Donor Relationships can be grown and fostered to improve retention and key financial behaviors over time. What is required is a theory based view of how these relationships form and how to measure and systematically impact them in simple, straightforward ways.
1. Applying Relationship
Theory to Donor
Stewardship
A Primer
Donor Relationships can be grown and fostered to improve
retention and key financial behaviors over time. What is
required is a theory based view of how these relationships
form and how to measure and systematically impact them in
simple, straightforward ways.
Kevin Schulman, kschulman14@gmail.com, 202-246-9649
6/20/2011
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2. The Problem
Everyone acknowledges there are significant issues with acquisition; namely costs going up, yields
going down. There are also significant issues with retention; namely there isn’t enough. This is
really two sides of the same coin; the increasingly expensive to acquire donor coming in has little
(and maybe less than he/she used too?) motivation to stay.
The financial argument for trying to keep them is well known - it can cost up to 10 times as much to
bring in a new donor as keep an existing one (Sargeant & Lee) and it takes, on average, 18 months
for a new donor to cover the cost of acquisition. Said another way, unless you have a specific plan
to keep a newly acquired donor on the file for at least two years (assuming net zero isn’t your goal
and how can it be?) then your organization, its mission and programs would be better served by not
taking their initial contribution.
If the problem of acquisition and retention are related and severe and the financial imperative to fix
it so clear then why are the trend lines getting worse, not better? And why aren’t donors who give
you one donation not more motivated to give you a second?
Some reasons posited,
1. Donor demos are changing. Or more aptly, our new, “old” donors are not like our old “old”
donors and we don’t know how to reach younger folks. For discussion, let’s accept this as
true.
2. More competition with an exponential explosion in the number of non-profits. This is a fact
and for discussion, let’s accept as true that this is another cause.
3. The trust in institutions in general and non profits specifically is falling. Unquestionably
true but is this a cause? Let’s posit, yes.
What do all three of these reasons have in common? They are beyond your control AND they are
constants in the equation that is fundraising, every org has to equally deal with these realities.
By analogy, imagine a world that goes dark. Everybody is equally affected by the lack of light, after
all it is dark everywhere and always. The innovators among us would find a whole lot of candles
and other incendiary devices rather quickly. These same innovators would be the successful
retailers who continued to sell product because they could be seen and found. The non-profits that
navigate the new reality for what it is rather than what it used to be will shine this same light.
An extended sidebar on trust: It is perhaps telling that personal philanthropy in the United States
has fallen alongside trust in institutions. After doubling between 1929 and 1960, charitable giving
as a percentage of personal income declined from a high of 2.2 percent of income in 1964 to a low of
1.58 percent in 1994. After recovering to 2.1 percent in 2000, giving fell again to 1.9 percent in
2004.
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3. Can declining trust in institutions be blamed for the fall in personal philanthropy? And what if,
contrary to our premise from a few lines above, you can do something about it? This isn’t about you
trying to do the (necessary) job of groups like the Independent Sector, this is more practical and
tied to solving your organization’s fundraising and retention problem.
We posit that the relationship and engagement terminology so popular at conferences and strategy
sessions are merely current labels for trust and its antecedents; not at the institutional level per se,
but rather between your organization and the lapsed and soon to be lapsed donors on your file.
But before you assume this is another white paper to nowhere on “soft” concepts like trust and
relationship, let us give away the ending now.
The Big Picture Solution
We know exactly how to measure the level of trust (we call it Donor Commitment) to your
organization at the individual donor level AND how your organization can impact it with your
marketing (direct or otherwise), communications and operations. You can click here to learn all the
details of how to measure and impact it and the PROOF that what we measure by way of attitudinal
commitment to your organization (i.e. mindshare) is correlated with ACTUAL GIVING and DOING.)
Now indulge us a bit with more “white paperesque” context.
Why do people donate? One need not answer this question fully or in detail to get at the more
fundamental answer - no DONOR on the planet engages in altruistic acts. They all want something –
that something may be very abstract and ephemeral (e.g. to simply feel good, to know they are
making a difference), but nevertheless real and ignored at your peril.
And in fact, the organization has, in all likelihood, delivered part of this “something” in order to get
the first gift. It has even succeeded in establishing the tiniest modicum of trust since the donor, in
the vast majority of cases, will never know if the money was well used. They must trust in your
brand, your message and your (often implicit) promise. However, in most cases, as the retention
data supports, this is it. The nascent relationship is over.
That’s right, we used the “R” word. No, not every donor wants a relationship, some did it on a never
to be repeated whim thanks to creative that struck a chord, lighting in a bottle or some other non-
repeatable event. In fact, let’s posit, for argument’s sake, that not a single donor would ever actively
seek out and aggressively solicit a relationship with a non-profit.
But, if we accept this as true we should also be willing to accept that at least some are receptive to
your working to establish one. And as long as that cost to establish it is less than the gain and with
less opportunity cost than acquiring a new donor, why wouldn’t you make it an organizational
imperative to do so?
The data is overwhelmingly in favor of retention with every donor retained increasing his/her
lifetime value by 100 percent or more and often 150 to 200 percent when we include the cost of
acquiring their replacement on your file (Sargeant & Lee).
The Theory Behind It
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4. So, if the first gift represents some level of progress towards a relationship, what is NOT happening
between the 1st and 2nd gift (and every foregone subsequent donation, think lifetime value here) to
undo it all?
There is a large body of academic work dedicated to understanding and explaining what
contributes to good and bad interpersonal relationships. In the for-profit marketing world these
basic relationship principles have become the accepted framework for what is required to
maximize profitability and it is this same framework that maps out the donor to non-profit
relationship.
The journey starts with the need to establish
a Functional connection to the brand, often
expressed as being reliable; the donor knows
what to expect from your organization, the
experience is consistent. Fail to do this and
you fail, period.
Achieve this basic level of functional or
satisfaction based connection and you have
opportunity to build the personal connection
(while also having some impact on the trust
or commitment component). The personal
connection is a more emotional one, in
relationship vernacular it is fidelity, the bond
that says there is a two-way street of give and take, of mutual respect and of the donor believing the
organization knows him/her and cares.
Trust is the linchpin to true (i.e. mindshare based) loyalty – not the often deceptive, pattern of
repeat behavior via RFM analysis. The kind of relationship that moves the donor to overlook
shortcomings, give greater share of wallet, promote the organization and go out of his/her way to
engage with it.
With this as a framework or guide, where then does the 1st gift that never materializes into a 2nd gift
fall short? How about the often cited, almost trite, thank you? If there was ever a specific, concrete
action to build the bridge from functional to personal, this would be it.
And what about a firmer functional foundation? If the donor’s 2nd contact with the organization is
another, largely or entirely unrelated solicitation how likely is that the donor will form a reliable
sense of what to expect when interacting with you? To compound the “undoing” of the very loose
relationship knot that was the first gift, the organization may not acknowledge the first gift when
asking for the second. How can the donor be expected to think the organization knows them (key
part of personal connection) when they are treated like a stranger? And how can the seed of trust
planted with the first gift be grown if there is no reference to how it was used to help the cause?
And this is all in the microcosm of the first to second gift scenario. When you extend this thinking to
all the other “touches” (e.g. call center, email marketing, website, social media, traditional media)
your organization has with the donor it is almost impossible to imagine a relationship being
established unless the organization is actively, consistently, strategically and tactically pursuing
one.
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5. Remind me why I should care about all this again?
The Little Picture Solution
We know that the Committed donor has a higher average gift, HPC and lifetime value than the Un-
Committed donor. We know how to measure the Commitment level and how to identify the
activities your organization already engages in that actually impact it.
But first things first, what are we really measuring here? What does it all mean in a practical sense?
There are seven survey questions (2 for personal, 2 for functional, three for Commitment).
These seven survey questions, in a nutshell, are measuring your donors’ level of intent or
motivation to maintain their (nascent or otherwise) relationship with your organization.
What we really have then is a mindshare based, leading indicator of future behavior. How they feel
about you should really be a good predictor of what they’ll do, right? That is what this is and it took
years and lots of time and application in the academic, commercial and non-profit setting to identify
the seven (out of hundreds) and how they work together.
How do you apply it? Strategically and tactically.
30,000 ft:
Not everything that you do matters to increasing the Commitment levels of your donors and what
does matter does not matter equally. And we know from information processing theory that people
cannot process a million things in order to form an opinion or make a choice – they use filters and
mental short cuts to deal with the world and this includes how they interact with your organization.
This means the list of things that really matter is finite, not infinite.
With a benchmark survey we determine the marketing, operational and communications activities
and messages that matter. Your organization needs to focus resources and have everything that
you do support relationship building.
This won’t happen overnight or maybe at all if we don’t make it less daunting, simpler to execute
against and with a more immediate upside. Enter the more tactical applications.
20,000 ft.
The great strength and weakness of direct marketing is its reliance on past behavior (most notably,
the financial metrics of recency, frequency and monetary amount) to presume future behavior.
Donors get put into buckets based on their past RFM behavior. This proven process still requires
living in the world that was and assuming it will be – good behavior begets good behavior and vice
versa. The big problem is this becomes a self fulfilling prophecy for poor retention since the
formerly “good” donor with, for example, two “missed” contributions quickly becomes tomorrow’s
“bad” donor. The even bigger problem is that non-profits wind up implicitly accepting the premise
that there is no real way, (other than brute force of more solicitations), to impact future behavior,
an almost fatalistic view that good donors are born, not created.
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6. But if Commitment to an organization is created, not born, (nobody thinks people are preordained
to like one non-profit over another, right?) and if Commitment is correlated with all the key
behaviors we covet, doesn’t it stand to reason that we can impact it and by extension, those
behaviors? That we can turn an otherwise “bad” donor into a good one and perhaps more
importantly stave off defection of the “good” donor?
This is not to suggest you can catch lightning in a bottle. The vast majority of your donors are not
committed to your organization and while in theory many could be, in practice you have to make
choices based on limited resources and the likely return and therefore, pick a relatively small
handful to target. There are “good” donors going off your file every single day. They, by definition,
are either highly committed to your organization, uncommitted or somewhere in between. The
good behavior/high commitment segment is an obvious place to start.
Ground level
The unflattering comparisons often made between the non-profit and commercial sector are mostly
unfair. In one area however, the non-profit sector is woefully behind; true relationship building at
the individual customer (read: donor) level. 1 to 1 marketing, relationship marketing, feedback
management…call it what you will, there are countless examples of the commercial sector soliciting
opinions and feedback from their customers at every “touchpoint” and post interaction (e.g.
purchase, visit, request). If there are any examples in the non-profit sector we’ve yet to un-surface
them.
Why is this? The non-profit sector will say it is different, that its donors don’t interact with it the
way they do with the commercial sector. True to a point but the typical non-profit does send an
enormous amount of mail, drives traffic to its website(s), participate in social media, use email
marketing, telemarketing and in some cases, customer service call centers. In short, there are more
“touches” than one might think and every incentive in the world to adopt these feedback processes
in at least a few of them.
For example, a non-profit can use a survey widget on Facebook or its website to ask the three
commitment questions and satisfaction with the most recent interaction. The responses place each
respondent (i.e. Facebook or website visitor) into a 2x2 matrix of hi/lo commitment and hi/lo
satisfaction. Each segment has specific business rules that trigger automated follow up to either
remediate a bad experience, build a relationship or maintain a strong one.
You won’t be able to follow up with everybody, some will remain anonymous but this can be done
quickly, cheaply and with no extra staff time so increasing lifetime value one donor at a time visa
vie more commitment is both feasible and worthwhile.
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7. Summary
Donor relationship management is a concept whose time has come. It is the aforementioned light in
the now dark world. To get there requires breaking down the sizeable barriers to the paradigm
shift from donors acting altruistically to supporters in need of reciprocal care and feeding. To
facilitate this paradigm shift we have operationalized how to measure and impact the strength of a
donor relationship and created specific tools and applications to execute against it.
Remember, your mission only exists because people elect to support it. Building a relationship with
those supporters should be considered an obligation – one that happens to pay for itself many times
over.
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