Explore or exploit?

March 23, 2017

Post by: Nick Ellinger

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Here, in order, are the top grossing movies of 2016:

  1. Sequel in an extended movie universe
  2. Prequel in an extended movie universe
  3. Sequel
  4. Animation with cute animals
  5. Remake
  6. Animation with cute animals
  7. Sequel of a remake in an extended movie universe
  8. Extension of a movie universe
  9. Extension of a movie universe
  10. Extension of a movie universe

In fact, the last movie to grace the year’s top ten list that wasn’t animated, sequel, prequel, or a remake was The Martian.  Even that, because of its theme of “saving Matt Damon,” could be considered a remake of Courage under Fire, Saving Private Ryan, Titan AE, Syriana, Green Zone, Elysium, or Interstellar.

Why, you may ask, am I bringing this up in a nonprofit marketing blog?  It’s because of the eternal struggle of explore or exploit (you can find the math-heavy version of this problem here).  We’ve faced it since we debated whether to stay at this hunting spot or more on to the next in hopes of greater game or fears of overhunting.

And now we face it in marketing.  Is this control package or “best practice” so good that we should exploit it for another year?  Or should we risk a test and, if so, how much?

One way to think of this like a pharmaceutical or consumer goods company.  What percentage of your budget are you going to set aside for your R&D budget?  One thing we have done with clients is to set up a pilot program with a small portion of their file, so most of their effort can be focused on exploiting what they have while our skunk works aim to overthrown the control.

The answer is to the explore versus exploit spectrum is: it depends.  And it depends on where you are in the lifecycle of your nonprofit.

If you are looking to create an enterprise that will stand for a thousand more years, you should bias toward exploring and experimentation.  After all, the faster you can get to the best strategies, the more of your thousand years you will have to exploit them.  On the flip side, if you are looking to finish your endeavor soon, it makes no sense to test significantly but rather to exploit everything you’ve already learned.

So the answer to why Hollywood is rife with recapitulation is that they are in exploit mode.  They know what works.  And they know they don’t have long left.  Between CGI actors, AI editors, theater attendance at a two-decade low, inefficiencies in labor contracts, threats from streaming services, piracy, a new generation of non-movie-goers, and competition from international culture makers, Hollywood is being disrupted and it knows it.  Hence, today we drink, for tomorrow we die.  Why risk John Carter when you can make Bond 25, Bourne 6, Harry Potter 9, Star Wars 9, Furious 8, or Marvel whatever-number-we’re-on-and-how-many-Hulk-movies-do-we-count-exactly?

The better question is why are many nonprofits functioning the same way?  After all, for many, the need is great – perhaps more than ever for many.

I’d argue is it because of a conflict between the best interests of the nonprofit and those of its partners.  Agencies are often on three-year contracts and even the managers of marketing program have a short half-life in a bottom-line driven enterprise.  It’s unlikely that they will be pushing for increased experimentation in their perceived final year.

Or, as fictional-Art-Howe said of his timid managing resulting from a one-year contract in Moneyball “I’m playing my team in a way that I can explain in job interviews next winter.” If he was to mess up, it would be in a way that conservatively comported with conventional wisdom, not on something his future employers would view as a mistake.

So as responsible managers of marketing programs, we must look at the people and the institutions involved in our programs and ask whether their incentives are to be with us for the long haul. From their actions, you should be able to see whether they are interested in doing the exploring necessary to find the next strategy, offer, channel, technique, etc.  And if you are interested in surviving long-term, you should see that they do.

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How the Facebook algorithm works outside of social media

March 16, 2017

Post by: Nick Ellinger

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The DMA in UK released data yesterday that 91% of all marketers don’t think their emails are relevant to their audience all the time and 42% say that, at best, only some of their emails are relevant.

This put me in mind of one concept from social media that is worth borrowing for direct marketing, even the offline world.*

It’s from the original Facebook algorithm – Edgerank.**  The base of EdgeRank is fairly easy; it’s three factors:

  • Affinity: How close the person creating the content is to the person receiving it.
  • Weight: How much the post has been interacted with it, with deeper interactions counting more
  • Time decay: How long it has been since it has been posted.

These interactions were multiplied together and summed, roughly.

A key measure of affinity is what percentage of posts a person interacts with.  If someone likes 1% of your posts, for example, they are far less likely to see a post from you than someone who interacts with 40% of your posts.

The trick is that light, easy-to-interact-with posts garner the most interactions.  A post that has a picture of a kitten with a note that says “like this post if you like kittens” is going to get far more interactions than most posts about the impact of global warming on poverty rates in Madagascar.

Thus, there are two warring impulses: one to deliver things your audience wants to interact with and the other is to deliver things you need your audience to interact with. Or, put another way with my limited art skills:

One can think of this like a piggy bank of support where you put coins in when you have a popular post and take them out to invest in things you need.

What if you thought of your non-social-media communications the same way: that you are building goodwill with relevant messages and losing it with irrelevant ones (even with the best of intentions)?

First, to get engaging and important posts – the genius of the and — the smart social media manager makes sure all the posts about the Austin 5K are geolocated to just the greater Austin area so the interaction scores on an “ask” post are still high.  Likewise, a smart emailer makes sure that their advocacy email goes out to only people who have an interest in advocacy and/or the issue area.  In an ideal world, the person would have even opted in to advocacy or to the issue and that would be something you play back to them in the communication.

But larger than that, you can’t volume your way into being interesting.  There are some who would argue that the way to find someone’s interests is to cast a wider, broader net.  That is, if you send more emails or more mail pieces, you will be more likely to find something of relevance to each type of donor.  This algorithm and way of thinking would say the opposite – that every time you send an ill-timed or ill-considered communication, it draws from your bank of goodwill.

This latter view is backed up by the research.  Donors get irritated with the frequency of appeals.  So most revenues from a new communication (in a mature program) are cannibalized from existing communications.

Thus, volume isn’t the solution; relevance is.

The implications of the EdgeRank algorithm are also like what we see in direct marketing.  As you lose relevance, you lose audience and you lose the ability to reach your audience with the messages that matter.  The difference is that, unlike with Facebook, all variables are under our control.

So to the nine percent of organizations who have only relevant emails, kudos.  Let’s see what we can do to get those numbers up together.

 

* No, we aren’t wholesale recommending social media for nonprofits.  We’ve talked before about the value of social media to fundraising: how public pledges can decrease the likelihood of someone acting according to their pledge and your more committed donors are more likely to follow you on Facebook and Twitter (it’s not social media making them more valuable) .

** The algorithm has been altered over time significantly.  There are now significant machine learning components baked in that help with spam detection and bias toward quality content.  Additionally, now users can prioritize their News Feeds themselves.  Finally, because of the sheer amount of content available, the organic reach of an average post is single digit percentages or below, meaning that if you have 100,000 likes, maybe 2,000 people will see your average post.

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The donorcentricity debate

March 2, 2017

Post by: Nick Ellinger

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There was a vigorous debate over at our friends at The Agitator about the nature of being focused on the donor, with topics like whether a “you” focus is sufficient to be donorcentric. Virtual blows were thrown, clarifications made, blood pressures checked.

At the same time, I had the opportunity to be with several nonprofit leaders discussing donorcentricity, where it was interesting to see different perspectives, programs, and sticking points working toward this elusive goal.

Both reminded me of the parable of the blind people trying to describe an elephant.  The one who felt just the leg thought it was a pillar; the one who felt the tusk thought it was a solid pipe; the one who felt the tail thought it was a rope; and so on.

With donorcentricity, I wonder if we are just describing different parts of the elephant. This is great — to hear people passionate about the topic with their own perspective.  As a former (and occasionally relapsing) debater, I believe firmly in the power of debate and discussion to convince and to bring out the best in our own arguments.

So I submit two points for discussion.

  1. A “you” focus in communications is a necessary condition of donorcentricity; it is not a sufficient condition.

One need only read a poorly written donor newsletter to see that we can’t declare victory on even this seemingly simple point. I read one the other day from a nameless organization (to protect the guilty) that mentioned the donor once, on the third page, second story, eighth paragraph. That’s a sin, and not a minor one.

Neither, however, would changing these communications to have 10% of the words being you be a total solution. For a simple example, if you have two donors, one who is dying of the disease you are working to end and the other in the “there but for the grace of God” camp, and you send them the same “you are making a difference by helping people with this dread disease, raising awareness in the general public, and working to find a cure” language, you aren’t honoring why at least one and probably both of these people are giving.

Likewise, when you are asking the person who just donated to tweet about the great impact they’ve made, you might be ignoring the fact that they just spend 30 minutes trying to navigate your online donation form.

Put bluntly, the person at the DMV can ask you by name how your day is and smile — that makes the experience better. But if they don’t care about the answer and you’ve just been waiting in a line for the third time after they lost your paperwork, it isn’t enough.  But it is something

  1. Focus on the donor isn’t a destination; it’s a journey.

Even the worse of us have hope. Even the best of us have miles to go. We face time, money, management, and mental energy constraints every day. We aren’t going to get this perfect. There is no perfect.

What we are continually striving for is a better state of broken.  We will always be short of perfect.  But we can be broken less and broken for fewer people.

That means when you take a step — deleting the “big check” photo from your site, adding a survey to assess experience, focusing a piece’s story on the donor and not on the logic model for the charity’s program, etc. — there should ever be two reactions:

  1. Congratulations
  2. What’s next?

We can all be better fundraisers, better relationship builders, better change makers. And debates like this one are part of how we get there.

If I’m wrong, let me know — I’d love to discuss and debate it with you!

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Data-driven fundraising and storytelling: the genius of the and

February 16, 2017

Post by: Nick Ellinger

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Two random things before we start:

  1. We’ll be at the DMA Nonprofit Foundation meeting next week and we’d love to meet with you. Feel free to drop us a line if you would like to meet. Also, DonorVoice folks will be participating two sessions: one about how to use behavioral science in your program and another about the debate around donorcentricity (at which there will be an actual debate and potentially chairs thrown) — hope to see you there!
  2. There was an excellent discussion on last week’s persona post here. Make-a-Wish has done an interesting project with personas where they use them as a way of educating their chapters about different types of stories they can tell and different ways to tell them.  While personas may not be helpful for direct marketing, this brand approach is interesting to getting through to potential communicators.

Now, to the blog post.  I was reading one of the approximately 2,349,087,222,495,873,945 posts about why the 2016 election went the way it did.

Wait!  Before you leave, I won’t talk about politics at all.  Nor will I engage in my own dissection thereof.

But the thesis of the article struck me: that Democrats lost because they focused on data-driven marketing, rather than traditional storytelling and narrative.

I believe this is a false choice faced often by marketers.  We don’t need data over stories or stories over data – we need the two of them working together.

I have a significant bias toward data.  I have argued that there are two types of marketers: those who use data effectively and those who will be the first up against the wall when the revolution comes.  When I say things like this, I get comments with upwards of 70% of the words spelled correctly.  But I should probably not rant against non-data-driven marketers because they fight dirty and their knuckles are closer to the ground.

In short, I believe marketing is a science, with aspects of art that intrude, rather than an art with science looming like an inconvenient truth.

That said, when you look at science, narratives are an important part of why we believe things and why we give.  Specifically, when people empathize with a story, they have 47% higher oxytocin levels and oxytocin leads to greater giving.  In fact, when we see vivid imagery in a narrative, our brain processes it as if it is a visual and motor experience – almost as though it happened to you.

So storytelling is important, even to we cold-hearted numbers people.

But storytelling is not enough itself.  Data is needed to know what story to tell.  For example, when you sign up for the ASPCA newsletter, they ask you to fill out a survey.  One of the questions on that survey is whether you are a cat or dog person.  They then use that information to customize the pictures they show you and the stories they tell.  This simple differentiator is the first line of customization and segmentation for ASPCA and it allows them to tell stories that their donors and prospective donors will care about.  Each nonprofit has these differences.

But of the nonprofits we secret shopped, fewer than a quarter asked about any topic preferences and only six percent asked for any attributes about the donor or connections to the cause.  That makes that for most people for most organizations, a new subscriber is nothing more than a name and contact info.

Incidentally, we will be releasing the full study shortly; please sign up for our newsletter here if you’ve like to get it first:

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Beyond picking which story goes to whom, data tells you what stories are worth telling.  Each person we serve as a nonprofit is a story waiting to happen.  By analyzing what causes people to commit to an organization, you can use just the ones that you know will work for your audience.

So don’t fall into the either/or trap.  Data without storytelling gives you insight, but no way to practice it; storytelling without data ends up telling a great yarn to people who don’t care.

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Persona non grata

February 9, 2017

Post by: Nick Ellinger

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There’s an interesting piece at CMO.com called “Don’t Take It Personally, But Innovators Are Done With Personas.”  In essence, leading for-profit CMOs are saying the same thing: giving a set of demographic and weak psychographic viewpoints a name and endeavoring toward it doesn’t work:

  • “Traditional personas tell you very little because they are based on simplistic models and transactions. They cannot help understand why customers bought, what motivated them to buy, etc.” – Shinola CMO Bridget Russo
  • “The reason personas failed to achieve true personalization is that they were too simplistic to reflect the unique attributes that differentiate individual customers and prospects from the mass of other similar customers and prospects. And that is the essence of true personalization.” – TIAA CMO Connie Weaver
  • “We recently analyzed the personas we had been using and found that the customer had changed dramatically. We are now rethinking the real-world, human differences, versus just transactional differences, among our individual customers and formulating a plan to engage with them as individual gamers versus superficial aggregates of different gamer personas.” – Darin Smith GameStop senior director

They conclude that traditional personas from implicit data don’t increase response rates; you need explicit data that people tell you about themselves.

I haven’t used formal personas in the past, but I’ve used proxies: things like trying to figure out what the difference is among “Red, White, and Blues,” “Heartlanders,” and “Blue Highways” (three real segments from PRIZM social groups), looking at the love child of transactional data and cooperative data that is Target Analytics Loyalty Insights), or my own anthropomorphization of a demographic profile (I often thought of “writing for Ethel,” a nice 67-year-old grandmother when writing copy).

These are helpful in helping remember “I am not the donor; the donor will not necessarily like what I like.” But beyond that, you are looking for some level of predictive value and these simply don’t deliver.
Moreover, a heavy-handed persona or segment can make a donor feel like they are little more than the box that you’ve put them in. One person in the CMO piece said:

“When I receive generic emails, it is obvious that you do not care enough to understand my individual needs. Instead, you are trying distill my complex needs into simple generalities to make your email blast easier for you … and useless to me!”

Ouch.

But we need to segment. We need something to differentiate among different groups of people. So if it isn’t demographics, personas, or RFM, what is it?

The for-profits also have a guide for this – understanding why, at a basic level, people give. In the article Dennis Kopitz, Shinola’s director of ecommerce said:

“To achieve and scale true personalization, we need to obtain deep human insights regarding who buys which category of our products, why they buy, what their needs and expectations are, and what they want next from us. This will take us to a far deeper level of understanding than traditional personas.”

We know that for disease charities, for example, people who give because they personally have the disease are far more like each other in their giving behavior than:

  • A 70-year-old woman is like another a 70-year-old woman
  • A 4-6 month, $20-$24.99 multigiver is like another a 4-6 month, $20-$24.99 multigiver
  • A Tipper is like another Tipper
  • Or a mail donor is like another mail donor

In other words, demographics, RFM, model, and channel preference all pale compared to a deeper understanding of donor identity in terms of predictive power and customization opportunities.

And every nonprofit has these key differentiates. It could be cat v dog people (or, like one DonorVoice partner, birders versus general nature people). It could be people who give to you because of your advocacy versus your services. Or another partner who found that there was a segment of people giving to live vicariously through the exploits and adventures of their volunteers versus another who was giving so that someone else would take care of the field work.

We’d love to help find this differentiator with you, but it’s more important that you find it, because finding out why different people give to you, beyond a one-size-fits-all answer is the key to not just messaging but audience.

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The data points you need from the new Fundraising Effectiveness Project

February 2, 2017

Post by: Nick Ellinger

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There is a quality debate going on right now at The Agitator (is there any other kind there?) about the extent to which nonprofits use donor identities to customize their appeals. This is subtopic of the big introspective question we have as fundraisers: how are we doing?

This discussion is wonderfully timed, because we have some new evidence to assess ourselves — data from the 2016 Fundraising Effectiveness Project.  So how are we doing at retaining donors?

Not great, it seems. We’ve lost four percentage points and eight percent off of our retention rates since 2008. And, if you’ll recall, 2008 was not a banner year for the economy or fundraising.

This also compounds, so if you had five years of 46% retention instead of 50%, you’d find yourselves with a third fewer donors retained.  Even these small amounts can wreak havoc on a file.  And on the flip side, the value of increasing retention is significant.

And how are we doing at welcoming donors to our organizations?  Even worse, it would seem:

This is a drop of 6.4 percentage points and almost 22% from 2008. With first-year retention at 23%, a new perspective is required. Let’s say your cost to acquire a donor in an acquisition mail piece is $20.  In reality, it’s $87, because 77% of those people you acquired aren’t retaining.  This necessitates a drop in acquisition cost, an increase in second-gift retention, an increase in the lifetime value of donors, or some combination thereof.

Repeat donor retention is also down, but “only” down 11%.

To quote the study authors:

“The question then becomes what can be done about retention and what resources should an organization employ toward improving their retention. This question is not easily answered, and likely varies widely depending on a variety of factors.”

We are either getting worse at retaining people or lower retention is happening to us because of systemic changes. Either way, we need to adapt in order to keep our files intact long term. And with first-year retention plummeting, there may be indications that what got us here may not be what gets us to our next there.

That’s why The Agitator discussion is so valuable: it’s all talented people grappling with a changing landscape and the extent to which we need to change as a result.

Here, we think the combination of commitment + identity + experience is the key to understanding why donors give and why they stop and that that understanding is what will drive our fundraising in the years to come.

Since the drop in first-year retention is especially perilous, we’re in the final stages of a white paper and webinar on online welcome serieses. Specifically, we’ll look at opportunities — taken and missed — to learn constituents’ identities and improve their experiences. If you’d like to learn more about these, please sign up for our email updates we’ll send you a notice when they go up:

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And, if you want a much more eyecatching version of the FEP data, Bloomerang did a nice infographic version of it here.

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And yet it moves: Galileo on mail quantity

January 26, 2017

Post by: Nick Ellinger

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It is the fate of glass to break. Likewise, dogmas.

Galileo knew it.  Whether or not he actually said “and yet it moves” after recanting the heresy that the earth moves around the sun*, he knew that knowledge, like life or science, finds a way.

I have believed the one about “mail more, make more” for most of my direct marketing career. And at the time it was espoused, it was the best advice. Nonprofits used to hide their asking light under a bushel basket, couching it a series of “would you consider”s and “if you aren’t too busy”s and “mother may I”s.

Few of us do this now; so should it be. Giving of ourselves is a good thing, perhaps the best thing. Asking for one to give can and should be a joyful act for both asker and giver.

But the “ask more, make more” orthodoxy remained even after we put away our fundraising fainting couches.

The study that 63% of a new mailing’s revenue isn’t new, but is stolen from surrounding pieces was a crack in the glass. I pondered all of the mail pieces that I had sent in my life that did negative good, robbing both from coffers and from the joy of giving.

And it does rob of joy.  We’ve been analyzing tens of thousands of comments given to numerous nonprofits around the globe.  Comment #1 is “keep up the good work.” Comments #2 and #3 are invariably, in some order, “no more mail” or “mail me less often.”  (BTW, if you would like to get the feedback white paper when it launches, please sign up for our newsletter at right)

Now, in today’s wonderful Agitator post (appropriately enough from not just one concerned scientist, but an entire union of them), there is a full year test of mailing four pieces instead of 12.  Turns out that this change, along with socializing this change with donors led to:

  • Increased net revenues
  • Cuts in the cost to raise a dollar by almost half
  • Increased value per donor
  • Decreased donor services calls and increased the quality of donor services

And more.  I won’t spoil it because it deserves a read on its own.  But going from 12 to four is a particularly bold and dramatic example.  And less is more is what we are seeing in early testing with other nonprofits as well.

As more evidence accumulates, we may/will have to make the shift from “burn the witch!” to “this can’t be the way the world works” to “is this the way the world works?” to “how do we deal with this new world?”

Like Galileo before us, I think we’ll find beauty there, new worlds to explore.  We’ll find that volume is but one lever to pull, one arrow in our quiver.

When we can no longer add a mailing to make up a gap, we will have to delve into deeper understandings of why people give and why they stop. I look forward to the exploration with you.

Special thanks to Laurie Marden, the Union of Concerned Scientists, and the Agitator for sharing this great case study.  And please share your stories in the comments.

*President Bartlett: I know of one guy they were ready to carve up with instruments of torture because he had this silly idea that the Earth revolved around the sun.

Ellie Bartlett: If this is an object lesson about how scientists have it better today because there’s no Inquisition…

President Bartlett: I enjoy talking about Galileo, and don’t you start with me!

Ellie Bartlett: It’s apocryphal, Dad. A story for tourists. If Galileo had muttered “It still moves” after they made him recant his life’s work, they would have killed him on the spot, and I don’t know why I let you do this to me!…

President Bartlett: When Galileo said “Eppur si muove”, it meant that he would continue no matter what to study and publish.

— The West Wing, “Eppur Si Muove”

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