Why we should use data to join the dots, not separate them

Donor insight is key to solving the direct marketing crisis, but is segmentation the answer? SolarAid doubled its income by doing the precise opposite, as Jenny Ramage discovers

The traditional portfolio of direct marketing techniques - street fundraising, direct mail, and door-to-door - is under the microscope. We’ve all seen the media reports of increasing public concern over ‘aggressive’ direct marketing techniques; meanwhile NPC research has revealed that fundraising costs are reaching worryingly high levels.

NPC’s director of research and consulting, Rob Abercrombie, says many charities are reporting sharply diminishing returns from traditional fundraising activities. He says the crisis is exemplified in the scattergun approach to messaging that many charities seem to be resorting to. “I was quite shocked, when in conversation with some big, well-resourced charities, to discover they are including ten different messages in prospecting letters. That strikes me as barmy. If that is common practice, then the situation is even worse than I thought.”

Rob is one of a number of experts in the field trying to get to the bottom of it all. “We need to have a better grasp of the situation we’re in, not just put our heads in the sand and carry on as before”, he says.

The importance of donor insight

Across the globe, and in every sector imaginable, all eyes are trained on data as holding the key to effective marketing. In the charity sector, there’s a good amount of research and testing being done around donor insight and segmentation, much of which takes advantage of open-source information, or ‘Big Data’. Macmillan, for example, has had notable success in this area, winning an IoF award for its Priority Audience Research and Segmentation project, while Leukaemia and Lymphoma Research made waves with its Bikeathon Dashboard.

NPC, meanwhile, has been undergoing some wider sector research to help develop a set of tools for charities to gain attitudinal insights into their supporters, and to determine the extent to which these can be usefully deployed within fundraising departments. “Understanding donors’ attitudes and motivations better has just got to be one of the ways out of this current impasse”, says Rob.

The charities that took part in NPC’s Fundraising Perspectives: Donor segmentation and Money for Good UK research, including RNIB, Oxfam and the Samaritans, are still experimenting with NPC’s attitudinal segmentation tool. The extent to which it might usefully be deployed across the many types of charities that exist - particularly in its current generic format - isn’t clear yet. But initial feedback from the participating charities is that the work done so far has, at the very least, produced some valuable food for thought.

The power of relationships

For SolarAid, one of the participating charities, the research yielded one particular insight that has had a profound effect on the charity’s relationship with its supporters. This was the finding that half of the 3,000 donors (and 80 per cent of the high income donors) interviewed for the Money for Good research were led to give as a result of being asked or recommended by someone they know.

“A lot of people in the sector don’t understand that the rules of marketing have changed quite dramatically”, says the charity’s chief fundraiser, Richard Turner. There is ample evidence in consumerism today of the massive prevalence of recommendations and peer-to-peer asks - and when it comes to charitable support, it’s no different. “Some of our largest gifts have come from someone who bought us a £20 solar light, and who went on to recommend us to a friend who then sent us a major donation.

“As a sector, we need to stop our obsession with ROI and instead focus on leveraging our supporters’ social capital, and on treating our supporters as a channel in themselves.”

The opposite of segmentation

Since this epiphany, Richard has stopped siloing fundraising activities by ROI. He’s stopped segmenting donors by behaviour. He’s even stopped separating out retention and acquisition. Instead, he has started to focus on how everything interconnects. “We are actually doing the opposite of labelling our supporters and keeping them in those boxes”, he explains. “Rather than just tag a supporter as a cash donor and treat them as such, we think about how we can inspire them to engage their networks. This is when the real magic starts to happen.”

It was this discovery that led Richard to actually shift the charity’s focus much more onto low ROI activities, such as events, “because we recognise that these are a great chance to have a conversation and inspire someone.”

Charities also need to recognise the power of digital - another area with typically low ROI - and should integrate it into everything they do, according to Richard. “Because we don’t see a direct return on digital, and because it’s hard to measure, we tend to park it into a different department. But if you start to see it in the context of engagement, you’ll realise it’s absolutely fundamental. The message just ripples out.”

For Richard, it all comes back to having an exciting purpose and a simple, inspirational story - and giving your supporters easy ways to share it with their networks. The proof of the pudding? SolarAid increased its income by 100 per cent last year. “Big Data might have its place, but you’ve got to get the basics right first - an inspiring purpose, and simple stories told well”, says Richard. “Getting those right might have a bigger effect on raising money than clever segmentation strategies will.”

The long road ahead

Well-analysed data is undoubtedly going to play a more and more important role in informing future marketing and fundraising activity, but as the Money for Good research shows, there’s still a lot of work to be done around how the various possible types of segmentation might work in practice, especially given the huge variety of types and sizes of charity out there.

Certainly, if data segmentation is used purely in an attempt to place supporters into neat little silos, it’s going to undermine all the hard work fundraisers put into donor care. The question remains: how can we ensure segmentation doesn’t sideline the nuances of the human relationships between a charity and its supporters? Because if this were to happen, it would undermine the very essence of relationship fundraising.

Jenny Ramage is editor of The Fundraiser