Increasing Donor Loyalty
Second in a series
One of the most important and efficient ways to maintain and increase current revenue is in the retention of existing donors. Blackbaud estimates that it costs 6-7 times more to acquire a new donor than to retain an existing donor.
A new donation offers up the promise of a long-term relationship. Like a friendship it must be two-way, worked on, mutually rewarding, respectful meaningful, and above all, loyal. Yet we lose many donors, often because the two-way character of the relationship is not understood.
The latest report from the 2016 Fundraising Effectiveness Survey of the Urban Institute and AFP indicates an average donor retention rate of only 45% from the previous year. Total amount of gifts and number of donors rose marginally, although retention did not.
For an average of $100 gained, $95 was lost from lower amounts of gifts and lost donors; for every 100 new and recovered donors, 99 were lost. The larger organizations did somewhat better, especially with major donors, although overall performance isn’t what it should and could be.
Retention rates of initial donors, younger donors and those giving smaller gifts were the lowest. Distribution of overall retention rates, averaging this 45%, resembled a bell-shaped curve, with organizations doing from quite poorly to quite well.
Retention as Efficient and Effective
In terms of cost, clearly it is much more efficient and effective to retain a donor as to recruit a new one. While retention is reported above as the overall average, a strategy of focusing first on increasing retention of high value donors and longer-term donors will make sense for most agencies.
However, all donors are important, including the newest, youngest donors. Long-term these new donors will constitute the most important segment for needed growth.
Speaking of growth rates, the historic annual rate of growth for nonprofits is an average of 7.5%, thus doubling every 9-10 years. Obviously, the most economical way to double growth is to increase donor retention rates, with the percentage of annual growth dependent on this retention, increases in year over year donation amounts and acquisition.
The first step in retention is to decide that it is, indeed, important and to dedicate staff time and resources to its achievement. Donor service takes on a new dimension and such factors as lifetime value, loyalty and commitment become major areas of focus.
(For a good way to determine lifetime value, go here)
What Needs to Be Done
Overall, every constituent needs to have exceptional experiences with the nonprofit. Operationally, this takes on many variations, dependent on segmentation based on their preferences, the nonprofit itself and the resources available.
The Basics: Keep Current and Get Donors Excited About What You Do.
1. Keep information current on donors: spouse, address, e-mail, giving history, record of communication, birthday.
2. Send gift acknowledgment and thank you in rapid order: follow the 48 hour rule, e.g. take no more than 48 hours from receipt of gift to sending gift acknowledgments. The letter should include not only the thank you but information on how the gift will be used. For gifts over a certain amount, have Board members and volunteers call or write to also thank the donor.
3. Communicate continuously with the donor base, emphasizing successes, individual stories, donor profiles, all with a goal of further involvement in the organization. With new donors, there is about three months to get them committed to the organization and its successes.
4. Individualize communication, noting signal events, e.g. five years as a donor, a birthday, a Thanksgiving wish.
The New Basics
1. Designate a development officer in charge of Donor Experience. The job description includes getting that two-way conversation going based on the shared values of the donor and the agency.
2. To get at donor values, preferences and experiences, survey them on their values, their expectations for and experiences with the organization, their preferences on requests for funds, newsletters, and their specific interests in the nonprofit’s program. Use this information for segmentation on values, interests, behaviors and preferences.
3. Based on the donor profile, ensure that they are kept aware of the organization’s experiences and successes in those areas of special interest.
4. Periodically, repeat the donor survey, asking for feedback. Pay close attention to feedback, take it very seriously and respond directly and promptly to individual donors.
5. Continuously ask for feedback. Have a telephone number and website where donors can go to give feedback, suggestions and complaints. Actively respond to all feedback and use it to continuously improve donor relationships.
6. Based on cumulative value and behavior data from surveys, construct profiles of those in the population likely to become donors. Use this information in acquisition as well as in regaining those who ceased giving in the past few years.
7. Develop strategy to increase retention through monthly giving. Highly loyal donors are best prospects for sustaining gifts; sustainers develop higher loyalty to the organization. This is a big win-win.
8. Along with 5. above, develop a comprehensive strategy to regain donors who stopped giving. With all of the work in attracting their initial donations, try to identify the elements of an appeal that will motivate them to re-up. First, call and talk to them about what they like about the organization, keeping in mind that many donors stop giving because they do not feel needed, or do not know how their funds were being used, or did not hear from the group, or, unbelievably, never got a thank you.
9. With Board and volunteers, develop a program to call each donor to thanks them for making a donation. Do not ask for a gift. CDS Global reports these calls can lower overall attrition by 10% or more.
10. Above all, pay attention to the on-going reports on retention. Currently, the best book on retention is Roger Craver’s, Retention Fundraising, (Medfield, MA, Emerson & Church, 2017) . His forthcoming co-authored book, Start Over, should also be a real winner.