Earlier this month, The Stelter Company presented the findings of its latest research project at the Partnership for Philanthropic Planning’s 2012 National Conference on Philanthropic Planning. What Makes Them Give: 2012 Stelter Donor Insight Report is the Company’s third study of planned giving in the United States.
As a nerd and as the winner of the 2011 Association of Fundraising Professionals/Skystone Partners Prize for Research in Fundraising and Philanthropy, I enjoyed reading the report. And, I thank The Stelter Company for adding to the nonprofit sector’s base of knowledge.
While flawed, the report does offer some interesting tidbits. This post will examine some of the useful tidbits and problematic flaws. Some of the insights are new while others will confirm what experienced gift planners have long known or suspected.
Many Planned Givers Are NOT Loyal Donors
Perhaps the most interesting finding is that 21 percent of those who have made a planned gift “never donated to the charity before putting a planned gift in place.” An additional 20 percent did give to the charity prior to making a planned gift, but did so for less than five years.
The conventional wisdom has been that loyal donors make the best planned giving prospects. However, the report shows that 41 percent of planned gift donors are outside of the loyal-donor model. This underscores the importance of making planned gift messaging ubiquitous.
Planned Givers Are NOT Always Large Current Donors
Among those who have made a planned gift and who have also made an annual giving donation to the charity, 40 percent gave less than $500. Only 16 percent have given $5,000 or more. While the old donor pyramid, where small donors become major donors and then become planned gift donors, may be true for many, the vast majority of planned gift donors have not first been major donors.
This means that, when looking for prospective planned gift donors, development professionals must consider the organization’s entire database. This includes large donors, medium donors, small donors, and even non-donors.
Bequest Giving is the Most Popular Planned Gift
The study found that “a bequest is the most popular vehicle for planned giving.” The report confirms what has been a long-held belief among gift planners and a fact that I included in my book, Donor-Centered Planned Gift Marketing.
This is good news for all nonprofit organizations. Virtually all nonprofits can easily and inexpensively promote bequest giving. For those organizations with a bit more expertise and resources, a bequest conversation or a bequest commitment may provide a gateway for a conversation with the donor about more complex giving vehicles. If the market finds a bequest to be the most popular form of planned giving, savvy planned gift marketers will take notice and market accordingly. On the other hand, bequest giving may be the most popular vehicle because it is the one that is already most widely promoted by the nonprofit sector; perhaps this should be examined in a future study.
Many Planned Givers Are Reluctant to Tell the Charity
Among those who have made a planned gift, 49 percent say that they have not told the charity. This raises an important question not asked as part of this study: Why haven’t you told the charity?
I suspect that many donors simply consider their estate planning a private matter and, therefore, choose not to disclose a planned gift provision to the charity that will benefit. I also suspect that others do not want recognition from the charity that they suspect will lead to more pressure to give more either to that charity or another nonprofit organization that takes notice. But, the biggest reason for nondisclosure may simply be that donors do not understand the value of disclosure to themselves and to the organization. Development professionals need to do a better job of articulating the benefits of disclosure to encourage more donors to do it.
Planned Givers and Prospects Use Social Media
A majority of planned gift donors and prospects surveyed use at least one of five social media networks tested:
–Facebook, 39 percent
–Google Plus, 19 percent
–LinkedIn, 17 percent
–Twitter, 6 percent
–MyLife, 1 percent
The report found, “Almost one-fourth of major donors, current planned givers and best prospects in their 40s would like to connect with nonprofits on Facebook.” Donors and prospects are using social media. Smart development professionals will meet donors and prospects where they are. This means including social media in the marketing mix.
Few People Are Asked for a Planned Gift
Only 26 percent of planned gift donors and best prospects — “people who say they will definitely or probably make a planned gift in the future” — say they have received a letter or email about planned giving. Only 17 percent say they have been asked directly for a planned gift.
If nonprofit organizations want more planned gifts, they need to ask more people, more often, and in the right way. With so few people receiving direct planned giving communications, there is not a high-degree of competition. On the other hand, this means tremendous potential.
While What Makes Them Give contains some useful and valuable information, I have some issues with other elements of the report:
Best Prospects Are Younger, Maybe Not
The “best prospects” for future planned gifts are those 40 to 54 years of age, according to the report. However, I suspect that the data is driven by the structure of the question. If a 70 year old is asked if she ever intends to make a planned gift, her planning horizon might be a few years or a decade or so. By contrast, a 40 year old who is asked the same question has a planning horizon of several decades and, therefore, might more easily imagine a time in the distant future when he might make a planned gift if circumstances allow. I think it would have been more meaningful if the survey asked: Do you plan to make a planned gift within the next five years? That would have leveled the playing field and provided some context for the responder.
Also, just because a 40 year old might be more likely to make a planned gift than a 70 year old, it does not mean that the younger person is a better prospect. Nonprofit organizations certainly need to consider propensity to give when developing a prospect list. However, organizations need to ensure a reasonable return on investment within a reasonable timeframe. An organization might be willing to accept a lower response rate to its appeals in order to have gifts actually realized sooner. A planned gift commitment from a 40 year old might not be realized for several decades while a commitment from a 75 year old might very well be realized in less than one decade. In other words, factors beyond propensity need to be factored in when prioritizing who is or is not the “best prospect.”
Best Prospects Are Single, Maybe Not
“Singles rise to prominence, however, among best prospects (23 percent, compared to 13 percent of current planned givers),” states the report. Without cross-tabulating this data with age, it is difficult to draw any real conclusions. The survey included many individuals in their 40s. “Singles” could be single because the individual is young and has yet to marry. In that case, age, not marital status, would be the more important factor.
The report also states that 65 percent of planned givers are married, 13 percent are widowed, and nine percent are divorced. So, if the vast majority of planned givers are or were married, why would the report assert that singles make the best prospects?
Recognition Groups Unwanted, Maybe Not
“Just 14 percent of planned givers and best prospects are currently members of a recognition club,” states the report. This number is artificially low and meaningless. I would be interested to know the percentage of planned givers who are part of a special recognition club. However, adding prospects to the data simply waters down the number. Someone who is a prospect — by definition, someone who has not made a planned gift — is not going to be included in a planned gift recognition club.
“Of those not part of a major donor or planned giving recognition club, only three percent want to be,” asserts the report. This statistic is also problematic. The research firm, Selzer & Company. did not take into account social bias. Many people might not be likely to say that they want something in exchange for a charitable contribution. That would not be the socially acceptable position.
In addition, if only 14 percent of respondents say they are part of a recognition club, that means that the vast majority that are not might not know what they are saying no to. This is a point even acknowledged by the report itself: “Very few express interest in becoming part of a community of donors for a nonprofit. Perhaps, however, they have a limited vision of what that could mean.” The study even finds that 40 percent of respondents believe that “giving to a charity is a good way to become part of a community of like-minded people;” that’s one of the functions of a recognition club; this statistic seems to contradict the earlier stat.
Without taking into account social bias and the likelihood that many survey respondents don’t understand the benefits of a recognition club, the data presented in this section of the report have little, if any, value.
Tax Avoidance is Not a Motivator, Maybe Not
The study found that 17 percent of respondents stated that “giving to charities is a good way to pay less in taxes.” As mentioned previously, the researcher did not take into account social bias. So, it is difficult to really know the true degree to which donors are motivated by a desire to avoid taxes. Also, while the majority of planned gift donors might not be interested in tax avoidance, those who make the largest planned gifts might be. Unfortunately, the study does not explore that possibility.
While the study does not really shed any light on the importance of tax avoidance as a motivating factor for why one might make a planned gift, we do know that it has little bearing on what organization will be given support. That’s because a donor can almost always receive the same tax benefits regardless of where the gift is made. So, when communicating with prospects, it will usually be wiser to focus on other motivating factors.
The report is worth reading. If you take the time to look at it, just do so with a critical eye. And, be sure to tell me what you think of the findings.
That’s what Michael Rosen says… What do you say?
UPDATE (Oct. 24, 2012): On Monday, I received a telephone call from Bev Hutney, Director of Innovation & Research at The Stelter Company. We had a friendly conversation. I was impressed with her willingness to collegially discuss Stelter’s research.
Hutney provided some additional information about responses to the question about recognition clubs. “Almost an equal proportion of current planned givers (17 percent) and prospects (13 percent) say they are members of a recognition group. Of those who are not, 3 percent of each group — current donors and prospects — say they would like to be invited to join one,” writes Hutney.
Despite the response to the question about recognition clubs, Hutney does not suggest that legacy societies are worthless. She writes, “Were respondents in our latest survey reacting negatively to the term ‘recognition club’? Did they truly understand what the term meant? Were they saying ‘no’ to the invitation aspect of Question 17B? We’ll never know. But this data, combined with our firsthand experience sending thousands of direct mail campaigns and millions of emails on behalf of nonprofits each year, has got us thinking. We’re not knocking Legacy Societies by any stretch but, in our practicable experience, we see that a fraction of donors get really fired up about them. There appears to be an opportunity to refresh our approach.”
I agree with Hutney. The nonprofit sector needs to change its approach to recognition clubs, and it needs to better communicate with donors why those recognition clubs are important. Because this is such an important topic, I will devote a full post to it within the next few weeks.
Finally, Hutney has generously shared the demographic breakdown of the survey participant list and the questionnaire that was used. I thank her for allowing me to share this material here.