Intro
The strategic purpose of annual giving is to activate generosity through compelling content. Annual giving is probably the most common strategy in fundraising. The work of annual giving is to acquire and retain a broad, large donor base at smaller gift amounts (any gift amount below your major gift threshold).
When to consider annual giving as a priority strategy:
- You have a high tolerance for a long runway (you will not receive a return on investment for 18 months)
- You’re prepared to apply direct response science to the fundraising operation
- You have a competency and proclivity to storytelling through words and imagery
- You have a mission that is competitive in your market to activate base-level donors
The best annual giving communication is produced through the lens of value-add content. Rather than creating a communication calendar that blasts at a frequency designed to wear people down until they give, value-add content is designed to be transformational to the reader.
Annual giving is generally the most predictable and sustainable of the strategies and establishes a bedrock of philanthropic relationships for the future. If you lose 10% of your annual giving donor base due to environmental, economic, or political factors, you can withstand the loss. Alternatively, if you lose 10% of your grant funders or major donors, you will feel it more.
The following overview provides insight on how to conceptualize and operationalize the annual giving strategy.
Definitions
Annual Giving: Activating contributed revenue from base-level donors through compelling content (communications calendar).
Value-add content: Content (video, copywriting, social media posts) that uses the organization’s expertise to elevate, liberate, or inspire the audience.
Acquisition: Communication efforts designed to acquire a first-time donor.
Cultivation: Communication efforts designed to engage existing donors to deepen their commitment to the organization (give additional gifts or convert from one-time givers to monthly givers).
Lapsed: Communication efforts designed to reactivate donors who used to give, but no longer give.
Stewardship: Communication efforts designed to demonstrate impact to donors.
Channels: The medium through which a message is delivered to a particular audience.
Segments: The portions of your audience to which you communicate separately.
Messages: The plan for the targeted communication for each segment.
The Annual giving funnel
This is an overview of the annual giving funnel. It is a process of transforming non-donors into life-time donors. You may see variations of these stages across the industry but we’re going to categorize this journey using these four stages: acquisition, cultivation, reactivation, and stewardship.
An important consideration for ESEs is coordinating the annual giving funnel with a marketing funnel for your customer base. Sometimes, social enterprise fundraising teams running an annual giving strategy work in tandem with marketing teams to ensure that the content produced overlaps intentionally. Sometimes, coordination is challenging. For example, the marketing team may be producing a monthly newsletter designed to convert individuals to customers. The same audience may also receive a fundraising-focused newsletter designed to convert individuals to donors. In order to coordinate efforts, the two teams should sync their communication calendars.
Every current or possible donor can be categorized in one of four stages. Each stage demands a corresponding approach to achieve the primary goal of that stage. In annual giving, we often use these stages to identify the purpose of a campaign. You may hear that an organization is in the middle of an acquisition campaign or a lapsed donor campaign. Strategically, the giving funnel is the framework for creating an annual giving calendar.
Acquisition refers to the efforts necessary to acquire a first-time donor. It starts with lead generation, or in other words, the initiation of interest into your mission in the form of capturing email and/or mailing addresses, and then focuses on converting those leads into first-time donors. For the sake of clarity, we define a lead as any non-donor who has given your organization an email address, physical address, or is a follower on Facebook. For ESEs, a major source of leads is your customer base. Sometimes the process of building a “sign up for our newsletter” on your point of sale system can be the best way to acquire new donors.
In summary, this first stage of acquisition encompasses both lead generation and first gift conversion.
In the cultivation stage, we are working to communicate in meaningful ways for the purpose of eliciting a response of action, of giving. At its simplest, the cultivation stage is about engaging donors in a variety of ways that increase their commitment to your organization, and more importantly, their heart of generosity.
Donors inevitably disengage from our organization for a multitude of reasons. Maybe they were persuaded by a situational event, like a natural disaster, and gave initially, but lost interest after that. Maybe they attended an event with a friend, but didn’t have a sustained connection to our organization. We have a separate stage in our cycle called lapsed/recovery or reactivation specifically to re-engage lapsed donors. In this stage we are focused on cultivation activities, and the strategy is to reconnect them to the motivator that prompted them to give in the first place.
It’s here that we begin a long-term donor journey. The last stage is our stewardship stage. In this stage we’re focused on the work of demonstrating impact and increasing loyalty.
Within the different stages of the giving funnel, we also have separate channels, segments, and messaging.
Channels: The medium through which a message is delivered to a particular audience.
Direct mail, email, direct response television, telephone, text-to-give, and even social media are all channels through which a message is delivered to a specific audience.
Segments: The purpose of segmentation is to ensure that we are targeting our communications effectively and efficiently.
There are several types of segmentation, and while you can slice and dice your database a million different ways, we’re going to focus on three primary lenses through which to think about segments. The first is recency, then gift frequency, and finally gift amount. There are many others, including acquisition channel or the list of donors by channel preference, engagement level, demographics, psychographics, communication preferences, etc.
Messaging: The theme, story, and call to action of the communication piece.
Messaging is all about telling stories. Stories can be told using data, narrative, imagery, and even through the package design of your channel. If there is one principle in annual giving messaging, it is this: people give when they feel both affected by the problem and effective towards the solution.
The following table demonstrates how channels, segments, and messaging differ at each stage of the giving funnel.
| PURPOSE | CHANNELS | SEGMENTS | MESSAGING | |
|---|---|---|---|---|
| ACQUISITION | Generate leads and first time conversions | Direct mail, email, and direct response television | Leads (ex. past 3 months) | Focus on the problem your organization address |
| CULTIVATION | Increase donors’ increase commitment and generosity | Direct mail, social media, and telephone | Ex. $1000-$9999 Mid-level Donors (multi-gift last 12 months) | Focus on the success of your organization’s unique solution |
| REACTIVATION | Re-engage lapsed donors | Telephone, direct mail, email | Ex. Lapsed 2017 Multi-gift Donors (<$100) | Remind donors why they gave in the first place |
| STEWARDSHIP | Demonstrate impact and increasing loyalty | Direct mail and telephone | Ex. $500-999 Base level donors; (first time and only gift last 12 months) | Demonstrate impact through storytelling, invite deeper engagement in non-monetary ways, invite to more personal relationship |
The Annual giving calendar
A key piece to running an effective annual giving strategy is to coordinate channels, segmentation, and messaging at all stages of the cycle so that you are constantly activating and stewarding donors toward greater and greater generosity. You can coordinate these activities with a 12-month annual giving calendar.
You can start with a calendar of appeals. Creating an appeal schedule with the right frequency, to the right people, and with the right message is critical in this stage.
The following are recommendations for how to build your calendar of appeals:
| Communications on the calendar are exclusive to annual giving (not program related, event invitations, volunteer opportunities, etc.). | |
| Stewardship communications occur monthly: newsletter, telephone thank-a-thon in November. Your newsletter is not focused on news, but rather stories that convey impact. Click here to view sample newsletters. | |
| Includes a minimum of 6-8 cultivation appeals per year: spring, early fall, end of year. | |
| Includes a minimum of 2-4 acquisition appeals, avoiding summer months, April/May or Sept/Oct are ideal. | |
| Includes a minimum of 2 lapsed appeals: spring, early fall, end of year. | |
| Utilizes channels including (not limited to) telephone, direct mail, email, and social media. | |
| Messages are coordinated across giving stages to maximize storytelling and resources. | |
| End of year efforts include at least 1 mail piece at the beginning of December, 3-4 emails over the final 6 weeks of the year. | |
| Communications with higher costs are scheduled in spring and end-of-year months. |
Planning your revenue growth
Four primary goals, and thus four primary measures are required for your annual giving program: revenue, total donors, retention rate, and average gift amount. These goals are fundamental in annual giving.
First, your revenue goal. Remember that this is your revenue goal for your annual giving strategy, not your overall organization’s revenue goal. Donor retention rate and average gift amount are indicators of the likelihood that you will meet your revenue goal for your annual giving strategy.
Second, we need to track the number of total donors. Ideally, the number only goes up. In any case, it indicates the level of overall engagement our organization is achieving.
Third, donor retention rate. A strong donor retention rate indicates a healthy organization that has captured the trust and support of people who believe in the mission. In fact, donor retention is one of the defining metrics of a meaningful donor experience.
If your organization were to track one metric only, it should be retention rate. Retention rates can say so much about you, your fundraising approach, your mission, communications, etc. It’s revealing.
Last, average gift amount. Higher gift amounts result in greater retention rates. Donors that give higher average gift amounts are those that continue to give year over year. So focusing on increasing the average gift amount of your donor base will not only result in greater revenue, but also a greater retention rate.
Click here for a planning spreadsheet to help you predict annual giving revenue across a five-year trajectory.
Lead generation
In annual giving, lead generation is best executed through digital channels, but even this can vary. For example, as we said above, your customer base is a major source of leads. You may not need to do further lead generation beyond asking your customers to sign up for your newsletter. However, if your customer base is not large enough, the following activities can help.
First, online quizzes or contests. Girls Scouts of America have a great example of this, where they launched an online quiz that matched your personality with a type of Girl Scout cookie. All you had to do to find out your cookie was to provide an email address.
Free content is another way to capture email addresses. When organizations are able to create unique content like e-books, white papers, or infographics, they have a powerful asset to capture emails.
Similarly, a standard of website design should be the ability to easily sign up for a newsletter or some other type of exclusive content.
Lastly, events as a channel for lead generation can also be effective, whether it be event sponsorship where attendee lists are part of the sponsorship benefits, or hosting a booth at an event where you capture contact information at the booth. Raffles, auctions, and the like are often used at events to help attract potential leads.
Click here to view Seed’s toolkit on lead generation.
Appeal writing
Each appeal should possess the following attributes.
- A clear statement of the problem that your organization is helping to solve.
- The specific solution your organization brings to the table.
- How the organization may be unique in its story or approach to its work.
A good appeal always has a story rooted in human emotion – a story that connects the reader to you and the work.
Appeals demonstrate clearly how a donor can take action and make an impact. We have to give donors the opportunity to act on the organization’s mission.
Lastly, an appeal includes 3 asks. Below, you’ll find an example appeal letter for your use and see these asks in action.
Click here to review Seed’s blog post on creating value-add content in your appeal writing.
Click here for Seed’s Appeal Writing Toolkit
Operationalizing annual giving
The following milestones are necessary to fully operationalize an annual giving strategy:
| MILESTONE | EXAMPLE OF SUCCESS |
|---|---|
| Develop/document weekly/monthly routine for annual giving efforts | A calendar of weekly/monthly annual giving tasks and activities is created with assignments to all relevant team members; Annual Giving manager uses this calendar for one-on-one check-ins with each staff member |
| Establish lead generation plan to match goal from dashboard | Lead generation activities are scheduled for the year with associated goals which add up to the total number of leads needed as per development dashboard; lead generation plan is incorporated into weekly annual giving efforts calendar |
| Finalize appeal schedule | Appeal schedule is finalized with all needed details per appeal: Name, Channel, Segments, Messaging, and Goals (Number of Gifts, Response Rate, Average Gift Amount, Projected Revenue, ROI) |
| Establish clear metrics for annual giving efforts by quarter | Metrics are derived from the Roadmap Dashboard. Metrics are divided into quarterly goals. Metrics include: #leads, #total donors, #new donors/reactivated donors, acquisition conversion rate, average gift amount, donor influx rate, retention rate |
| Establish a routine for using CRM for annual giving work | Establish segmentation in CRM according to appeal calendar to ensure segmentation can occur; a protocol document is drafted which includes guidelines for tracking which appeals each donor has received, updating stage of giving cycle, and tracking gifts |
| Establish/clarify relationship with outside agency (if applicable) | Agency has clear scope of work that aligns with our priorities; agency has seen and is driving toward our dashboard metrics |
| Create/launch appeal copywriting process | Story collection process is in place, copywriter has been trained on appeal writing checklist, appeals are analyzed each time for test/learn |
| Establish social media protocol | Social media calendar is created and aligns with appeal schedule |
| Maintain quarterly goals on annual giving metrics | Identify 3000 leads, convert 500 new donors, maintain 750 active donors, maintain an average gift amount of $150, maintain a 50% donor retention rate (base) |
Staffing considerations
The most essential roles in operating an annual giving strategy are a strategist and an operator.
Annual Giving Manager: This person is responsible for the overall strategy, including the communications calendar and the performance of each campaign. They are excellent at coordinating channels, segmentation, and messaging to activate donors. They also develop lead generation strategies. They analyze data to learn from giving trends and make decisions on pivots that should be made accordingly.
Annual Giving Operators: Many job descriptions fall into this category including: digital communications specialists, copywriters, graphic designers, donor relations specialists, and database managers. These roles ensure that the infrastructure of annual giving is effective. Early stage organizations may outsource many of these roles.
Click Here for Seed’s Job Description repository.
Additional Resources: Do you want to spend more time on this?
6 min: Review Seed’s blog post on creating value-add content in your appeal writing
10 min: Review Seed’s Appeal Samples
20 min: Review Seed’s Annual Giving Toolkit
30 min: Plan your lead generation strategy
40 min: View Seed’s online microcourse on Writing Appeals through Crisis
1 hour: Review build your Annual Giving revenue projections
About Seed
Seed is a community of professional fundraisers and nonprofit leaders who strengthen and scale culture-building institutions in the social sector. Seed’s consulting team has supported REDF’s portfolio since 2019.