Prospect Research in a Campaign

David Lamb

Consultant

Target Analytics

Agenda

Why do a campaign Feasibility study Campaign pyramid Risk analysis/prospect identification Prospect management

Why Do A Campaign?

Raises funds for featured objectives Motivates existing donors to increase their giving

and involvement Acquires new donors Generates visibility and excitement about the

organization’s mission If well run, post

campaign giving may remain above pre-campaign giving

Years

Peak Campaign Giving

Pre Campaign Giving

Post Campaign Giving

Gift

$

Campaign premium

Internal Readiness

Are the featured objectives for your campaign realistic?

Do you have the staff to research, solicit, process gifts, and steward donors?

Do you have (or can you get) the funding for a campaign?

Is your database up to snuff? Do you have an effective prospect management

system? Is your leadership (staff and board) committed to

seeing a campaign through?

External Readiness Do you have the donors to support a

campaign? Capacity Motivation Numbers

Is the case for the campaign compelling to your constituency and the community?

Are the environmental factors favorable? Economy Competition for gifts Public attitudes

Feasibility (or Planning) Study

Tests the case for support Is conducted by a credible, objective,

outside consultant Consists of series of interviews

Board and staff Key supporters Prospective major donors

Integrates all findings into an assessment Strengths and weaknesses Recommended goal Prognosis for success

Phases Of A Campaign

Typical total time frame for a comprehensive campaign is 7-10 years

Phase Research Issue

Pre-campaign, 1-2 years Identification and verification of top prospects

Quiet, 1-2 years Verification and profiling of top prospects; identification of mid-tier prospects

Public, 5-6 years Profiling of top prospects and mid-tier prospects

Consolidation, last two years

Identification, verification, and profiling second wave prospects

Campaign Pyramid You can get to your goal faster if you get a

few very large gifts and many smaller gifts Pyramid forces you to see the gift size

reality Time tested rule: 4 prospects for every 1

donor at the top levels of the pyramid 90/10 rule – some predict this is changing The pyramid you start with might not be the

pyramid you end with

Campaign Pyramid

Pivotal / Transformational

Principal

Leadership

Major / Special

Annual

Inverted Pyramid

Major /P

lanned

Major

Loyal Donors

Constituent Base

Planned

Post-Recession Pyramid

http://philanthropy.com/news/updates/8853/colleges-will-see-a-decline-in-megagifts-experts-predict

Recovery from the recession likely to be weak Fewer mega-gifts ($5MM+) than before the recession Pre-recession – 70% of campaign total came from $1MM+

donors Post-recession probability – 50% of campaign total will come

from $1MM+ donors Places increased pressure to find more mid-level major gift

prospects Pyramids of the future may be flatter Implications for prospect research: we need more of those

who are more difficult to research

Campaign Pyramid: $500MM

Source: http://www.blackbaud.com/resources/giftrange/giftcalc.aspx

Gift Range No. Gifts

required

No. Prospects

required Prospects identified

Prospects needed

Level Subtotal

Desired Cumulative Total

Desired Cumulative

percentage 50,000,000 1 4 4 0 $50,000,000 $50,000,000 10%

25,000,000 2 8 7 1 $50,000,000 $100,000,000 20%

12,500,000 5 20 17 3 $62,500,000 $162,500,000 33%

5,000,000 10 40 36 4 $50,000,000 $212,500,000 43%

2,500,000 20 80 84 0 $50,000,000 $262,500,000 53%

1,250,000 40 160 148 12 $50,000,000 $312,500,000 63%

750,000 60 240 213 27 $45,000,000 $357,500,000 72%

500,000 100 400 384 16 $50,000,000 $407,500,000 82%

250,000 125 500 646 0 $31,250,000 $438,750,000 88%

100,000 150 600 735 0 $15,000,000 $453,750,000 91%

50,000 200 800 822 0 $10,000,000 $463,750,000 93%

25,000 250 1000 1016 0 $6,250,000 $470,000,000 94%

Under $25,000 Many Many Many Many $30,000,000 $500,000,000 100%

Setting The Goals Top down:

Set the goal based on need and find the prospects to support it

Tends to be most aggressive and riskiest The easy road:

Set the goal based on projected base-level giving

Tends to be the easiest to achieve Bottom up:

Research the ability and interest of the prospect pool

Tends to balance risk vs. reward

Top Down – High Risk

Gift Range No. Gifts

required No. Prospects

required Prospects identified

Prospects needed

Level Subtotal

Desired Cumulative

Total Desired Cumulative

percentage 50,000,000 1 4 5 0 $50,000,000 $50,000,000 10%

25,000,000 2 8 7 1 $50,000,000 $100,000,000 20%

12,500,000 5 20 17 3 $62,500,000 $162,500,000 33%

5,000,000 10 40 35 5 $50,000,000 $212,500,000 43%

2,500,000 20 80 81 0 $50,000,000 $262,500,000 53%

1,250,000 40 160 148 12 $50,000,000 $312,500,000 63%

750,000 60 240 209 31 $45,000,000 $357,500,000 72%

500,000 100 400 359 41 $50,000,000 $407,500,000 82%

250,000 125 500 504 0 $31,250,000 $438,750,000 88%

100,000 150 600 629 0 $15,000,000 $453,750,000 91%

50,000 200 800 725 75 $10,000,000 $463,750,000 93%

25,000 250 1000 965 35 $6,250,000 $470,000,000 94%

Under $25,000 Many Many Many Many $30,000,000 $500,000,000 100%

Prospect research must identify 203 additional prospects who can give over $25K

Easy Road – Low Risk

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

$18,000,000

$20,000,000

gift total

gift total

Average increase in giving since 2001 is about 4% per year

Project that into the future for a seven year campaign of $110 million over 7 years

Risk Adjusted Pyramid Risk adjusted pyramid takes into account the

likelihood to give at particular levels Typical 4:1 prospect : donor ratio has a flaw

Not all prospects have the same likelihood to give Your best prospects may be closely tied to your org

already For your best prospects, the proper ratio may be more like

2:1 or 3:1 (low risk) For other prospects, the proper ratio may be in the 4:1 or

5:1 range (medium risk) Even some prospects with little current contact (but who

are on your database) may make major gifts – 10:1 (high risk)

It is not possible to precisely assign probability of a gift, but you can put people into groups of similar propensity

Hypothetical Example

8 prospects identified at the $25MM level 2 sit on the board, are personally committed

to the org’s mission, and have made major gifts in the past

1 has been a volunteer and a past major gift donor

3 are an alumni with modest but regular giving to the annual fund

2 are friends who have never made a gift Do they all have an equivalent likelihood to

give?

High Likelihood - Low Risk GroupHigh likelihood prospect:donor ratio = 2:1Example: • 2 prospects identified at $25 MM level• As a group, their potential is $100 MM• 2:1 ratio suggests that only half of their group potential will be realized

Gift Range Prospects Identified Expected Income

$50,000,000 2 $50,000,000$25,000,000 1 $12,500,000$12,500,000 2 $12,500,000

$5,000,000 5 $12,500,000$2,500,000 7 $8,750,000$1,250,000 15 $9,375,000

$750,000 32 $12,000,000$500,000 50 $12,500,000$250,000 69 $8,625,000$100,000 75 $3,750,000

$50,000 124 $3,100,000$25,000 201 $2,512,500

Total 583 $148,112,500

Moderate Likelihood – Medium Risk Group

Moderate Likelihood prospect:donor ratio = 4:1

Gift Range Prospects Identified Expected Income

$50,000,000 2 $25,000,000$25,000,000 4 $25,000,000$12,500,000 6 $18,750,000

$5,000,000 15 $18,750,000$2,500,000 55 $34,375,000$1,250,000 88 $27,500,000

$750,000 123 $23,062,500$500,000 211 $26,375,000$250,000 276 $17,250,000$100,000 319 $7,975,000

$50,000 326 $4,075,000$25,000 414 $2,587,500

Total 1839 $230,700,000

Low Likelihood – High Risk Group

Low likelihood prospect:donor ratio = 10:1

Gift Range Prospects Identified Expected Income

$50,000,000 1 $5,000,000$25,000,000 2 $5,000,000$12,500,000 9 $11,250,000

$5,000,000 15 $7,500,000$2,500,000 19 $4,750,000$1,250,000 45 $5,625,000

$750,000 54 $4,050,000$500,000 98 $4,900,000$250,000 159 $3,975,000$100,000 235 $2,350,000

$50,000 275 $1,375,000$25,000 350 $875,000

10 1262 $56,650,000

Combined Risk-Adjusted Tables

Anticipated MG Gift Receipts

High Likelihood $148,112,500

Moderate Likelihood $230,700,000

Low Likelihood $56,650,000

$435,462,500

Combined Risk-Adjusted Tables

Gift Range No. Gifts required

Standard Ratio

Prospects Identified

Desired Income

Desired cumulative total

Risk Adjusted Expected Income

Risk Adjusted Expected Cumulative total

Difference From Desired Per Level

Prospects Needed (Donors x 4)

50,000,000 1 4 5 $50,000,000 $50,000,000 $80,000,000 $80,000,000 $30,000,000 025,000,000 2 8 7 $50,000,000 $100,000,000 $42,500,000 $122,500,000 ($7,500,000) 112,500,000 5 20 17 $62,500,000 $162,500,000 $42,500,000 $165,000,000 ($20,000,000) 6

5,000,000 10 40 35 $50,000,000 $212,500,000 $38,750,000 $203,750,000 ($11,250,000) 92,500,000 20 80 81 $50,000,000 $262,500,000 $47,875,000 $251,625,000 ($2,125,000) 31,250,000 40 160 148 $50,000,000 $312,500,000 $42,500,000 $294,125,000 ($7,500,000) 24

750,000 60 240 209 $45,000,000 $357,500,000 $39,112,500 $333,237,500 ($5,887,500) 31500,000 100 400 359 $50,000,000 $407,500,000 $43,775,000 $377,012,500 ($6,225,000) 50250,000 125 500 504 $31,250,000 $438,750,000 $29,850,000 $406,862,500 ($1,400,000) 22100,000 150 600 629 $15,000,000 $453,750,000 $14,075,000 $420,937,500 ($925,000) 37

50,000 200 800 725 $10,000,000 $463,750,000 $8,550,000 $429,487,500 ($1,450,000) 11625,000 250 1000 965 $6,250,000 $470,000,000 $5,975,000 $435,462,500 ($275,000) 44

< 25000 Many Many Many Many Many Many$500,000,000 $435,462,500 ($34,537,500) 343

The Middle Challenge

People capable of giving $25K-$100K may have very few discoverable indicators of wealth

A filter or screening of the database may help surface these people

Look for: High incomes Titles Gifts to other orgs Expensive or income-producing property

Major, special and leadership gifts

Assessing Risk/Prospect ID

RFM Analysis Age Constituent characteristics Statistical models

Generic Custom

List matching (aka wealth screening)

RFM Analysis Recency – when was the most recent gift?

Score 0 if more than 3 years ago Score 1 if 3 years ago Score 2 if 2 years ago Score 3 if 1 year ago or less

Frequency – how consistently has the donor given? Score 0 if none of the last three years Score 1 if only one of the last three years Score 2 if only two of the last three years Score 3 if each of the last three years

Monetary Value (must be customized) Score 0 of largest gift is $0 Score 1 if largest gift is $1-$999 Score 2 if largest gift is $1,000 – $4,999 Score 3 if largest gift is >= $5,0000

RFM Analysis If a prospect scores >= 8

Top priority for additional research to estimate capacity

Consider the person a high likelihood prospect If a prospect scores 4 – 7

Second priority for research to estimate capacity Consider the person a moderate likelihood

prospect If a prospect scores 0-3

Do not do additional research unless specific indicators come to light

Consider the person a low likelihood prospect

Filtering On Age Life Stage Theory: constituents have

different propensities to give depending on age Peak earning years for many professionals

begins in the 40s Increases through the 60s Retirement age and older may be a threshold for

even greater giving for the very wealthy Focusing on age risks excluding some

successful younger people

Filtering On Constituent Characteristics

Alumni/program participants may be have a built-in propensity

On the other hand… Some alumni may have minimal affiliation Some of your best donors may be community

partners or friends

Other Constituent Characteristics

Degree Major Current/former

parent Grateful patient Board member Volunteer Subscriber Age

Ticket buyer Event participation Requests for

information Number or quality

of communications Number of

affiliations RFM

Statistical Models What size gift is “major” Must have at least 200 examples of gifts in the last

year at a particular level for valid statistics Don’t include gifts from corps or founds

Gift Level Gift Count % of totalCumulative Count Cumulative %

0 Dollars 109,135 90.85 109,135 90.85

1-49 Dollars 2,497 2.08 111,632 92.93

50-99 Dollars 1,902 1.58 113,534 94.52

100-249 Dollars 3,867 3.22 117,401 97.73

250-499 Dollars 1,153 0.96 118,554 98.69

500-999 Dollars 728 0.61 119,282 99.30

1000-2499 Dollars 582 0.48 119,864 99.79

2500-4999 Dollars 113 0.09 119,977 99.88

5000-9999 Dollars 72 0.06 120,049 99.94

10000+ Dollars 73 0.06 120,122 100.00

One year gift table

Constructing the models Do-it-yourself

Must invest in software like SPSS or SAS Must invest in statistical education Must invest in data sources if you plan to use info beyond

your database Suggested technique: regression analysis Variables with strong correlation become included in the

model Watch out for false or misleading correlations!

Hire a consultant/vendor Must depend on the expertise and experience of another Consultant/vendor may have ready access to marketing

and geo-demographic data

Wealth screening

An automated process that matches the names on your database to those on other databases

Simple minded, but fast Information returned requires

verification

Prospect Identification

Ideal approach is to pre-screen with a model, then go deeper with a list matching process on top scoring prospects

On a pre-screened database, 1 in 10 may end up looking like major gift prospects.

If you need 4,000 prospects, screen 40,000 constituents

Campaign Staffing Staff needs are based on campaign goal Goal controls number of prospects and donors

needed If each major gift prospect must be contacted at

least 2x/year, and there are about 240 working days in a year, an MGO must contact two prospects/day to carry a portfolio of 120 prospects

Ideal portfolio will be between 75 and 150 prospects per MGO

Portfolio size is influenced by Ask amount Geography Job responsibilities

Campaign Staffing To estimate number of MGOs needed for

the campaign Calculate the number of prospects who must be

contacted Divide that number by 200 Only 100 of these will be assigned at any one

time The first prospects to be assigned will be the

low-risk prospects As prospects make gifts or are disqualified,

portfolio will be re-supplied from verified prospects in the medium and high risk groups

Ratio of MGOs to researchers should be 1:4 or 1:5 in a campaign context

Campaign Staffing

Goal = $500 million Prospects above $25,000 to be contacted:

4,000 (rounded up) Major gift officers needed:

4,000/200 = 20 Researchers needed:

~20 MGOs/5 ≈ 4 researchers – more if many prospects must be qualified

This does not include staff time for prospect management

Research In A Campaign Filter the database to surface top

prospects for research and contact Assess capacity and inclination of top

prospects Brief profiles at identification Full profiles as solicitation nears

Rationally place prospects on the pyramid by risk and capacity

Supply verified prospects to MGOs

Research In A Campaign

Refine understanding of risk and capacity through contact and further research

Re-evaluate pyramid position of each prospect

Match institutional needs to the prospect’s interests

Manage prospects through the pipeline

References Fundraising Feasibility Studies,

http://www.nps.gov/partnerships/fundraising_feas_study.htm The Strategic Role of Quantitative Research in Campaign

Planning, http://www.martsandlundy.com/dl.php?filename=pdf/special_reports/Quant_Research.pdf

A Kaleidoscope Of Prospect Development, Bobbie J. Strand, CASE Books, 2008