Some very wise words from George ...

Six easy steps to take to apply the Pareto principle and increase your direct marketing income – George Milne, Joint Managing Director

You’re a fundraiser, so chances are you’ve heard of the Pareto Principle, formulated by Vilfredo Pareto in 1906. Maybe you know it better as the ‘80-20 Rule’. In practice, it means that about 80% of your donor appeal income stems from around 20% of your donors.

You’ve, no doubt, noticed that active donors of multiple gifts with a highest gift of £100 or more consistently boost your appeal incomes by donating more money more often. In fact, it’s a surprisingly constant
phenomenon. TW CAT has found, across a wide range of charities that this holds true within a range of around 65% to 90% of appeal incomes.

So we have put together six easy steps to applying the Pareto principle

1. Look at each donor transaction and classify it realistically. It’s amazing how often charities base their segmentation on, say, sponsorship money raised by taking part in the London Marathon, which is more an indication of the donor’s physical stamina than their ability to go on making large donations.

2. You know these donors are responsive to direct marketing appeals, so give them more to read. TW CAT has tested letter length for High Value donors and we know longer copy produces a better response in terms of both average gift and response rate.

3. Take a distinct creative approach for your High Value donors. While the emotional argument for support you usually make to your donors still applies to them, they will also want to see the rational argument. Extra ‘lift’ elements, including financial reports and endorsements from their peers will help to lift response.

4. If a certain group of supporters provides more income than others, then it must be worth greater investment. This may mean using a more expensive media such as telephone or simply sending mail packs printed on better paper stock, which suits the High Value proposition by treating serious issues seriously.

5. Make sure you’re asking people for the right kind of gift. While identification of High Value donors is mostly based on the recency, frequency and value of their gifts, you can assume that everybody has the
potential to give, as long as the most suitable method of giving can be found. For example, a donor who seems cash poor but asset rich may be a more likely legacy prospect, so why not go ahead and ask them for one?

6. Remember, the principle doesn’t just apply to donors. The same approach works just as well for High Value recruitment, not just in investment in the creative product but investing in finding the right prospects to generate donors who will contribute to the 80% of income.
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