January, 2002 - Issue 9

Of 418 nonprofit groups surveyed by the W.K. Kellogg Foundation, 75 percent reported that they had functioning Web sites. Thirty-two percent characterized their Web sites as "dynamic," or offering visitors ways to get involved in the work of the organization. Of those groups who described their site as dynamic, 44 percent were able to accept charitable donations through their Web sites and 54 percent were able to recruit volunteers online.

Nonprofit groups are at different stages of evolution: 1) the online brochure; 2) online transactions; 3) interactive Web sites and email; and 4) integrated marketing and constituent relationship management.

Phase 1: The Online Brochure
In Phase One, nonprofit organizations are essentially using their Web sites as a placeholder of content and are simply moving print brochure content online. An online brochure allows a nonprofit to convey basic information about the organization. Typically, content updates require technical intervention and implementation by a technical staff person, volunteer or agency. Consequently, for most of these groups, updates are infrequent. The online brochure is a place to view static content and begs the obvious question -- why should anyone return to the Web site? Online brochures do little to enable fundraising or relationship development.

Phase 2: Online Transactions
As nonprofit organizations have recognized the potential to raise funds online, many have taken the second step to use their Web sites to accept online donations. Some organizations have a form that donors can fill out and fax or transmit online as a pledge. For those nonprofit groups interested in taking credit card information online, many have invested in secure servers or signed up with transaction processing services. With a secure server, a donor fills out a Web form, which encrypts or codes donor and credit card information before the credit card number is processed over the Internet. In most cases, these secure forms do not facilitate automated transaction processing and response. For example, donor and credit card information is received unencrypted by staff at the nonprofit but requires manual intervention for gift processing, donor acknowledgement and receipt creation as well as time-consuming data entry to update and append new information into the group's donor database. Organizations using transaction-processing services have benefited from automated online transaction processing where gifts are processed and acknowledged in real-time, and money flows directly into the organization's bank account. Generally, these services have not provided full integration into donor management systems, so groups still have had to manually re-key information into their systems. Some service providers have also used their own names (merchant accounts) for transaction processing such that the donor's credit card statement does not mention the charity name but the name of the service provider. This practice can be confusing for some donors.

Has Online Fundraising Really Been Successful?
A survey by The Chronicle of Philanthropy found that even though 55 percent of nonprofit groups take donations online, less than 1 percent of funds were raised online in 1999. At that time, prevailing wisdom held that disaster-related organizations would be the only group within the nonprofit sector likely to benefit from online fundraising. The challenge facing all groups has been how to consistently drive people to their Web sites to donate year-round. Few groups in Phase Two have systematically been able to drive traffic to their Web sites through traditional marketing media. Virtually none have re-marketed to constituents through email to develop ongoing relationships or leveraged their Web sites as channels for personalized communications and stewardship, which are the keys for building a supporter's loyalty. Moreover, most Web sites remained essentially static, giving supporters little reason to return.

Phase 3: Interactive Web sites and Email
Many large nonprofit groups, as well as a few progressive smaller organizations, have worked to reach Phase Three. Many Phase Three organizations have invested in building dynamic, database-driven Web sites that can be updated frequently and, in some cases, offer personalized content that appeals to constituent interests. Early adopters of the Internet have either built infrastructure in-house or contracted with Web agencies to build data-driven Web sites. As a result, these nonprofits have invested anywhere between $100,000 to more than $1 million to build interactive, dynamic Web sites. Other groups have achieved the effect of an interactive Web site by hiring teams of people to keep their content fresh through more manual tools. For example, some groups have invested significant dollars and have hired anywhere between three and 15 Webmasters to keep their Web sites fresh. In these scenarios, groups have found that the Web teams often become the bottlenecks to get content updated if functions such as development or advocacy do not have autonomous control of their portions of the site. Other nonprofit groups who have more recently considered building data-driven Web sites have been able to benefit from Application Service Providers (ASPs), another type of solution which has come to market in the last two years.

Email As a Means of Communication and Solicitation
Nonprofit organizations in Phase Three have also started to experiment with email as a means of communication and solicitation. In a 2001 survey by The Chronicle of Philanthropy, of 100 nonprofit groups with online donation capabilities, 41 percent sent email newsletters and 28 percent sent email solicitations. Studies began to prove that email response rates were significantly higher than direct mail, e.g., in tests, Stanford University achieved a 2x response rate on email campaigns versus direct mail campaigns. However, the key challenge in developing effective email marketing programs for Phase Three organizations has been a lack of email addresses -- anecdotal evidence indicates that most groups have email addresses for less than 10 percent of their active donor bases. Few groups have systematic capabilities to capture email addresses through their Web sites or offline marketing channels.

Too Many Vendors -- Is It Possible To Store Data In One Place?
As Phase Three organizations grow their email marketing, online fundraising, advocacy and web content initiatives, a significant burgeoning challenge is how to tie all their systems together to maximize marketing effectiveness. Phase Three organizations have typically found that their different Web systems -- for email marketing, content management, fundraising, advocacy, etc. -- have created silos of data which are not seamlessly connected. One large national nonprofit even reported having more than 650 distinct constituent databases. Phase Three groups have had difficulty in connecting their Web systems to such offline systems as development and/or direct mail databases. Sharing constituent and segment information as well as tracking constituent interactions in a unified manner becomes a real challenge. Moreover, most groups in Phase Three have also treated the Internet as a stand-alone channel and have not systematically integrated traditional marketing programs (mail, media, etc.) with Web programs.

Phase 4: Constituent Relationship Management and Integrated Marketing
The most progressive nonprofit groups have reached Phase Four in their adoption of the Internet -- constituent relationship management (CRM) combined with integrated marketing.

CRM -- Constituent Relationship Management -- What is it?
Constituent relationship management is a systematic approach for managing constituent relationships by tying systems together, profiling and tracking constituent interactions to create a unified view of a constituent's interests, activities and characteristics, and then leveraging the information for more personalized marketing. In simple terms, online systems need to be connected and unified through a centralized online database. Online systems also need to connect to offline systems such as donor databases or ticketing systems. Many nonprofit organizations that have embarked on Internet projects have, for the most part, taken a departmentalized approach; for example, development functions have deployed online donation processing capabilities while advocacy functions have built online advocacy tools. This approach fails to leverage the synergy of constituent relationships from one function to another for cross-marketing purposes and, in the process, creates silos of data. An enterprise-wide approach to constituent relationship management seeks to tie together systems across functions. This approach allows all systems and functions to share the latest information about constituents. For example, have constituents responded to a campaign or have they said they do not want any more communication? It also allows segmentation criteria to be developed that leverage interactions across multiple facets of the organization for marketing purposes. For instance, a fundraiser may want to create a prospecting segment composed of people who subscribe to the communication group's email newsletter, who click through regularly or complete surveys and who have participated in an advocacy alert, but who have never given. This task would be extremely difficult without the capability to collate and unify data around constituent interactions. Once this segment group is created, the fundraiser may want to create an online campaign solicitation for this particular segment group, send out an email and create some content that is of interest to the segment group. Executing this kind of segmented campaign across email, the Web site and the online campaign section is again very difficult unless systems can share segment information.

Combine Offline with Online Direct Marketing Activities to Maximize Results
Integrated marketing combines offline with online direct marketing activities to maximize response rates and the achievement of goals. To date, most organizations have treated Web campaigns as stand alone efforts, rarely integrating them into their traditional marketing activities such as direct mail and telemarketing. However, in cases when there is integration, success rates have been significantly higher. In an integrated acquisition campaign, a prospect could be offered the opportunity to respond online to that specific campaign as well as by writing a check. In an integrated campaign to a current donor (e.g., renewal, additional solicitation), the nonprofit sends an email or series of emails as a precursor to a mail campaign. If the person responds to the email, the group could stop the mail piece to save costs.

Summary
Today, most nonprofit organizations that have embraced the Internet have reached Phase Two, or the online transactions stage of the evolutionary process. As groups begin to experiment with Interactive Web sites, email, and integrated marketing, they will reap significant benefits by establishing strong relationships with constituents, and increasing their ability to achieve online fundraising success.