chapter 3: annual giving and membership programs Flashcards
involvement of small donors - why?
o Initial engagement: Donors often begin with small contributions and increase over time.
o Cumulative impact: Small donations can collectively have a significant financial impact.
o Accessibility: Broad support, even from modest donors, strengthens the institution’s image as being accessible.
annual giving programs
- Involve regularly scheduled solicitations for restricted or unrestricted funds to support general operations, specific projects, or special needs.
- Typically, gifts range from under $100 to a few thousand dollars, but large institutions may receive annual donations in the hundreds of thousands.
- These programs help cover short-term needs and ongoing expenses like maintenance and utilities.
membership programs
- Aimed at engaging small donors through structured benefit systems that incentivize continued support.
- Offer donors different contribution levels, each tied to specific benefits. The higher the contribution, the more exclusive the benefits.
- Benefits may include perks like ticket discounts, event invitations, or behind-the-scenes experiences.
- Impact: Can increase attendance, ticket sales, and commercial revenue while building a long-term donor base.
Benefits of Annual Giving and Membership Programs:
- Unrestricted revenue: Helps cover necessary but unattractive expenses like utilities and staff salaries.
- Broaden support base: Multiple giving tiers make donations accessible to individuals across different income levels, reducing reliance on a few major donors.
- Engage donors: Keeps modest donors engaged through events and benefits, fostering long-term relationships.
- Create audiences for new programs: Existing members and annual donors serve as the first audience for new initiatives.
- Feed pipelines for larger donations: Engaged small donors may evolve into major donors over time.
marketing tools
Annual giving and membership programs often use direct-response marketing tools, including direct mail, email, and phone/text solicitation to reach donors. Orgs leverage web tools to cut costs and target specific segments of their donor pool. These methods include a call-to-action, requesting immediate responses from potential donors.
3.2 Understanding Small Donors and Their Motivations to Give
Three Types of Motivational Drivers:
Altruistic Orientation: Donors are motivated by the desire to help others and support the community. They want to feel that their contribution is creating a meaningful impact. They may continue giving even if an org is well-funded because they gain self-esteem and visibility from their association with renowned institutions.
Needs Orientation: Donors are driven by internal (psychological) and external (social) needs. They may give to feel good about themselves or to gain recognition in their social circles. Socially motivated donors are influenced by peer pressure or a desire for reputation. Arts organizations should focus on personal relationships, utilizing peer-to-peer strategies to appeal to these donors.
Value Orientation: Donors seek tangible benefits in return for their contributions, such as discounts, tax incentives, or exclusive event access. These donors make calculated decisions based on the value of what they will receive. Arts organizations must balance offering tangible benefits without converting philanthropy into a purely commercial exchange.
3 types of motivational drivers for small donors
altruistic orientation, needs orientation, value orientation
altruistic orientation
Donors are motivated by the desire to help others and support the community. They want to feel that their contribution is creating a meaningful impact. They may continue giving even if an org is well-funded because they gain self-esteem and visibility from their association with renowned institutions.
needs orientation
Donors are driven by internal (psychological) and external (social) needs. They may give to feel good about themselves or to gain recognition in their social circles. Socially motivated donors are influenced by peer pressure or a desire for reputation. Arts organizations should focus on personal relationships, utilizing peer-to-peer strategies to appeal to these donors.
value orientation
Donors seek tangible benefits in return for their contributions, such as discounts, tax incentives, or exclusive event access. These donors make calculated decisions based on the value of what they will receive. Arts organizations must balance offering tangible benefits without converting philanthropy into a purely commercial exchange.
Subscribers or Members? Membership Programs as Bridges Between Marketing and Fundraising
Connection Between Marketing and Fundraising:
Both departments aim to build long-term relationships, but they function differently:
Marketing connects audiences with arts products.
Fundraising designs tools to engage potential donors.
Membership programs serve as a bridge, transforming transactional exchanges into philanthropic giving.
Membership vs. Subscription:
Subscribers pay for access to performances or exhibitions, receiving reduced fees for regular attendance.
Members form deeper connections with the institution, valuing its mission and community impact beyond attending events.
- BUT (especially in Europe) people tend to see subscriptions as most appropriate way to support arts institutions at an individual level (especially when organizations receive public funding)
o Therefore, often do not consider other forms of support
Loyalty as a Key Driver:
- Biggest challenge = designing consistent path that converts passionate subscribers into engaged members
o A lever that encourages arts devotees to become members is loyalty - Loyalty = indicator of value of relationship between arts organization and its attendees
o Loyal consumers likely to repeat purchase over time + have high willingness to recommend experience to other people and self-identify with brand to which loyal
Shared value strategy: - Shared values strategy all about making sure audiences (loyal or not) aware of what an organization stands for => what it believes in and what it fights for
- Having cultural experience while looking for something else = searching for experiential attributes that can be social, relational, educational, even spiritual
o Convert arts into something more personal and consequently more valuable for the engaged public
o To increase engagement audience (and convert attendees into members), arts organizations must encourage shift from a value perception perspective to one of value sharing
Types of Membership Programs:
Patron Programs: Cater to higher-end donors, often philanthropists seeking social recognition. Benefit from a set of basic functional benefits and also exclusive advantages. Often involved in bigger development projects.
Friends Programs: Broader and more affordable, targeting smaller donors who make modest and unrestricted contributions in return for functional benefits, including free or discounted tickets, retail discounts, and exhibition entries. Sometimes, also support more substantial fundraising efforts (restricted to special projects) as well as being a source of volunteers and advocates.
3.4.1 Defining Benefits
Benefits for Members:
Designed to motivate members to climb the giving ladder.
Include tangible (e.g., free parking, discounts) and intangible (e.g., emotional satisfaction, social recognition) rewards.
Higher contribution levels correspond to more exclusive benefits like priority seating or backstage tours.
Important to understand donors give more not only in return for benefits but also because they become closely connected with the org’s mission: benefits should be a tool to reinforce relationship between institution and its donors
Symbolic recognition: Benefits should show appreciation for donors, making them feel personally valued.
Benefit Categories:
Tangible vs. Intangible:
Tangible: material advantages like free parking, discounts.
Intangible: personal, indirect gratifications (motional satisfaction, social connection)
Individual vs. Social:
Individual: Direct personal advantages like reserved seats.
Social: desire for social connection and recognition (opportunities for networking and social status)
Transactional vs. Philanthropic:
Transactional: Quantifiable advantages (free admissions or discounts).
Philanthropic: connect donors with institution in exclusive relationship based on common goal of providing public good (Exclusive invitations or deeper institutional involvement).
In-person vs. Digital:
In-person benefits: include free admission and access to events
Digital benefits: involve online previews or exclusive content.
o Digital Memberships: Example of the MoMA’s Digital Member Lounge, which enhances engagement with virtual visitors.
Deciding Contribution Levels * Fixed Contribution Tiers:
o Rational strategy: based on fixed contribution targets and structured paths for upgrading donors (staff define the contribution tiers that give access to related packages of benefits). But, emotional drivers strongly motivate donations in arts so, must involve donors in a more engaging way:
o “Thoughtful asking” approach where donors reflect on their contribution relative to the organization’s mission. They are required to suggest voluntary contributions. Advantage = no limit. But problem: they might misunderstand meaning of “no limit” into “no value”. So, forego pure voluntarist approach in favor of an impure one, by suggesting donors how much extra they could give
o Orgs can use techniques like “Pay What You Want” (PWYW): ask purchasers to reflect on the extended value of what the org offers and to add an extra to the fixed price in return for that. Combines a price suggested by org with an extra fee added by customer. Patrons can add extra on top of a base price for services or experiences.
- COVID-19 Impact:
o The pandemic accelerated experimentation with dynamic pricing and additional donation prompts for digital offerings, engaging patrons to help close funding gaps.
Recognizing Donors
- Importance of Recognition:
o Even altruistic donors expect thanks and recognition.
o Timely acknowledgment (within a week for modest donors) is crucial to maintaining relationships.
o Personalized approaches are appreciated, and recognition can be both functional (receipt of gift) and emotional (highlighting the impact of their support). Also provide info about how gifts are used. - Effective Recognition:
o Ensure donors understand how their contributions impact the org’s mission.
o Public recognition (e.g., listings, special events) reinforces the emotional bond and encourages future donations.
acquisition of members
o Membership programs provide an entry-level for first-time donors, often converted from the attendance base.
o Focus on key factors for acquiring donors / analysing prospects:
1. Interest: Passion for the art form.
2. Capacity: Research the potential donor’s ability to give.
3. Connection: Build a personal link with the institution.
4. Personalization: Tailor approaches to individual donors.
retention of donors
o Keep donors engaged through constant communication, exclusive events, and personalized recognition.
o Pay attention to the evolution of relationships, needs change.
o Donor segmentation helps match fundraising actions to specific profiles, increasing loyalty and retention.
o Be aware of the lifetime value of each donor
o By developing a good donor retention strategy, orgs can benefit from practical advantages: stability of contributions over time and reductions in donor management costs (more costly to attract new donors than to retain and upgrade existing ones).
o Regular communication important! Case for support, clarity, urgence, connection
- Upgrading Donors:
membership programs can be an effective way to make donors move toward the top of the giving ladder. The upgrading process of gift levels is:
o Vertical upgrading: Increase contributions of current donors by engaging them more deeply with the institution (boosting donations of existing m)
Upgrading lower-level members and donors: identify individuals who are currently giving at lower levels but have signaled an increasing interest and have a higher estimated capacity for giving.
Contacting former upper-level members and donors: Maximizing these donors’ propensity to give can be more cost-effective than looking for new prospects. However, understanding why such donors suspended or discontinued giving is important to know before initiating a solicitation.
Working on post-event engagement: Individuals who attend one-time fundraising events could be approached about providing annual support.
o Horizontal upgrading: matching upper-level donors with some cross-action.
Developing more transactional programs: orgs with an appealing venue can rent out spaces for weddings, receptions or other special events, and require that those who rent the facility be annual fund donors or members at a certain level. Transactional donors are not as invested as those moved by philanthropic values, and are therefore less likely to renew their support throughout the years.
Making peer-to-peer efforts: some donors may be engaged in the organization, willing to spontaneously donate more and introduce other prospects. Peer-to-peer connections can be fostered if donors are engaged as volunteers, serve on a volunteer committee or help with a special fundraising campaign or initiative. This is also possible if dedicated peer-to-peer programs are developed, an example being bring-a-friend initiatives.
Measuring results of acquitting, retaining or upgrading
In arts fundraising, the most common metrics are:
Acquisition: measure at what level an org can acquire donors, in terms of number of donors + costs for activities and the lifetime value of contributors. These metrics are:
* Response rate: New membership sold via specific channel / Total membership asks via specific channel
* ROI: Net revenue from new members / Revenue from new members
* Cost of sale: Cost of acquiring new members / Revenue from new members
* Customer lifetime value: Average annual contribution x Average length of membership
Renewal metrics: quantify “regularity index” of members’ donations, in terms of number of members + costs and level of donation per year. Useful in helping to understand the retention and loyalty of members BUT should be coupled with the evaluation of customer lifetime value. These metrics are:
* Renewal rate: Num of members who gave in Year 1 and 2 / Num of members who gave in Year 1
* Cost of sale: Cost of renewing members / Gross revenue from renewing mbr
* Upgraded renewal rate: Num of mbr who gave in Year 1 and at higher level in Year 2 / Num of mbrs who gave in Year 1 and 2 at any level
Rejoining metrics: measure how amenable donors are to rejoining the org after relation has been interrupted.
* Reactivation rate: Memberships sold to former mbrs / Total rejoin asks
Attracting Individual Donors through Digital Memberships
- Digital Membership Programs:
o Engage modest donors through digital platforms like online membership pages and donation portals.
o Automation: Digital tools streamline acquisition and retention processes with personalized follow-up emails and targeted messaging. - Social Media and Community Engagement:
o Platforms like Facebook, Instagram, and Twitter allow real-time interaction with members and potential donors.
o Active members can become ambassadors for the institution, promoting it to their own networks and attracting new donors. - Benefits of Digital Memberships:
o Cost savings: Reducing management and marketing costs while increasing reach.
o Always-on: Donors can engage with the institution and make contributions 24/7 through digital platforms.
