March 2003 - Issue 17

The New Marketing Model
For Nonprofits

By Vinay Bhagat
Founder and CEO, Convio, Inc.

With momentum building for the last few years, 2003 may be the year that the nonprofit sector broadly begins to embrace the Internet as an indispensable tool.  Organizations that rely primarily on traditional methods are finding it tougher to sustain fundraising and other forms of constituent support.  Now, the data is beginning to amass on “early adopter” nonprofits that began incorporating the Internet into their operations a year or two or three ago.  The numbers make a compelling case for groups to go online in a big way, especially in the current challenging environment for philanthropy.      
 
Survival and growth require “mind-share”

Nonprofit groups today are struggling to do more with less.  Budgets have tightened in the wake of: declining endowments; reduced government, corporate and foundation funding; and rising competition for donor dollars, especially as supporters reduce the number of causes they support.  But the need for programs and services continues to grow.

Given these conditions and the growing uncertainty as our country prepares for war, maximizing “mind-share” with your constituents, getting them involved, and increasing and sustaining your relevance is more important than ever.  To achieve that, the nonprofit “marketing model” must change. 

Time for a new marketing model

The traditional nonprofit marketing model is not working. Although major and planned giving donors/prospects receive a lot of personal attention, constituent-to-nonprofit staff ratios typically are too high for sufficient direct interaction and the human touch that produces strong relationships.  Annual giving and membership programs yield poor returns as groups churn 30-50 percent of supporters from year to year, use costly acquisition techniques that take 12-36 months to break-even and spend heavily on paper-based communications. Special events fundraising suffers from low contributions per participant and weak participant retention. 

Groups relying on earned revenue often under-invest in marketing, most of which is loosely targeted.  Grassroots advocacy programs tend to tap a narrow constituency.  Finding and retaining good volunteers also remains a challenge for many groups.  Nonprofit departments operating as “silos” fail to leverage the synergies between functions such as development, volunteer recruitment, client services, advocacy and special events to cross-market from one constituency to another and maximize involvement.  Uncoordinated communications result in a lack of congruency in constituents’ eyes, or no “single version of the truth.”

The eCRM model: creating and managing constituent relations online

Not surprisingly, acceptance and preference of the Internet as a communications and direct response channel is growing.  Organizations using online Constituent Relationship Management (eCRM) are starting to raise meaningful dollars and achieve significant program results.  They are realizing that:

• The Internet is a strategic marketing tool, not a cost of doing business.
  
• Internet success is not just about having a Web site, collecting online donations or sending email it’s about taking an integrated, systematic approach to managing relationships through eCRM.
  
• The Internet affords the opportunity to build relationships through regular, relevant or value-added communication rather than just to solicit.
  
• Unlike mail, online interactions are a great opportunity to learn about constituent interests and motivations.
  
• Building a large constituent email file significantly impacts success.
  
• Theme-based appeals (e.g., explaining how your donation will be used) are more effective than generic appeals and giving forms.
  
• Online and offline campaigns should be integrated online marketing systems must connect with your donor database.
  
• Volunteer-based fundraising is powerful because it taps known loyal supporters and their like-minded personal contacts, plus today’s Internet tools make it easy and efficient.
  
• eCRM supports all key functions where outreach and relationship management are required, i.e., for marketing services, recruiting volunteers, driving advocacy and also cultivating, acquiring and stewarding both annual giving and major donors.
  
• eCRM should be integrated across functions sharing a single Internet platform.

The proof that eCRM works

Nonprofits following these principles are achieving strong results.  Consider these Convio clients:

• Planned Parenthood Federation of America: Between October 2000-December 2002, raised $1.7 million online. The average online gift size increased 86 percent from 2001 to 2002.
  
• American Society for the Prevention of Cruelty to Animals: Raised more than $430,000 online between October 2001-December 2002, and the average renewal gift online was 74 percent higher than direct mail.  Also, grew its online Advocacy Brigade membership by 247 percent in seven months.  Much of the organization’s success is attributable to cross-marketing between constituent groups, e.g., activists and donors.
  
• Carnegie Museums of Pittsburgh: Increased its email house file more than 50 percent in just eight month. Now sends four monthly newsletters to members.  The average online gift is 16 percent higher than offline gifts.  Attendance is up for events that are marketed and managed online. 
  
• HoustonPBS: Raised more than $123,000 online via pledge drives in 14 months.  Has completed one-third of event registrations online. Used online communications in the wake of eliminating roughly $150,000 annually in paper-based communications.  Just launched a “members only” area, offering a wide array of services, which will help to grow loyalty.
  
• Citizens Against Government Waste: Increased its email house file from 2,000 to 11,000 in 13 months.  Now sends nearly 8,000 emails per advocacy alert, with response rates that have exceeded 60 percent.  Up to 40 percent of alert respondents are “off the file” (i.e., received forwarded messages), and join the file as a result of taking action.

These types of results from organizations large and small and in different segments of the nonprofit sector prove that the Internet does help nonprofits build strong constituent relationships which, in turn, optimizes fundraising, marketing, special events management and advocacy.  As more data comes in, watch for more nonprofits to follow suit by assimilating the Internet into their mission-critical operations.