Investing in Annual Giving will Pay Off in Your Major Gift Pipeline 

Chad WarrenVice President and Senior ConsultantAugust 3, 2022

The year was 1965 – one year after graduating from Johns Hopkins University with a degree in electrical engineering, a young Michael Bloomberg made his first gift to his alma mater: $5. Over the last 57 years, Bloomberg’s philanthropy to Hopkins has eclipsed a staggering $3.5 billion. Yet, his generosity did or does not start or end with his affinity for his undergraduate institution.

In fact, according to Bloomberg’s own website, he has given $11.1 billion to philanthropic causes. Bloomberg Philanthropies ranges from healthcare such as the H1N1 outbreak in 2009, the West Nile Virus in 2012, and most recently the COVID-19 pandemic, along with climate change initiatives to supporting several historically Black and minority-serving schools with a strong record in STEM. Bloomberg’s generosity is vast, diverse, and noteworthy.

Philanthropy is learned, and trust is built with donors through a lifetime of engagement

The remarkable story of Bloomberg’s kindness had a beginning: his first-ever annual gift of five dollars to Hopkins. I bet you have a similar story in your database. A big donor began giving early and built trust over time as their resources increased. We see this in our major gift pipeline data across numerous institutions. Commonly, we see that the average major gift donor has given 10+ years in some way annually before making a major gift. 

Less than one in ten major givers give big with their first gift, and we think it might be even less than this because many institutions have poor data from decades ago, missing credits for many small gifts. Therefore, investment in annual giving today is crucial. Major gift donors don’t grow on trees. They are grown by your consistent engagement and education about the value of giving to your mission.

There’s a cost to raise a dollar, but the rewards go far beyond the first year of giving

I acknowledge that soliciting gifts is expensive. Nationally, it costs in the range of 70 cents to over $1 to raise a dollar of giving from a donor in the first year. But it’s crucial to look at both the mid-and long-term return on this investment. In our study of the value of new donors, we saw massive ROI following the first gift, even though many donors attrit or are intermittent in future giving. Our study of new donors showed an average of over $1,800 in giving over two decades following the first gift. And a considerable number of major gifts were identified through initial annual giving of lesser amounts.

The good news is that modern fundraising engagement technology drives down the cost of securing the initial gift. We’ve abandoned the world of “send everything to everyone” and “call everyone” for targeted approaches and, in many cases, incredibly low-cost touches that keep those we can’t immediately meet or talk with engaged.

We hear stories of leadership donors identified through low-cost channels like texting every month. Like this recent exchange that occurred a few weeks ago:

Student Ambassador: Hi Stefan, this is Cora from… We tried calling to see if we could count on your support before June 30. Can we give you a callback or send you a link to make a gift? If you prefer, we don’t text, reply stop. Thanks!

Alumnus: Thanks for reaching out. Please forward me the link. Have a great evening.

The result: a donor’s first gift of $2,022 via an online link thru a P2P text exchange!

It’s time, to be honest about the fruits of our labor in annual giving

Sadly, the value of future gifts within even a short time doesn’t go into the calculation of “annual giving ROI.” It’s absolutely true that you need to monitor your expenditures and make data-driven decisions to maximize how you use them. We also need to start paying attention to the other side of the equation: what people give over time.

How many of you calculate the 5-year value of new donors, and consider that in your ROI calculation for acquisition? Given how less expensive it is to retain a donor, you should. And calculate the percentage of your major givers who have given 6+ times annually before their major gift and report this to leadership. These are fairly simple methods, easily calculated from your database, and they really change the conversation about annual giving ROI.

Stewardship and impact are critical, and maintaining relationships drives major gift ROI

Donors like Bloomberg were continually cultivated and heavily engaged with fundraisers, alumni relations, and leaders at the institutions. Remember, you are with your donors for decades. Their interests will expand and change. That’s why it’s crucial to listen, whether it’s through surveying, AI-driven digital listening, or even through personal conversations. As you hear what donors care about, ignite their passion, so it aligns with your mission instead of just showing up with your hand out.

Bad annual giving ask: Thanks for giving last year. Will you give to the annual fund again, this time more?

Great annual giving ask: Thanks for coming to the event last month, and for volunteering as a career mentor. I see you’ve donated to a few areas over the past few years, and from what you just said, you’re interested in making a difference for (impact area). Would you consider an increased gift of X to make a difference in that crucial part of our mission?

Listening to donors, engaging them personally, and showing up at the ask with a full picture of their engagement is a game-changer. This strategy builds engagement over time and pays off well beyond this year’s fund total. The decision to have a robust annual giving program is not about today, but the leaders that will fill your shoes in two or three decades.

A combination of patience, and direct, personal engagement are key to annual giving ROI

As the English poet, William Langland wrote in 1360, “patience is a virtue.” We must remember most major and legacy gifts do not arise out of anywhere. Dedicating your organization to a sophisticated, ever-evolving annual giving program that benefits the entire enterprise is essential for the philanthropic longevity we all seek. 

We must persevere, remain patient, and know that the long-term potential is significant with proper investment today. While not every college or charity has the gift of a multi-billionaire on their roster of alumni, you certainly have givers who have the capacity to support today, tomorrow, and in the future with transformational gifts. It’s time to invest in crucial engagement relationships with these supporters and talk to your advancement leaders about the impact on more than just this year’s annual fund.

Have you been able to convince your leadership to invest for the long term with donor engagement? This is a crucial strategy — drop me a note, I would love to connect.

About the Author

Chad Warren

With over 2 decades of experience as a senior higher education leader, Chad Warren is an expert in maximizing donor engagement and meeting goals with the best use of resources. Dr. Chad Warren serves RNL partners...

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