Prospect Research in a Campaign

1. Prospect Research in a Campaign David Lamb Consultant Target Analytics

2. Agenda • Why do a campaign • Feasibility study • Campaign pyramid • Risk analysis/prospect identification • Prospect management

3. Why Do A Campaign? • Raises funds for featured objectives • Motivates existing donors to increase their giving and involvement • Acquires new donors • Generates visibility and excitement about the organization’s mission • If well run, post campaign giving may remain above pre-campaign giving Peak Campaign Giving Post Campaign Giving Gift $ Pre Campaign Giving Campaign premium Years

4. Internal Readiness • Are the featured objectives for your campaign realistic? • Do you have the staff to research, solicit, process gifts, and steward donors? • Do you have (or can you get) the funding for a campaign? • Is your database up to snuff? • Do you have an effective prospect management system? • Is your leadership (staff and board) committed to seeing a campaign through?

5. External Readiness • Do you have the donors to support a campaign? • Capacity • Motivation • Numbers • Is the case for the campaign compelling to your constituency and the community? • Are the environmental factors favorable? • Economy • Competition for gifts • Public attitudes

6. Feasibility (or Planning) Study • Tests the case for support • Is conducted by a credible, objective, outside consultant • Consists of series of interviews • Board and staff • Key supporters • Prospective major donors • Integrates all findings into an assessment • Strengths and weaknesses • Recommended goal • Prognosis for success

7. Phases Of A Campaign Typical total time frame for a comprehensive campaign is 7-10 years

8. Campaign Pyramid • You can get to your goal faster if you get a few very large gifts and many smaller gifts • Pyramid forces you to see the gift size reality • Time tested rule: 4 prospects for every 1 donor at the top levels of the pyramid • 90/10 rule – some predict this is changing • The pyramid you start with might not be the pyramid you end with

9. Campaign Pyramid Pivotal / Transformational Principal Leadership Major / Special Annual

10. Inverted Pyramid Constituent Base Loyal Donors Planned Major Major /Planned

11. Post-Recession Pyramid • http://philanthropy.com/news/updates/8853/colleges-will-see-a-decline-in-megagifts-experts-predict • Recovery from the recession likely to be weak • Fewer mega-gifts ($5MM+) than before the recession • Pre-recession – 70% of campaign total came from $1MM+ donors • Post-recession probability – 50% of campaign total will come from $1MM+ donors • Places increased pressure to find more mid-level major gift prospects • Pyramids of the future may be flatter • Implications for prospect research: we need more of those who are more difficult to research

12. Campaign Pyramid: $500MM Source: http://www.blackbaud.com/resources/giftrange/giftcalc.aspx

13. Setting The Goals • Top down: • Set the goal based on need and find the prospects to support it • Tends to be most aggressive and riskiest • The easy road: • Set the goal based on projected base-level giving • Tends to be the easiest to achieve • Bottom up: • Research the ability and interest of the prospect pool • Tends to balance risk vs. reward

14. Top Down – High Risk Prospect research must identify 203 additional prospects who can give over $25K

15. Easy Road – Low Risk • Average increase in giving since 2001 is about 4% per year • Project that into the future for a seven year campaign of $110 million over 7 years

16. Risk Adjusted Pyramid • Risk adjusted pyramid takes into account the likelihood to give at particular levels • Typical 4:1 prospect : donor ratio has a flaw • Not all prospects have the same likelihood to give • Your best prospects may be closely tied to your org already • For your best prospects, the proper ratio may be more like 2:1 or 3:1 (low risk) • For other prospects, the proper ratio may be in the 4:1 or 5:1 range (medium risk) • Even some prospects with little current contact (but who are on your database) may make major gifts – 10:1 (high risk) • It is not possible to precisely assign probability of a gift, but you can put people into groups of similar propensity

17. Hypothetical Example • 8 prospects identified at the $25MM level • 2 sit on the board, are personally committed to the org’s mission, and have made major gifts in the past • 1 has been a volunteer and a past major gift donor • 3 are an alumni with modest but regular giving to the annual fund • 2 are friends who have never made a gift • Do they all have an equivalent likelihood to give?

18. High Likelihood - Low Risk Group • High likelihood prospect:donor ratio = 2:1 • Example: • 2 prospects identified at $25 MM level • As a group, their potential is $100 MM • 2:1 ratio suggests that only half of their group potential will be realized

19. Moderate Likelihood – Medium Risk Group Moderate Likelihood prospect:donor ratio = 4:1

20. Low Likelihood – High Risk Group Low likelihood prospect:donor ratio = 10:1

21. Combined Risk-Adjusted Tables

22. Combined Risk-Adjusted Tables

23. The Middle Challenge • People capable of giving $25K-$100K may have very few discoverable indicators of wealth • A filter or screening of the database may help surface these people • Look for: • High incomes • Titles • Gifts to other orgs • Expensive or income-producing property Major, special and leadership gifts

24. Assessing Risk/Prospect ID • RFM Analysis • Age • Constituent characteristics • Statistical models • Generic • Custom • List matching (aka wealth screening)

25. RFM Analysis • Recency – when was the most recent gift? • Score 0 if more than 3 years ago • Score 1 if 3 years ago • Score 2 if 2 years ago • Score 3 if 1 year ago or less • Frequency – how consistently has the donor given? • Score 0 if none of the last three years • Score 1 if only one of the last three years • Score 2 if only two of the last three years • Score 3 if each of the last three years • Monetary Value (must be customized) • Score 0 of largest gift is $0 • Score 1 if largest gift is $1-$999 • Score 2 if largest gift is $1,000 – $4,999 • Score 3 if largest gift is >= $5,0000

26. RFM Analysis • If a prospect scores >= 8 • Top priority for additional research to estimate capacity • Consider the person a high likelihood prospect • If a prospect scores 4 – 7 • Second priority for research to estimate capacity • Consider the person a moderate likelihood prospect • If a prospect scores 0-3 • Do not do additional research unless specific indicators come to light • Consider the person a low likelihood prospect

27. Filtering On Age • Life Stage Theory: constituents have different propensities to give depending on age • Peak earning years for many professionals begins in the 40s • Increases through the 60s • Retirement age and older may be a threshold for even greater giving for the very wealthy • Focusing on age risks excluding some successful younger people

28. Filtering On Constituent Characteristics • Alumni/program participants may be have a built-in propensity • On the other hand… • Some alumni may have minimal affiliation • Some of your best donors may be community partners or friends

29. Other Constituent Characteristics • Degree • Major • Current/former parent • Grateful patient • Board member • Volunteer • Subscriber • Age • Ticket buyer • Event participation • Requests for information • Number or quality of communications • Number of affiliations • RFM

30. Statistical Models • What size gift is “major” • Must have at least 200 examples of gifts in the last year at a particular level for valid statistics • Don’t include gifts from corps or founds One year gift table

31. Constructing the models • Do-it-yourself • Must invest in software like SPSS or SAS • Must invest in statistical education • Must invest in data sources if you plan to use info beyond your database • Suggested technique: regression analysis • Variables with strong correlation become included in the model • Watch out for false or misleading correlations! • Hire a consultant/vendor • Must depend on the expertise and experience of another • Consultant/vendor may have ready access to marketing and geo-demographic data

32. Wealth screening • An automated process that matches the names on your database to those on other databases • Simple minded, but fast • Information returned requires verification

33. Prospect Identification • Ideal approach is to pre-screen with a model, then go deeper with a list matching process on top scoring prospects • On a pre-screened database, 1 in 10 may end up looking like major gift prospects. • If you need 4,000 prospects, screen 40,000 constituents

34. Campaign Staffing • Staff needs are based on campaign goal • Goal controls number of prospects and donors needed • If each major gift prospect must be contacted at least 2x/year, and there are about 240 working days in a year, an MGO must contact two prospects/day to carry a portfolio of 120 prospects • Ideal portfolio will be between 75 and 150 prospects per MGO • Portfolio size is influenced by • Ask amount • Geography • Job responsibilities

35. Campaign Staffing • To estimate number of MGOs needed for the campaign • Calculate the number of prospects who must be contacted • Divide that number by 200 • Only 100 of these will be assigned at any one time • The first prospects to be assigned will be the low-risk prospects • As prospects make gifts or are disqualified, portfolio will be re-supplied from verified prospects in the medium and high risk groups • Ratio of MGOs to researchers should be 1:4 or 1:5 in a campaign context

36. Campaign Staffing • Goal = $500 million • Prospects above $25,000 to be contacted: 4,000 (rounded up) • Major gift officers needed: 4,000/200 = 20 • Researchers needed: ~20 MGOs/5 ≈ 4 researchers – more if many prospects must be qualified • This does not include staff time for prospect management

37. Research In A Campaign • Filter the database to surface top prospects for research and contact • Assess capacity and inclination of top prospects • Brief profiles at identification • Full profiles as solicitation nears • Rationally place prospects on the pyramid by risk and capacity • Supply verified prospects to MGOs

38. Research In A Campaign • Refine understanding of risk and capacity through contact and further research • Re-evaluate pyramid position of each prospect • Match institutional needs to the prospect’s interests • Manage prospects through the pipeline

39. References • Fundraising Feasibility Studies, http://www.nps.gov/partnerships/fundraising_feas_study.htm • The Strategic Role of Quantitative Research in Campaign Planning, http://www.martsandlundy.com/dl.php?filename=pdf/special_reports/Quant_Research.pdf • A Kaleidoscope Of Prospect Development, Bobbie J. Strand, CASE Books, 2008