How Accurate is the Pareto Principle?

Hopefully you know all about the Pareto Principle, also known as the 80/20 rule.

In fundraising it means concentrating more resources on the 20% of people who would, theoretically, give you 80% of your future revenue.

Pareto² (Pareto squared) is a little bit more complex.  It is when we look at those top 20% of donors, and note that 20% of them will give a majority of income too.

Again, theoretically, this small number (20% of 20%, which is 4%) would give you 80% of 80% of your revenue – 64%.

This theory can really help with resource allocation.  But how close is reality to theory?

The Principle ‘works’ to different degrees.  A charity with a database consisting of only monthly donors would have a ‘flat’ Pareto score.  Their top 20% of donors might give just 45% of donations for example.

Whereas a charity who has a broader portfolio of donors and is good at maximising revenue from bequests and mid-major donors would be much closer to the ‘true’ Pareto principle.

My colleague Andy Tidy had a look at all the individual donations made to all 75 charities in the Pareto Benchmarking study, and we saw something really interesting.

Bringing the charities together, you would expect the charities who are reliant on monthly giving would ‘balance out’ the charities who do well in bequests and major donors to get us close to the Pareto principle.

And indeed they do.

One off donations – including bequests – come very close to the ‘Perfect Pareto’.

With 73% of revenue coming from 20% of donors, and 46% coming from 4%, those one off gifts are close to theory.  When charities are really good at their bequests and major donors, their Pareto principle will be closer to 80/20 and 64/4.

But monthly givers are nice and ‘flat’ with the top 20% of donors ‘only’ giving 45% of revenue, and the top 4% just giving 16%.

Pareto Principle - Theory v Reality 

So what does that mean when you develop a plan for your mid value, major donors and bequests?

Well, the lessons of Pareto still apply – there is more potential now and into the future from a minority of your donors. Your approach should be the same.

Here are my thoughts about the Pareto principle and Pareto², even if the numbers are not quite 80/20 and 64/4.

• You will get a majority of your revenue from a minority of donors
• If you have a ‘flat Pareto score’ - like 20% of donors giving you 50% or less of revenue - then you are probably not doing enough work in the areas of bequests, mid and major donors
• If you have a ‘steep Pareto score’ - like than 5% of donors giving you 80% of revenue – then you may be too reliant on a few donors for your whole operation. Time to invest in some monthly givers?
• Increasing investment in your ‘top’ donors is likely to reap rewards. What type of investment?
  • Better stewardship
  • Visits, events and meeting donors ‘in the field’
  • Bigger, better direct mail to fewer donors
  • Integrating direct mail with digital, phone, visits and events

So don’t worry if you don’t have a perfect Pareto score, the learnings still apply and can guide you in your future planning.

And if you're interested in how you can turn your mid value donors into major gift donors - you should join my next webinar, where we'll give you more details and a process on how to do this:

The Quickest, Cheapest and Easiest Way to Extra Cash Now, Turn Mid Value Donors Into Major Gifts In a Week. 

The webinar will be live on 29th / 30th September (depends on your time zone), however even if you can't make the date, the recording and slides will be available for all who register. 

Click here to register for my webinar.

Sean

How much ‘relationship’ is enough?

When fundraising is like the gawky guy or gal who just needs to ask for the date!

There are lots of books, blogs, webinars and conference sessions about stewardship and building relationships with donors.  Most I have seen are good, and the theories would work if charity staff did them.

But most take a long time, and involve developing big cases for support, many meetings, lots of research and more.  They also rely on experienced and rare staff talent.

Looking around at data, as well as having an understanding about how many charities operate, most stewardship and relationship plans simply don’t work. 

Why? Impatience, too many distractions and short employment periods all contribute to the failure. As does the challenge to get the talented staff, or the difficulty in dealing with staff who are simply not up for the job.Also, we tend to aim a little high, and often try to build relationships with people who have a capacity to give but no previous relationship directly with our charity.

A while back I came up with a little program that I called ‘Major Donors, Next Week.’

The idea is for charities with large enough databases to turn donors who give, say $1,000 into donors who give $2,500 very quickly.  It has even increased donors to give over $10,000.

This is possible using these tools and thoughts:

• Donors who have given well above average already have a relationship with you - all you need to do is make a special ask

• Better direct marketing will help, but nothing beats face to face conversations

• You don’t need big or new cases for support – your direct marketing is already working on this group, so base your ask around the work you have featured in your direct marketing

• Only research donors after they have agreed to meet

• Meet and ask. Yes, ask in that first meeting

• Do this next week, or it doesn’t work.

Go on, give it a go!

My next webinar will actually give you more details about this exciting yet simple program. And I’ll also give you a process to do this. But ultimately it is a more structured version of those points above.  Uncomplicating the process is key to making it work.

Click here if you haven’t already registered for The Quickest Cheapest And Easiest Way To Extra Cash Now. Turn Mid Value Donors Into Major Gifts In A Week.  Live on 29th / 30th September (depending on your timezone), but the recording and slides available for all who register – even if you can’t make the date.

Sean

The Pareto Principle - Damian O'Broin's latest blog

You may like to hear from other fundraisers from time to time, so I'd like to share my friend and fundraising expert, Damian O’Broin’s latest blog on the Pareto Principle. 

Yes, I know you have heard about this principle a million times before, but I believe it is always worth reading others thoughts, particularly if it only takes you 5 minutes, which this will. 


Click here to read Damian's blog: bit.ly/Damians_blog

I am also very proud to be invited to speak at Ask Direct (Damian’s agency)’s Summer School in Sept 2016. Click here to find out more about the event. 

• Stewardship 3 Easy Steps Presentation Slides

• Customer Care Feedback Handling Guide Mini Give Away

• Customer Care Training - Module Overview (Pareto)

• Donor Feedback Log Template

• Examples of lovely thank you communications

• Nice donor cards from Maude at Children of the Street Society

• Example welcome program

• Should we thank? Proof in numbers? AND how to construct a thank you test.

How good is your donor care?

Hi! 

I'm Fiona McPhee - Fundraising Strategy Director for Pareto Fundraising. Sean has asked me to help him with his webinar on stewardship this week.

I am really looking forward to this as it is an area of real passion for me.  His other webinars have gone down really well, with great feedback, like this:

“This series thus far has been the best investment I have ever made in webinars.  My entire development team of [six] … are participating and all of them are gaining so much knowledge and information... If only we could get our board and executive leadership to watch these too!!!”

Mary Butler, Catholic Charities of St. Paul and Minneapolis

If you have already registered – great and thank you!  But please read on, because I would like to ask a favour of you…

All registrants get a recording and the slides, and if you are free for one of our three time slots on Thursday or Friday (depends on your time zone) you can attend live.  

Stewardship: Three Easy Steps To Make Your Mid-value Donors Feel Like The VIPs They Really Are

If you haven’t registered, you can now watch the recording here.  We are limited to 101 people per webinar watching live so please register soon!  

The favour:  Can you please help Sean and I help more charities? Whether you work within a charity or an agency, we want to showcase great examples of donor care and awesome anecdotes of wonderful stewardship.

A letter or video you are proud of, or a communication you received.  Anything that shows off great donor care to help others learn.

And – a very generous gift indeed – I am hoping for one or two people willing to share their organisations’ donor care plans, diagrams or flow charts.  Or an anonymised client’s plans? (If you are an agency bod, we will credit you if you request it). 

Perhaps you have a nice chart or process flow diagram of what donors get what communications?

Just imagine how useful that would be for a charity.

You could be helping so many more causes beyond your own.  And would very likely trigger a donation from Sean who will almost certainly donate himself to such generous charities!

Please just email anything useful to sean.triner@paretofundraising.com topic/subject ‘Donor Care.’

You can now watch the recording of Stewardship: Three Easy Steps To Make Your Mid-value Donors Feel Like The VIPs They Really Are

If you can’t make one of the three time slots this Friday in New Zealand and Australia, or Thursday in Europe, UK and North America, don't worry! All registrants will get a copy of the recording, slides and any handouts so you can watch anytime.  It is just US$89.  That is less than the price of a taxi from the airport in London!  (Well, it was, depends on how much more the pound has fallen since Brexit!)

Reminder of what we'll cover in the stewardship webinar:

In the session we will be:

• Looking at a sensible and practical decision ‘flow’ for managing donor care and stewardship with limited resources
• Dissecting some great donor care examples (like this CCIA one you can read here).
• Giving you easy and instant tips to improve your causes’ donor care – in a way that will make you more revenue.

See you soon!

Click here to watch the recording.

Thank you so much.

Fiona McPhee
Fundraising Strategy Director, Pareto Fundraising

Great Donor Care from Amnesty International

You know how we all worry about overheads? Well, Josh O’Rourke a relationship fundraiser from Amnesty International Australia had a good approach with one of his mid-value donors.

Having met up with a mid-value donor who had ‘only’ ever given $2,000, Josh found out the donor was keen to multiply her donation.  The donor asked to be anonymous, but let’s call her Janine after Josh’s mum.

There is lots of evidence that ‘multiplying gift appeals’ increases average donation and/or response rate. The offer is something like ‘Donate by 30 June and our sponsor will match your gift…’

Janine had obviously liked that offer previously.

Chatting with his colleagues in direct marketing, Josh found out there were no matching gift campaigns that she could contribute to at that time. So he turned it on its head and asked Janine to be the ‘sponsor’ who would be matching other people’s gifts!

It turned out she was keen, and interested in Amnesty’s campaign on the back of their work with indigenous children.  She gave $30,000.  Josh was chuffed, as were his colleagues in digital direct marketing.  They usually have such a campaign around this time of year, and hadn’t got a sponsor.  They emailed it today.

Within ninety minutes of the email going out, they had raised $20,000, and will definitely whizz past the $30,000.  Janine’s donation will be worth at least $60,000 to Amnesty’s important work.

Amnesty were making sure Janine felt like a VIP.  

I hope the Amnesty example gives you some inspiration!

Amnesty match appeal email campaign

Do You Care About Donors!?

Is stewardship just another buzzword? Is that why so few charities actually bother?

Of course you care about your donors.  But how much should you care!?

The webinars I have been running for about a year now have been really popular and the Stewardship one is really stacking up to be one of my best.

After a recent webinar, Andrew Hateley from The Leprosy Mission Australia said“Thanks Sean! Really appreciated your frankness and clarity around what is and isn't a good investment. Will definitely carry your insights with me into future fundraising/marketing/communications strategies.”

Every registrant gets the recording, the presentation, and a load of useful information whether they attend live or not.  Brilliant stuff you can watch anytime.

Ted Davis from US Charity AmeriCares said my webinars had…“Great, usable content.  Goes right to the heart of the issue”

Stewardship: Three Easy Steps To Make Your Mid-value Donors Feel Like The VIPs They Really Are

In my line of work, I come across very few ‘experts’ in donor care and stewardship.  Fiona truly is an expert.

I met her when she was ‘doing’ customer care at WWF Australia more than ten years ago.  Now she is one of the most senior and accomplished consultants in New Zealand.  With a WEALTH of experience and knowledge I reckon even just the Q&A section at the end of the webinar will be worth your time and investment!

In the session we are going to show you how to steward.  How to do good donor care. We are going to give you some fantastic handouts and examples of great donor care.Fiona is going to give you awesome decision trees and maps for stewardship.She will also give you some incredibly practical training tips for your staff and volunteers.

Stephen Batsche, Executive Director (the BOSS!!) from The Salvation Army USA“Your advice is straightforward, practical and based upon experience.”

Well Stephen, thank you – and this next webinar is going to really make sure we do the same.

You will leave with a toolkit containing immediate, practical ideas to go and do.

Also, there will be lots of handouts, examples and more.  I am going to give you the MOST bonus material I have ever included with a webinar.  (Nearly of all which Fiona prepared J)

Stewardship: Three Easy Steps To Make Your Mid-value Donors Feel Like The VIPs They Really Are

Long Fundraising Letters. Why, oh, why!?

Long letters work better.

But don't just take it from me. 

Dr Barnardo wrote a four page appeal letter in London in the 1880s using classic DM techniques. Underlining, urgency, dollar handles, specific ask and a clear reference to what YOU could do to help. The winter had been 'the severest and most arduous, so far as work among the children of the poor is concerned.'   So the good doctor needed to raise £100 a day for food.  He told readers 'unceasing demands upon our resources' were having an unprecedented impact on his charity.

The four page Dr Barnardo letter from the late 19th century.

Years later, another children's charity, Starlight, had a rough year and they had decided to go public about their shortfall. Unceasing demands upon their resources were tough too. They asked for funds but also had a refreshing degree of honesty. The donor learned that part of the shortfall was because Starlight funding strategy relied too much upon events and companies.After reading the press stories about their plight I pulled together an 'emergency' appeal to their donors and met up with them. The emergency appeal was only developed to show how I work, but they decided to mail it immediately anyway. 

The opening paragraphs of the Starlight letter

A full Case Study of this appeal is here, including an entire copy of the mailpack here.

It would never win awards for graphic design beauty. But the appeal raised over target. It more than doubled the amount raised from the same donors the previous year.

At the heart of the appeal was a four page appeal letter.

Despite the rise of other media, direct mail is still the biggest source of new one off donors.  So it is important we maximise revenue from mail donors.  And longer letters will tend to do that for you.

New Cash Recruits - by channel, across Pareto benchmarking charities.

I really don't like long letters, by the way. They are a pain in the butt to write, check copy, get clients approval, print and mail-merge. And someone important in most of our clients doesn't like them. And they don't look great in my portfolio (though the results do).

And I prefer doing digital stuff. And... I think you get the idea.

In focus groups, donors say they dislike them too. In Hong Kong, one client ran focus groups which all concluded that donors would be more likely to respond to a pack with a two-sided letter and tear off coupon than a four-page pack (actually eight pages - English and Chinese) with lots of additional information. The two pager raised HK$1.5m (AUD$220k) - the big pack raised over HK$7.5m (about $1.1m).

But they work.  As you can see from the test results below.  These are from a revolutionary pack National Heart Foundation did more than a decade ago.

I featured it in training I did on writing great direct mail for mid-value donors.  (You can access this training session as part of the mid-value webinar series I have done).

Long letters beat short letters - a defining test by National Heart Foundation

It isn't just me that thinks so.  Jeff Brooks attempts to explain why fundraising letters tend to work better in this 2012 article.  He also tells us in his Fundraising is Beautiful podcasts that in tests, long letters are three times more likely to win than shorter ones!  (He adds long email appeals are twice as likely to win as short email appeals).

I know longer letters tend to work better, but not because they are long. I think it is because, to tell a good story with a beginning, middle and end and ensure the right fundraising tactics, it simply takes more words. These tactics include target, what the target is for, deadline, establishing need, demonstrating solution, demonstrating why that charity is best placed to solve etc). Having said that, a dreadful four pager is worse than a good two pager - if a story can be told more quickly then tell it. As Mal Warwick says 'A fundraising letter should be as long as it needs to be...'

This article is a re-hash of one I wrote seven years ago.  Things have changed since then, but nothing changed in terms of whether long letters work better or now.

See Dr Barnado's 19th century appeal on SOFII here.

Long letters tend to work better with mid value donors too. Maybe it is just about respect - good donor care to take the time to explain why the donors support is so important.