[Lnc-business] Comission Based Paid Fundraisers.

[Joe Bishop-Henchman]

It's a good question, and I thought I would add some context on the 
tradeoffs involved. I've tried or seen tried essentially every 
combination of the below.

The short version is that individual fundraising is a trilemma, where 
you can have no more than 2 of:
(1) Raise lots of money
(2) Build long-term (multi-year) trusting relationships with donors
(3) Spend less than you bring in

Campaigns often make use of commission fundraisers because they don't 
really care about (2), and sometimes not even about (3). They don't care 
about (2) because the campaign will end, so there's no need for a 
long-term donor relationship - if the campaign doesn't deliver on any of 
its promises, no consequences since you don't need money from the donor 
next year, so might as well churn 'n' burn them, as the crude term goes. 
A campaign may not even care about (3) because the goal may simply be to 
boost small contributions so as to lower the overall average donation 
amount, a common talking point. Hillary, for instance, would plead for 
supporters to send her tiny amounts ($1 or $5), so then she could 
plausibly claim to have an average donation amount in the neighborhood 
of Bernie's. She didn't care if she lost money on every donation, what 
she needed was the talking point and she was willing to burn money to 
get it.

Our fundraising strategy, as best as I can tell, is actually five 
different fundraising strategies: (1) memberships, (2) direct mail, (3) 
email/online, (4) event sponsorship/registrations, and (5) major gifts. 
All have benefits and costs. Key to keep in mind is that the general 
rule of thumb is that 80% of your revenue will come from 20% of your 
donors, so the most success will come from focusing most of your 
resources on that 20%.

(1) Membership, at the $25 level, probably breaks even at best after 
accounting for material and labor costs from obtaining renewals and 
maintaining communications with members. We could throw contractors or 
commissioned-staff at boosting this number, but it would probably be 
loss-leading endeavor, undertaken for some other goal (to boost 
membership numbers, to get engagement, or to get members into the funnel 
for major gift cultivation). I think we've had some membership 
renewal/retention/growth success from phone cultivation, but I'd be 
skeptical if it's much better than break even after including labor 
costs.

(2) Direct mail's component pieces (writing the letter, 
finding/buying/renting the lists, sending the letters, processing the 
returns, combing the resultant data) can each or all be contracted out, 
but contracting it all out usually costs more than it brings in, and the 
less it's in-house, the less you can control the message and less you 
can obtain the data and insights needed for major gift cultivation. A 
spectacular letter open rate for your existing supporters is 8%; for 
donor prospects, 1%. You have to keep close eye on open rates, average 
gift, cost of mailing, cost of processing, and attrition, or else your 
numbers can easily go upside down. An org I may or may not be familiar 
with basically loses money on new direct mail donors for the first 3-5 
years before it goes into the black, having recovered the costs of 
initial acquisition. (I don't know much about Project Archimedes, but I 
think that was the gist of the strategy for that.)

(3) Email or online gift processing is usually contracted out to someone 
(as an embed on the website), who are paid either a commission or a fee 
of some kind. There are companies that will handle the entire email 
donation, but at a cost at or above what you bring in, unless you have a 
ginormous list, like Bernie's. A spectacular email open rate is about 
20%.

(4) Most fundraising events lose money, short of a deep-pocketed sponsor 
or some other unusual circumstance. We're very lucky in that our 
convention essentially breaks even, and enables us to do in-person 
fundraising at the event that puts us far into the black. The former 
could probably be contracted out, but it's a careful game since there's 
real risk of cannibalization (shifting someone's major gift to instead 
be an event sponsorship, or vice versa) if it's being done by different 
people. The latter could be commissioned if it's the right person that 
the audience will open up their wallets more for, assuming the person 
wouldn't do it without a commission. The most common method is to have 
some big draw as a keynote for a closed, extra-fee event, who will 
motivate attendance of donor prospects who wouldn't otherwise attend.

(5) Major gifts. You never contract this out. Never, never, never. This 
one is about building a trusting relationship between the donor and 
someone deeply involved with the organization, to motivate annual 
giving, and the occasional "stop-and-think" 10x annual giving gift. It 
involves a lot of research, cultivation, engagement, asks, and 
follow-ups. I've seen mixed results with making it commission-based: you 
have to be very specific about what you make incentive-based since you 
will absolutely get more of that to the detriment of something else. 
(Examples: if a fundraiser in charge of major gifts and direct mail gets 
a commission for major gifts, you have to define the hazy line between 
them. If a fundraiser in charge of major gifts and event sponsorship 
gets a commission for major gifts, there's an incentive to solicit one 
at the expense of the other.)

Commissions have a tendency to push toward churn-and-burn, when the goal 
of major gifts is long-term relationships, so it needs to be done very 
carefully with people you trust to keep the long-term in mind. The 
horror story is something like the Disabled Veterans Foundation, which 
contracted out its fundraising in total. They raised a ton of money - 
$116 million over a couple of years - through misleading shock messages 
to donors, a gold-plated contract that shifted all risk to the charity, 
and tactics like making envelopes look like past-due utility bills. But 
raising that $116 million cost the charity $130 million plus their 
reputation, as they burned all their donors. They folded.


JBH

------------
Joe Bishop-Henchman
LNC Member (At-Large)
joe.bishop-henchman at lp.org
www.facebook.com/groups/189510455174837

On 2019-04-08 22:59, Joshua Smith via Lnc-business wrote:
> Have we used commission based fundraisers in the past for the LP?
> 
> And please don't think that's a knock on you Lauren. You have done an
> amazing job with what you have been handed, but I personally would
> like to look in to some other avenues that may be more helpful for you
> and the party.
> 
> On Apr 8, 2019 7:56 PM, Joshua Smith <joshua.smith at lp.org> wrote:
> 
>> We have been a party for over 40 years. How many max donors per year
>> do we have? I think long term relationships are great, but aren't
>> working so great at raising enough money to be competitive just to
>> be quite honest. I have heard some success stories from around the
>> country about paying specific fundraisers on commission, and believe
>> we should be using every tool at our disposal. Especially if we can
>> raise money and pay the person or people doing so without hurting
>> our budget.