Every year, Masterworks hosts a gathering of leaders and marketers from ministries of every description. We call it the Edgewater Group.
We spend several days talking about what’s working, what’s not working and how we can inspire even greater levels of generosity in the donors who support Kingdom work.
Here are the 5 key trends I presented at this year’s event — major developments I’m seeing play out across the nonprofit marketing landscape:
1. We’re in an age of dramatically accelerating change that is impacting ministries in unprecedented ways.
The old model of fundraising, which relies heavily on direct mail, is struggling and will eventually fade away — maybe sooner than we think. I’ve told my team at Masterworks that our Kingdom focus is the only thing that won’t change for us. Everything else will.
The influence of artificial intelligence, cloud computing, big data and print on demand are rapidly changing the face of nonprofit marketing. What’s more, we have to realize that the internet is not just “another channel.” It’s the foundation of a new way of connecting, communicating and engaging with donors. Nonprofit organizations must either recognize this or die.
2. Direct mail is dying, especially direct mail acquisition.
While it’s still the primary cultivation medium for all but one Masterworks client, we’re rarely breaking even anymore on first gifts. The response decline would be accelerating if not for our success with the use of co-op mailing lists. In the last year, only one of our clients has had a significant breakthrough in acquisition. Many are limiting or ceasing testing altogether and applying those dollars to online innovation.
Masterworks’ proprietary segmenting and forecasting method and other data-driven strategies are propping up our results. We’re using artificial intelligence and data from dozens of outside sources — not just donor transactional information — to improve net income an average of 15 to 20 percent. This has worked with every one of our clients that has tested it.
Interestingly, digitally acquired donors are generally not responding well to direct mail — the first channel where we’ve ever seen that happen. We’re testing longitudinally with different types of direct mail treatments to see what happens. Our working hypothesis is that more digital cultivation and a lot less direct mail will improve income and retention. Stay tuned.
And finally, we need to work hard on finding the next big breakthrough in long-term value. Is it something like planned giving? It’s tough to make even the best direct marketing strategies work for lead generation. But, I asked the Edgewater Group, What if we were to take half of the unexpected gifts we get and use that money to fund lead generation? I think it’s worth trying.
3. Digital is breaking through in acquisition, not just cultivation.
For two-thirds of the 17 Masterworks clients using digital strategies to acquire new donors, it’s working. Their two-year ROIs are strong. We define “working” as “better than direct mail.” Or, if they’re starting off without a direct mail history, a five-year ROI of 4:1.
Two of our clients have scaled up, to the point where they’re spending 80 to 100 percent of their acquisition budget on digital. In other words, they’re spending more than $1 million per year and seeing no drop in ROI.
4. Technology is lagging at nonprofits.
We’ve got to figure out how to get a lot smarter about our use of technology — in both our marketing and business operations.
The use of technology at most nonprofits is at least 10 years behind that of the business world. This is not surprising. But consumer expectations are rising every year as they see the world’s smartest companies — the Amazons, Facebooks and Snapchats — innovate aggressively to find new audiences, hold on to existing customers/users and fend off competition. We must do likewise in our sphere. Donors will demand it.
In the nonprofit sector, Customer Relationship Management (CRM) system conversions are worse than ever. This will hurt their ability to offer unique experiences and connect with new audiences in a way that is relevant, meaningful and captivating. Again, donors will demand a great experience or look elsewhere.
5. Privacy concerns are a huge threat to marketers, especially direct marketers.
Privacy laws could change the nonprofit digital plan next year, next month or overnight. We don’t know.
Just look at what’s happening. Facebook founder Mark Zuckerberg was grilled by Congress over the social media network’s use of personal information. Direct mail acquisition is dead in Europe, the victim of increasingly stringent privacy regulations. The European Union’s new GDPR rules are a potential game-changer for enterprises of every kind.
But there is encouraging news. With one of our clients, a tracking pixel placed on their website quickly built a list of 1.5 million warm leads. We’re now doing this for all clients, with the goal of developing databases that can eventually replace expensive and fatiguing rental lists. Our premise is that, ultimately, this will bring our clients not just more donors, but more fully engaged donors.
And finally, cybersecurity is the topic du jour as sensitive data at well-known companies continues to be hacked, compromised and stolen. It’s only a matter of time before a recognized nonprofit is hit.
The big question: Is your organization doing what it needs to in order to protect sensitive donor information?
We’ll keep an eye on developments and report back to you. Watch this space for more information. And let us know what you’re thinking.