Anonymous State University Annual Fund Program Audit Prepared by Barbara Berglund

1. Anonymous State University Annual Fund Program AuditPrepared byBarbara Berglund

2. TABLE OF CONTENTS Introduction 2-3 Executive Summary Audit Components 5 Summary of Recommendations 6-7 Findings/Recommendations: 5-Year History Introduction 9 Overall Annual Fund 10-11 Performance by Alumni Segments 12-16 Parents, Faculty/Staff, Non Alumni 17-20 Summary by Decade 21-22 Newly Acquired vs. LYBUNT 23-24 Retention/Reactivation, Increases/Decreases 25-27 Reunion, Gender, Alumni Couples, Alumni Association Members 28-32 Performance by Top Five Dollar-Producing Colleges 33-34 Program Development Findings Strategic Planning and Goal Setting 35 Marketing Planning 35-36 Budget Planning 36-37 Evaluation and Reporting, Organizational Review 37 Program Development Recommendations Strategic Planning and Goal Setting 38 Marketing Planning 39-40 Budget Planning 40 Evaluation and Reporting, Organizational Review 41 Appendix List of Interviewees 42

3. INTRODUCTION Introduction • The purpose of the audit was to help the Annual Fund find ways to improve its strategies, operations, and results while working within the needs of the University and its restricted budget. We believe it is imperative for the leadership of University Development to identify alternative sources for funding this program. Within the current context, this review provides recommendations to enhance the current work and implement additional strategies and approaches. • There are multiple challenges which have come out of the study results and recommendations. The University is conducting a comprehensive Capital Campaign that is running from 2000 to 2007. State funding for the University has been decreasing. This has resulted in reduced funding for Advancement programs, staffing, and the campaign. There are expectations of further reductions in state budgets for the University and Advancement programs in the coming year. • Annual Giving programs are conducted by a number of related and independent programs at the University throughout the year. The Annual Fund, colleges, the Alumni Association and Athletics all target and solicit constituents for annual gifts and memberships. The Alumni Association, in addition to the University Advancement and college's major giving work, has its own building campaign. • In this environment, the Annual Fund, which started in 1994 to consolidate the multiple giving asks for the University, finds itself competing with other Annual Giving programs across the University, all of which are asking alumni and friends for annual gifts. The Annual Fund has the additional and critical challenge of asking for and raising significant unrestricted dollars that are the core of the budget support for Advancement. • The Annual Fund wants and needs to improve its programs. This audit identifies findings and presents recommendations to improve and accelerate this effort.

4. INTRODUCTION Introduction, cont’d • The Annual Fund is part of many Annual Giving programs. Constituents receive solicitations from four groups and organizations to fund the University. • Each soliciting group has certain program and budget funding needs that are reflected in their programs and solicitations of donors and constituents. • The Annual Fund raises money for the Advancement budget with unrestricted gifts. It also raises restricted gifts for the colleges which also contribute a percentage of their independently raised dollars back to the Advancement budget. Some money is also raised for the Alumni Association. • The colleges increasingly compete for donors to give directly to the college rather than through the Annual Fund.

5. EXECUTIVE SUMMARY

6. EXECUTIVE SUMMARY Audit Components • Annual Fund Performance Analysis with Five-Year History • Donor Acquisition, retention and upgrading • Quantitative and qualitative review and recommendations by targeted demographic segments • Annual Fund Program Development • Strategic planning and goal setting • Marketing planning • Budget planning • Evaluation and reporting • Organizational review

7. EXECUTIVE SUMMARY Summary of Recommendations • Annual Fund Performance Analysis with Five-Year HistoryRecommendations cover the following: • Maximizing high-tech methods of targeting and segmenting to improve ROI and reduce CPDR. • Refine targeted strategies based on donor history and coordinate across mail, phone, and online programs. • Use individually targeted asks based on prior giving to retain, reactivate, and upgrade. • Combine multiple mailings into single high-tech projects to increase mailing “hits” at lower cost per piece. • Use photo testimonials in all media, with case histories to define and quantify “the need” in personal terms. • Capitalize on all available and functionally improved technologies to find and solicit constituents.

8. EXECUTIVE SUMMARY Summary of Recommendations: cont’d • Annual Fund Program DevelopmentRecommendations cover the following: • Strategic Planning and Goal Setting • Set goals for participation, dollars, ROI, and CPDR based on realistic, benchmarked projections for revenues and expenses by program components and targeted segments. • Marketing Planning • “Brand” the mission of the Annual Fund by making a compelling, accurate case for the Annual Fund on paper, by phone, and online. • Work with colleges to build $1,000-donor pipeline collaboratively, instead of competitively. • Reduce competition with Athletics and the Alumni Association through coordinated, collaborative “relationship marketing.” • Budget Planning • Work within current budgets to increase returns based on retention and upgrade goals by segment. • Commit to reinvesting a significant portion of the increased revenue into raising the Annual Fund marketing budget to a benchmarked level required for significant future growth. • Evaluation and Reporting • Develop a year-long reporting plan focusing on year-end SYBUNT and second-ask campaigns. • Repeat current, complete review of performance for budgeting and strategic planning for following year. • Organizational Review • Implement staffing resource recommendations achievable in current budget context.

9. Findings and RecommendationsDerived from Five-Year Performance Analysis

10. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Analysis By Currently Solicitable Constituencies Introduction: Audit of Annual Fund Giving by Solicitable Constituencies • The analysis charts which follow are designed to show historical performance by a constant group — the currently solicitable alumni and other constituents. • This allows apples-to-apples comparisons of programmatic elements over time, showing the impact of different strategies applied to the constant group. • The trade-off is that the increases in the database over the period are not accounted for, which means that participation numbers would be even higher in the earlier years, if donors were counted against a smaller base. • The review of complex individual charts will encompass an entire slide. For less complex analyses, one slide will cover numerous charts which follow.

11. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Overall Annual Fund • Findings • This overall chart encompasses all solicitable constituents on the Annual Fund database: • Undergraduate alumni • Graduate alumni • Parents • Faculty and staff • Non alumni friends • Total dollars raised in 2004 were slightly up from 2003, but still below the figure for 2000. • Participation has declined steadily over the period. • The program does include four mailings a year to the full constituency, which we consider to be the minimum for sustainability and growth. • The overall average gift has risen from $109 to $132, but the under $100 average remains under $40. • $1,000/+ donors have declined. • Recommendations follow by segment

12. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Overall Annual Fund cont’d

13. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Performance by All Alumni, Undergraduate Alumni and Graduate Alumni • Findings • Giving by all alumni has declined by 16 percent over the five years — from $1,402,080 to $1,183,690. • Participation by all alumni has dropped steadily from 9.7 percent to 7.3 percent. • The overall alumni average gift has increased slightly while the under-$100 stays below $40. • Messaging does not clarify needs. • Donors are not being solicited for upgrade asks based on their giving history. • $1,000/+ alumni donors have dropped off by almost half — conceivably due to cultivation by the colleges. • The trends are exactly parallel when looking at undergraduates vs. graduates — with the graduates performing slightly less well, but not as far below as we often see. As hoped, dual degree alumni out-perform slightly. • Recommendations • Maximize high-tech targeting and segmenting to improve ROI and reduce CPDR • Refine targeted strategies based on donor history and coordinate across mail, phone, and online programs. • Mail four times a year with individually targeted asks based on prior giving to retain, reactivate, and upgrade. • Combine multiple mailings into single high-tech projects to increase mailing “hits” at a lower cost per piece. • Use photo testimonials in all media with case histories to define and quantify “the need” in personal terms. • Capitalize on all available and functionally improved technologies to find and solicit constituents. • Differentiate strategies and messages by undergraduates vs. graduates, and by other segments as discussed through this section.

14. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY All Alumni

15. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Undergraduate Alumni

16. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Graduate Alumni

17. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Dual Degree Alumni

18. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Parents, Faculty/Staff and Non Alumni • Findings • Parent participation in the 5 percent range is unexpectedly high by comparison to alumni performance. The under-$100 average gift is also in the $30’s, and there are only five $1,000/+ donors among the parents in 2004. • Faculty and staff show twelve $1,000 donors. The participation rate has increased slightly over the period, but5.3 percent is extremely low. However, this is one of the only segments which shows a significant increase in total dollars over the 5 years. • Non alumni dollars have also risen sharply, but this probably reflects the make-up of the group as affiliated constituents with some deep pockets. • Recommendations • Incorporate these groups as individual segments of all other campaigns, with appropriate differentiated messaging and targeted upgrade asks. • Use peer spokespeople — parents, faculty, friends — explaining the need and their reasons for giving.

19. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Parents

20. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Faculty/Staff

21. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Non Alumni

22. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Summary by Decade — Undergraduate Alumni • Findings • The results by decade are totally typical — but worst case — for a fund that has not had the resources for significant re-strategizing and reinvesting. • Overall, everything plummets, moving from 2000 to 2004, and from the oldest alumni to the youngest. • The disturbing parts of these results are the degrees of decline and the less-than-10 percent participation. • Typically we see a fall-off of a few percentage points in participation moving from right to left: the fact that the oldest two decades have lost 9.5 percent and 5.8 percent is alarming. • The youngest three decades are the future, and their participation is crucially lacking. • Except for the decade prior to 1955 and the youngest alums, the dollar declines are unusually steep, especially since we often see overall dollars rising in spite of declining participation. • Recommendations • All of the targeting and segmenting recommendations will help to acquire, retain, and upgrade. • Specifically, we recommend segmenting all approaches by age, dividing after 1974. • A high-powered combination “friendraising” and fundraising campaign online will have the most impact on the younger alums, and the monthly debit/credit sell may substantially increase dollars. • Use peer spokespeople by age segment.

23. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Summary by Decade — Undergraduate Alumni cont’d

24. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Newly Acquired vs. LYBUNT Comparison • Findings • This is the chart that always proves wrong the assumption that donors can more or less be counted on to renew… • Looking first at the right LYBUNT column, the five-year period shows that 34 percent to 40 percent of donors lapsed every year — representing between $311,376 and $477,415 for the year. The goal is usually to get below 30 percent. • The good news is that the fewest dollars left on the table were in 2004 – ironically coupled with the highest lapsed percentage rate. • The left column shows the degree to which newly acquired/reactivated donors balance the lapsed losses. The good news this year is that net dollars were gained instead of lost, and the net loss of donors was also significantly reduced. • Recommendations • Again, all of the targeting and segmenting recommendations will help to acquire, retain, and upgrade by recognizing the donor’s status in all communications and asking accordingly. • The entire year’s plan in all media must focus first and foremost on donors and SYBUNTS with at least four mailings — phoning until they say no — and six e-mails. • All campaigns must be planned to crescendo to year-end with constant reminders that “they are missed.” • In fundraising, as in everything else, “your best prospect is your current/former customer,” and these are worth hundreds of thousands annually.

25. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Newly Acquired vs. LYBUNT Comparison cont’d

26. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Retention/Reactivation Rates and Increases/Decreases • Findings • Typically we like to see retention rates of 50 percent+ — tailing off to the mid-30s after three years. The fact that this chart begins with a renewal rate of less than 40 percent matches up with the higher-than-average lapsing rate. • A fund with good momentum will also have reactivation rates of 30 percent to 35 percent which is higher than what you are achieving. • The increased/decreased comparison again shows new strength beginning in 2004, when considerably more donors increased their gifts than decreased, for a net increase in dollars of $77,277. • Recommendations • All of the targeting/segmenting strategies already discussed should impact both of these comparisons significantly in 2005.

27. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Retention/Reactivation Rates — Undergraduate Alumni

28. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Increased/Decreased Gifts — Undergraduate Alumni

29. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Performance by Reunion Cycle, Gender, Alumni Couples and Alumni Association Membership • Findings • Reunions have no appreciable impact in terms of either dollars or participation. • We often find that female alums participate at higher rates even they contribute fewer dollars than their male counterparts. Here we see half as many females participating, and half the dollars in gifts. • Alum couples are performing according to the standard, frustrating pattern — higher participation and an average gift less than that of non-coupled alums. • Alumni Association members show a triple participation rate and average gifts 50 percent+ higher. • Recommendations • We recommend short-term continuation of the “reunion” events that center around affiliations that are not class-based — with program implementation based primarily on volunteer internet activity. To the degree that increased reunion focus takes more staff time, it is our feeling that the Reunion effort should be assigned a low priority. • Women’s motivation to give is not the same as men’s, which has been recognized appropriately in your phone scripting. Effective messaging for women focuses on the good being accomplished rather than maintaining the University’s competitiveness. • To the degree that the budget allows, all communications should carry this differentiated messaging by gender. • Targeting alum couples specifically as “specially affiliated,” combined with appropriate ask amounts, can eliminate the current gap over time. • The Alumni Association member results underscore all recommendations on relationship marketing university-wide.

30. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Reunion Cycle — Undergraduate Alumni

31. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Gender — Undergraduate Alumni

32. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Undergraduate Alumni Couples

33. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Alumni Association Membership — Undergraduate Alumni

34. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Performance by Top Five Dollar-Producing Colleges • Findings • Even the top five colleges show the same declining trends, with few minor exceptions. • Recommendations • These results underscore the urgency of creating a new collaborative plan to work with the colleges on relationship marketing and to eliminate their current cannibalizing of top prospects.

35. FINDINGS/RECOMMENDATIONS BASED ON FIVE-YEAR HISTORY Performance by Top Five Dollar-Producing Colleges cont’d

36. PROGRAM DEVELOPMENT FINDINGS Strategic Planning, Goal Setting, Marketing Planning • Strategic Planning and Goal Setting • Overall goals are established according to Advancement budget needs rather than Annual Fund performance. • Goals for increased revenues are given to Annual Fund staff with flat or decreased budgets to achieve them. • Objectives related to participation vs. dollar goals change throughout the fund year. • Ongoing goals now focus on unrestricted dollars to fund the Advancement budget; long-term Annual Fund growth depends on increasing participation. • There are no micro goals for performance by donor level or demographic segment. • Directions are changed throughout the year, particularly in the critical focus on participation vs. dollars. • Coordination with the competing Alumni Association and Athletics programs is ineffective. • Directives such as the prohibition of searching for alumni by SS number hinder the program’s progress. • Marketing Planning • The Annual Fund is not branded. • Communications focus almost exclusively on supporting academic excellence and student programs. • There is widespread belief and concern that many appeals give donors the impression that they are contributing to their college when they are not. • The goal of eliminating competition from the Alumni Association has not been achieved. • There is no calendar coordination of the alumni mailbox which continues to be filled with solicitations from competing programs.

37. PROGRAM DEVELOPMENT FINDINGS Marketing Planning cont’d , Budget Planning • Marketing Planning: cont’d • There is no “relationship” marketing to move donors up the pyramid. • The current funding system encourages the colleges to identify $500/+ donors and acquire them as major gift prospects. • The value of a donor’s total annual giving through the Annual Fund, the colleges, the Alumni Association and Athletics is not available to be used for Annual Fund Chancellor’s Circle prospecting. • New programs such as the Chancellor’s Associates further dilute the pipeline stream. • The comprehensive marketing approach of the Annual Fund is superior. • Successful targeting/segmenting initiatives include the alumni survey and the work with SalesForce and Target Analysis to develop differentiated solicitations. • The Annual Fund is well-positioned through ads in the magazine and articles in various newsletters. • Event partnering with the colleges and the Alumni Association is significant and ongoing. • Ancillary constituents, including parents and seniors, are fully integrated into the program. • Budget Planning • The budget has decreased or remained flat over the last three years. • CPDR (cost per dollar raised) of $0.11 without salaries and $0.27 with salaries is a strong result which reflects ever more “lean and mean” planning. • However, it appears as though disproportionate dollars have been spent on non-mainstream projects including Chancellor’s Circle/Associates packets and the ACC Challenge initiative. • Multiple mailings carry a higher cost than high-tech production which accomplishes targeting and upgrading for all segments in a single project.

38. PROGRAM DEVELOPMENT FINDINGS Budget Planning cont’d , Evaluation and Reporting,Organizational Review • Budget Planning: cont’d • The cost-efficiency for the calling center appears to equal or better benchmarked levels. • The program has made maximum use of the most cost-effective ancillary media including magazine advertising, newsletter articles, and online solicitations. • Evaluation and Reporting • Results are tracked efficiently and consistently throughout the year against budget and vertical goals such as performance by college. • Solicitation programs are also appropriately monitored in the phone and mail programs. • There does not appear to be a similar reporting program to track by donor level and dollars to focus on SYBUNT performance, in particular as fiscal year-end approaches. • Participation reporting, including Athletics, includes significant duplication of donors. • Organizational Review • The elimination of a full-time position has seriously stretched the department’s staff resources. • Limitations of programming support require line staff to perform many of their own queries to accomplish their tasks.

39. PROGRAM DEVELOPMENT RECOMMENDATIONS Strategic Planning and Goal Setting • Strategic Planning and Goal Setting • Set goals for participation, dollars, ROI, and CPDR based on realistic, benchmarked projections for revenues and expenses by program components and targeted segments. • Use the analyses and recommendations in the prior section to set dollar and participation goals by targeted segments. • Subdivide these goals by retention, reactivation, acquisition — and by demographic segment. • Define and budget all campaigns/projects for the Annual Fund year with the commitment that later additions will only be possible by deleting something in the plan. • Work on reversing the SSN number decision which, we believe, is critical for the University. • Collaborate with the Alumni Association and the colleges to plan searches for addresses/phones/emails and share information. • Plan and manage new tracking systems to monitor all of the above throughout the year.

40. PROGRAM DEVELOPMENT RECOMMENDATIONS Marketing Planning • Marketing Planning • “Brand” the mission of the Annual Fund by making a compelling, accurate case for the Annual Fund on paper, by phone, and online. • Develop a consistent case for the “need” that accurately reflects the distribution of gifts received in all programs. • Use a professional writer to script this case, based on the reality of the scholarship/academic/student service needs, which can only be funded with dollars raised through Annual Giving —“your gift is making it possible to raise this money.” • Secure a University-wide commitment to utilize this same boilerplate copy on all Annual fundraising communications — including those of the Alumni Association and Athletics. • Adjust all marketing materials to reflect this new branding: mailings and acknowledgments, phone scripts, online communications, ads, and newsletters. • Work with the colleges to build the $1,000-donor pipeline collaboratively instead of competitively. • Use the new messaging to clarify whether the ask is for the colleges. • Jointly review relationship value to identify Chancellor’s Circle prospects and define solicitation responsibilities. • Consider a “dual ask” — not a split revision, but a specific ask for two gifts at the same time, basing the upgrade on the relationship value of the donor. • Coordinate messaging so that the donor’s second appeal reflects “thanks” for gift to school/unrestricted and “ask” for the other one.

41. PROGRAM DEVELOPMENT RECOMMENDATIONS Marketing Planning cont’d , Budget Planning • Marketing Planning: cont’d • Reduce competition with Athletics and the Alumni Association through coordinated, collaborative “relationship marketing.” • Develop message themes for all constituents and choose appropriate spokespeople/case histories. • Reach consensus with all colleagues on year’s plan and themes: colleges, the Alumni Association, Athletics, magazine. • Re-test joint calling program with the Alumni Association; test more “dual asks” by mail with Annual Fund, Alumni Association and/or Athletics. • Plan coordinated “alumni mailbox” calendar with the above colleagues. • Budget Planning • Work within current budgets to increase returns based on retention and upgrade goals by segment. • Use high-tech mailing production to increase numbers mailed by reducing current CPDR of $.56 to the $.30-$.35 range. • Commit to an e-mail appending program costing approximately $.20 per guaranteed address. • Incorporate bi-monthly e-mail solicitations into the budget plan — at a cost of pennies on the dollar compared to direct mail. • Continue cost-effective utilization of magazine ads and newsletters. • Commit to reinvesting a significant portion of the increased revenue into raising the Annual Fund marketing budget to a benchmarked level required for significant future growth.

42. PROGRAM DEVELOPMENT RECOMMENDATIONS Evaluation and Reporting, Organizational Review • Evaluation and Reporting • Develop a year-long reporting plan focusing on year-end SYBUNT and second-ask campaigns. • Repeat current complete review of performance for budgeting and strategic planning for the following year. • Review participation numbers in this report and/or perform a merge-purge on recent calculation to de-dupe Athletics and Annual Fund donors. • Organizational Review • Implement staffing resource recommendations achievable in the current budget context. • Re-establish the eliminated full-time Annual Fund position. • Consider hiring a programmer dedicated to the Annual Fund. The ACS team feels this would free up the two developers to focus on system and Advance projects. • Increase internships in the Annual Fund office to assist with myriad non-managerial functions.

43. Associate Vice Chancellor, University Development Associate Vice Chancellor, Advancement Services Director Special Advancement Projects Director, Annual Fund Annual Fund Staff Director, Alumni and Donor Records Director, Advancement Information Director, Budgets and Accounting Manager, Administrative Computing Services Associate Executive Director, Alumni Association Director of Development, College of Engineering Executive Director, College Advancement, College of Agriculture Executive Director, Office of Development, College of Physical and Mathematical Sciences Director of Development, College of Education Development Associate, College of Education Alumna University Trustee APPENDIX List of Interviewees