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Cinderella Doesn't Live Here

Strategic planning and long-range vision—not fairy godmothers—are the keys to turn your annual fund into a pipeline for major gifts

By Brian Daugherty

There are no Cinderellas. Nike hammered this point home in dramatic ads during March Madness 2008: Cinderella stories do not exist, because every fairy-tale basketball season starts with a visionary coach and players willing to stretch beyond their limitations. Hard work, not magic, delivers each famous NCAA upset.

This message applies just as well to our efforts in developing major gifts. We may wish major gifts would just materialize, but most result from months or years of strategic planning, research, and the hard work of initiating, building, and maintaining fruitful relationships. A good place to start building those relationships is your annual fund.

"The annual fund is the most obvious place to go to develop major gifts, but it is also the most overlooked," says Lori Yersh, executive director of donor relations at McGill University in Quebec and a consultant to more than 85 annual giving programs. "Most institutions are not proactively and tactically using their annual fund to find major gift prospects."

Building the pipeline is about using the vast amount of data your annual fund is already collecting, developing strategies to build on this initial information, engaging donors in meaningful ways, and positioning your organization to solicit the donor for a major gift. There is no magic equation-direct mail appeal + phone solicitation + event attendance = a major gift-but there are strategies that work. And there is every reason to invest in the pipeline.

"We don't know who is going to be the next Bill Gates to graduate from college," says Yersh. "We do know that the two main factors in a major gift are inclination and capacity. We can't influence capacity, but we can influence inclination through our annual giving programs. Will you be their charity of choice? How your institution treats donors at the beginning can determine whether they will become major gift prospects over time."

Take the long view

Traditional annual giving metrics have focused almost exclusively on short-term goals, including alumni giving percentages, average gift size, and a prescribed percentage increase in donors and dollars. Although valuable, these metrics tell us nothing about how donors behave over the long term.

Instead of just looking at retention rates for a single-year period, we need to examine retention and upgrade percentages over longer periods. How does the picture change when you look at five-year increments? Consider all your first-time donors in a given year-whether they graduated in '48 or '08-as a cohort. How many of those first-time donors of 2008 will still be with you in 2013? How many will be major gift prospects?

Set goals for your team based on these long-term metrics. Aim to increase, not just your year-to-year retention rates, but your five- and 10-year retention rates. Set a percentage goal for major gift prospects. You may not meet all the goals you set, but if you don't have a plan, it's definitely not going to happen.

Keep in mind what is at stake. The average retention rate for first-time donors is about 30 to 35 percent. For donors who are still giving four years later, the retention rate more than doubles to almost 90 percent.

When we take a long-term perspective, we can give those consecutive-year donors the targeted follow-up e-mails and phone calls that build loyalty and, for those with capacity, move them into your major gift pipeline.

Developing leaders

At San Diego State University in California, three of our major donors are perfect examples of a pipeline at work. Each of these donors, a trio of friends who met through SDSU activities and athletics, has recently made a commitment of $900,000 or more. They each began giving to the university with gifts of less than $200. It took from five to 10 years before they made their first $1,000 gift and between 25 to 35 years until their most recent commitment. We encouraged them to become alumni leaders, asking them to challenge their classmates to match and exceed their generosity. They have done that and more: Their gifts are at the heart of our successful campaign for our new alumni center.

Leadership annual giving groups, with a formalized structure and minimum gift requirements, are an excellent source for gathering information, deepening relationships, and focusing efforts on a group of donors who have already expressed a solid commitment. It doesn't matter if you call it the President's Fund, Chancellor's Associates, or the SDSU Club. What matters is what you do with these members. To be effective, members of this group must be involved in activities that will build their philanthropy. Surveys, personalized renewals, and targeted special events provide opportunities to build relationships and bridge the gap between annual and major giving.

Stewardship 101

Stewardship is an essential tool in building your pipeline. There are 1.1 million nonprofits in the United States, and that number is growing. If we don't take care of donors who have demonstrated a long-term commitment to our institutions, someone else will be more than happy to do so.

As Yersh points out, stewardship should begin early. A well-run senior class gift ensures that all alumni understand what philanthropy means for your institution. Their individual checks for $20.09 this year may not look impressive, but a positive beginning is indispensable in building donor loyalty.

In San Diego, a well-known philanthropist uses small annual gifts to test organizations' responses for how they would steward a larger gift. Surely this donor is not alone in employing this strategy.

The good news is stewardship does not have to be extravagant. What donors really want is to hear about the impact of their gift. How are you communicating this to them? Think about how you can use e-mail to thank donors while telling them about the tangible ways their gift has made a difference: from the $50 that bought a new textbook for the library to the $5,000 that outfitted one bio lab station. For those donors who are at the top of your prospect list, think outside of the box on how to engage them on a regular basis.

Brian Kish, director of development and constituency relations at Salve Regina University in Newport, Rhode Island, points out that alumni perceive the total institution. They aren't thinking about whether they are interacting with your development office, your alumni relations shop, or your faculty. Kish employs a team approach to stewardship, making use of all the university's resources. "I had a $1,000-level donor who was given a tour of the special collections of the library because of his interest," says Kish, "and he ended up giving a $5 million gift to the library."

Tailoring technology

Technology has significantly altered our landscape and the way we interact with donors. Recent innovations allow us to communicate with annual donors in personalized ways that were reserved for major donors just a few years ago. Annual fund donors who express an interest in your medical school, for example, can get quarterly e-mail updates on medical breakthroughs at the school. E-mail is a cost-effective way to increase engagement for donors at every level.

Technology can also help us deal with specific challenges of our institutions. Lishelle Blakemore, director of annual programs at the University of California, Berkeley, relies on technology to manage the sheer size of her alumni pool.

"We have 450,000 living alumni," says Blakemore, "so we have to be very strategic about how we invest our resources."

Data analysis helped Blakemore identify a new group of donors with enormous potential: parents whose children attended private K-12 schools. "These parents have a sophisticated philanthropic history," says Blakemore. "They come to their children's education with the expectation that they will be asked for support."

Salve Regina's Kish also uses technology to strategically manage his list-and to tackle the opposite problem of UC Berkeley.

"At 60 years old, we are a younger institution, and 60 percent of our alumni graduated since 1990," says Kish. "We are truly, truly laying the groundwork for the future with our annual fund."

Strategies Kish uses include asking for the highest donor level possible from the beginning. "We are more likely to retain those who gave a higher dollar value for their first gift," explains Kish. "Someone who gives $10 initially is about a third as likely to give again as someone who gives $100."

Another strategy Kish employs is to "work the middle" of the pipeline, consistently asking donors to upgrade their giving levels by large increments. "I do a $500 ask of someone who's been giving $100 and a $1,000 ask of someone who's been giving $500," says Kish. "I want them to know where we want them to go, and I want them to know other people are doing that."

Kish notes that lapsed donors are prime prospects for upgrades and are actually more likely to donate more than someone who gives faithfully every year at the same level. "If you are only looking at who gave last year, you may be missing out on some nice upgrades from lapsed donors," he says.

Frontline fundraising

A new strategy in place at both SDSU and UC Berkeley is to assign frontline fundraising staff to the annual fund. These staff members develop relationships with annual donors and upgrade them, not just to higher levels of annual support but also to the major gift level. This concept singlehandedly changes the dynamics of an annual giving operation from one that focuses on macro-level appeals to one that manages donor relationships on an individual basis. In a short period at SDSU, we have seen significant returns on these investments.

Blakemore, at UC Berkeley, has also seen a big payoff from the strategy. "We've created new regional fundraisers who each have a geographic beat," says Blakemore. Her staff racks up lots of airline miles, traveling to visit far-flung prospects.

"In just the last six months, we've had two prospects who had never given more than $5,000 to the university each giving $1 million," says Blakemore.

Frontline fundraisers can also "move donors up the ladder," says Kish, strengthening the middle of your annual fund. Many institutions use a threshold for major gift officers. While the threshold may vary from $5,000 to $100,000, there is likely a gap between your $100 annual donor and your threshold for major gifts. Frontline fundraisers in the annual fund provide the natural bridge between these two levels.

Frontline staff can also facilitate the dual ask. When we ask for a major gift-let's say $100,000 structured over four years-we can also ask for an additional $4,000 to be given to the annual fund in $1,000 increments. Make the case to the donor that her leadership in the annual fund is too important for the institution to do without for four years. This strategy keeps the donor engaged in all the ways that led her to a major gift in the first place. It allows you to build your fund from the high end, rather than decapitating it as you build the pipeline. Also, you avoid the difficulty of reengaging a donor in the annual fund after a major gift.

In the end, building your pipeline boils down to understanding the multiple factors at play in raising major gifts, having a strategic understanding of the annual fund's role in this process, and investing in the people and programs that will allow your pipeline to run to its full capacity.

While yours may not be a Cinderella story, by properly integrating your annual fund in your major gift strategy you can ensure that you will have your pick of Prince Charming prospects for a happily ever after story.

About the Author Brian Daugherty

Brian Daugherty is the executive director of the San Diego State University Fund in California.




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