bass. Copyright © 2003 by Mal Warwick. All rights reserved.


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