The Hidden Value of a Comprehensive Annual Giving Program

by Susan Holt and Bob Wilkens

As we are all painfully aware, philanthropic giving fell sharply during the recent recession and donations are still down about 8 percent from their 2007 peak of $344.5 billion.  As we attempt to bounce back, it’s time to get creative in asking.

Rightly so, many development managers focus primarily on major gifts and the top 5 to 10 percent of the existing donor pyramid. While major gifts are obviously critical to the success of every development program, the annual giving segment of the donor pyramid is often given little attention, strategic thought and limited resources.This can be a costly mistake. 

Annual giving can be a surprisingly robust part of overall gift support of any institution and its advancement program. When done well, it is one method for keeping the constituency informed and engaged through regular communication. Besides the obvious result of supplying an annual revenue stream, the annual fund helps to instill the habit of regular giving, one important component in a robust philanthropic culture. From a campaign standpoint, it is an important pipeline for identifying and cultivating prospects for the major donor and planned giving program.

Managing a successful annual fund, especially in the unknowns of today’s health care landscape, requires a sophisticated blend of art and science by a skilled annual fund professional. There are many proven tools at the advancement department’s disposal, from sophisticated wealth screening programs that tie personal solicitation approaches to predictive modeling programs based on the donors’ gift capacity and giving habits, to multi-channel strategies (a mix of direct mail and electronic media) to web-based fundraising practices.

Wealth Screening

One key element of successful annual giving programs is targeted donor research, with the goal of increasing gift levels of high net worth donors.  Accurate wealth screening and research combined with qualification by staff and Board members can identify donors who can clearly upgrade their support levels.  Once identified,  these donors are ripe for cultivation by staff and volunteers as potential major gift donors in the future.

Effective and timely cultivation and solicitation of potential large donors can be especially important in hospitals and medical centers during the time, or immediately afterwards, when patients are under active care.  Many wealthy individuals who are in this situation become very interested in supporting the research and clinical care initiatives of their physicians during this tense and sometimes challenging period.  When properly cultivated and solicited in a sensitive and caring manner, these individuals can become major supporters of the institution and its clinical and research mission, leading to multi-year commitments.

Timely major gift solicitation of patients who are supporting annual giving is critical because once the active phase of care is completed, many donors again refocus on their traditional philanthropic giving areas and the opportunity may be lost.

Personalized Solicitations:  Lessons learned from the economic downturn

In 2008 and 2009 when large major gift support plummeted at many institutions, creative annual giving appeals and focus on personalized solicitations for key annual donors helped many organizations weather the storm.  Although in many cases the strategy at that time was simply to stay connected with our donors and keep telling our story, in other cases gifts to the annual fund helped maintain a relationship.

Successful annual giving appeals required conversations with potential major donors who were reluctant to make multi-year pledges while their assets were depleted. Creative development managers who worked closely with their key donors to keep them engaged as annual fund donors while economic conditions improved have likely seen a return on that investment. As in the case of good stewardship and cultivation, these savvy development officers, kept donors aware of capital needs for possible support when donor balance sheets improved. By staying close to these donors and keeping them aware of new developments without major asks, these development officers are now well positioned to engage in comprehensive discussions about critical support as the economic condition improved.

Multi-Channel Strategies

Today, multi-channel giving is an important aspect of any annual giving program. Studies show that donor response varies greatly depending on the age and the method of approach. “Mature” donors (born before 1945) tend to respond at a higher rate to direct mail, but beginning with Baby Boomers — those born between 1946 and 1964 — followed by the Gen X’s — those born in the 1960’s and 1970’s — and GenY’s — those born from the late 1970’s to the early 2000’s — this response rate falls precipitously off with each successive generation.  Studies also show that younger audiences (especially Gen X’s and Y’s) will likely respond to multiple methods of approach (mail, online, text and mobile) and will jump between them.[1] Direct mail alone is simply insufficient and, at the same time, expensive.

These forms of giving can add real value to an institution by supporting the expansion of the donor base and helping to create a more diverse constituency. Annual gifts, particularly at the higher end, can also be a vital resource for operational support when capital support is not forthcoming.

Giving Clubs and Societies

Giving clubs and societies are certainly tried and true mechanisms in the annual fund and can be especially valuable for upgrading donors. Whether named for a beloved leader, physician, professor or landmark, the gift club or donor society not only recognizes the donor but sends a signal to others that may be influenced by a friend’s gift; in other words, gift clubs/societies are basic to the notion of leadership giving.   

Estate Planning

Finally annual giving donors can also become excellent planned giving donors if the development team creates appropriate language in gift acknowledgement letters and other mailings which encourage donors in the 60-year-old+ range to consider making provisions in their estates.  Accurate donor research and effective staff follow up with selected donors will be important since donors often change their estate plans when they move to retirement areas.

A well-conceived and implemented annual giving program can be a key element in a healthy, growing development program.  It is therefore critical that this program is properly staffed and given necessary resources to unlock the hidden value in this core element of a successful program.  A well-engineered annual giving program will reap benefits far in excess of its cost.

[1]The Next Generation of American Giving: A Study on the Multichannel Preferences and Charitable Habits of Generation Y, Generation X, Baby Boomers and Matures Authors: Vinay Bhagat (Convio), Pam Loeb (Edge Research), Mark Rovner (Sea Change Strategies).