We can boost donor retention. But only if we get smart
- Written by
- Chuck Longfield
- May 23, 2011
The last time SOFII spoke to Chuck Longfield, for our feature Data is gold. But only if you can get to it , he concluded the conversation with the following observation: ‘...the potential for better use of data is huge. If we aspire genuinely to build mutually beneficial relationships with our donors we simply have to find better ways to use our data.’
Here, again talking to SOFII’s Ken Burnett, Chuck picks up where that interview left off.
When SOFII met up again with Chuck Longfield at the start of 2013 the closing observation above quickly became the starting point for a new conversation designed to help fundraisers understand the key data they should have at their fingertips, and how to get it. All this though should be seen in the context of the big issues that should be occupying nonprofit leaders’ attention now. In Chuck’s view these are,
- Nonprofits are struggling to keep and develop their customers.
- Acquisition response rates are steadily declining.
- First year retention rates are low and getting lower.
- These trends started before the economic downturn and will likely continue after its recovery.
- Younger donors are less loyal than older donors.
- Many organisations now find it too costly to acquire new donors in sufficient number to replace donors as they lapse.
If we face up to these we have to accept our sector is in a crisis of near terminal proportions. So anyone who might throw a lifeline setting out what wise nonprofits should be doing to slow, stop and reverse this situation should be very welcome to sector leaders.
Under the general theme of wise investment, both time and money, to increase retention Chuck launched in with five specific, timely nuggets of advice.
1. Acquire donors who are more likely to stay for a reasonable time.
This seems odd advice. Yet what’s truly odd is that most nonprofits don’t measure the quality of their donor file based on whether or not people stay around. We judge new donors by response rate, cost of acquisition and average gift value, not by their eventual retention rate. But today’s systems can quite easily analyse your files to compare your acquisition sources and identify those from which donors have been more likely to stay. Chuck suggests you find out what distinguishes the stayers, then actively recruit more like them.
To do this you’ll need not only to monitor and measure first year acquisition statistics but second and subsequent years retention too. After all, which is better: an acquisition list that produces a low, initial response rate but most of its donors stay two or three years at least, or a list that produces a good initial response rate but from donors who never give again? The point is you should know, so that if one source produces significantly more donors who stay, you can up your acquisition from that source.
For example, street fundraising famously suffers from high attrition and average dropout rates are regularly pored over. But do all types of donors drop out at the same rate? Do women recruited in this way stay longer than men? Do older donors stay longer than young donors? All donors are not the same. If fundraisers were to study more closely those who lapse they may find that age, social status, gender, affluence and a range of other factors all have influence. Again, they should focus only on recruiting and developing those most likely to stay.
Fundraisers should not only look differently at donors who stay longer, but also those who give more. Some donors are much more of a loss than others. Chuck’s point is, we should know this stuff, in detail, so we can make acquisition decisions based on it.
2. Invest differently in donor retention. A little invested now will improve future income even if you still do 90 per cent of all the things you know you shouldn’t.
Some years back in her book Donor-Centred Fundraising Penelope Burk showed that personally calling and thanking new donors improves first year revenue retention* (see right) by around 40 per cent. This statistic stuck in Chuck’s mind, so just over two years ago he organised the calling of new donors in large numbers. Now in its third year the exercise has shown, in volume, that it’s true, simply calling and thanking your new donors increases both renewals and average gifts. Even leaving a thank-you message on a new donor’s answering machine increases giving. Though not by much, so Chuck has worked out that it’s worth calling back at least once before leaving a message.
If it works so well, why don’t more organisations do this? Simply, it seems, because spending on the calls involves expenditure now, from this year’s budget, whereas the benefits of increased renewals and extra gifts, mostly, will not be felt until the following year.
Short-term thinking is endemic in our sector, fed among other things by fundraisers generally not staying in post long enough to reap the benefits of anything that takes more than a year to pay off. Short-term thinking particularly blights bequest and major donor programmes. These require long-term foundation-laying, so tend to be weak and under-funded in many organisations.
Clearly at some times no amount of encouraging longer-term thinking will work. So, says Chuck, if you must focus on short-term results, why not do so with 90 per cent of your resources but allocate 10 per cent to changed behaviour and see what happens? Sometimes, particularly when times are tight, it’s best not to introduce change cold turkey, to make transition a little at a time, as and when you can afford it.
Though it adds a bit more expense, it pays to record what people say on these calls, because so often it gives clues as to what matters most to them. If a donor raves about how important your organisation’s work is, you might pass along her name to your bequest or major donor programme, for a personal follow-up. And, in Chuck’s experience, even donors who profess to be upset or inconvenienced by a call tend to give more, perhaps a sign that while they may be irritated with the call and the caller, that doesn’t mean they don’t support the cause.
3. Plug your leaky bucket. Find what it is that causes donors to not give again.
It’s hard to understand why fundraisers don’t track this data but many, if not most, do not. So, 30 per cent of your file, or whatever, did not renew their support this year. Why?
Possibly, two or three per cent died. Not much you can do about that. But, what about the others? Once a year at least you should take a day or two to find out what you can about all those who didn’t continue. You won’t discover reasons for all of them, but you should at least sample a percentage.
For example, ten to 20 per cent of your donors will have moved; a similar percentage will have changed their email addresses. How effective are your organisation’s processes for receiving their new information? And what percentage of these donors are now effectively ‘lost’?
In response to why they stopped giving, some donors will say ‘I lost my job’ or ‘we have to cut expenditure’. You can offer them a payments holiday, put them on a ‘newsletter only’ list, let them know that they can still keep in touch for free, then maybe one day they’ll come back. Some will say, ‘ I hated your decision on the XYZ policy.’ You can politely remind them of the nine other decisions you made that they supported 100 per cent. Or you can suggest that it’s better that they influence the organisation from the inside, as an active not a lapsed donor. Some will stay, for sure.
The point is, you can’t influence people’s reason for not renewing unless you know what those reasons are. What you don’t measure, you can’t do anything about.
4. If you are struggling with a too long ‘to do’ list, get someone to do it for you.
A visitor from Mars looking at the literature of the fundraising sector would conclude that all fundraisers must love lists. ‘Ten things you must do’, ‘the three essentials of data management’, ‘the seven secrets of social media’ and such like seem de rigueur for all of us. But for many fundraisers the ubiquitous ‘to do’ list looms above them like a mountaintop obscured by clouds. Instead of helping us it just seems to be getting ever more remote, longer and harder to climb.
So cut the ‘to do’ list. Do the things that matter but get someone else to do it for you. All of the advice on this page could be delegated internally or sub-contracted externally. All the wise fundraiser needs to do is to be able to justify the cost, in terms of RoI.
5. Know which of your data and metrics to monitor and act on them.
All who would improve donor retention in their organisations know only too well the basics of a donor-centred approach as preached by SOFII and others for some time.
- Be personal, be nice, be quick, be sincere.
- Be available, open and accountable.
- Tell great stories and offer wonderful feedback.
- Make interactions ‘win/win’ for donor and cause. Offer something tangible so that giving is not a one-way street.
Everyone knows all these of course, though they’re often not observed in practice. Chuck’s advice, that we should measure the metrics that matter, seems unarguable and ever more apposite. Even if other fundraisers resolutely ignore all this, those who put donors at the centre of their relationship fundraising will be the ones who’ll prosper.
Follow Chuck Longfield’s first six ‘top tips for making more of your data’ here. And tell SOFII, please, if you think any of this is helpful to you. Together, we can do something to stop the too sudden flight of those oh-so-expensively recruited donors.
We hope we’ve made this easily understandable and accessible for you. Whether or not you put Chuck’s sage advice into practice is up to you.
© SOFII.org 2013
Employer matched funds should be renewed too.
It isn’t just about renewing regular donors. A major example is donors who, when they give, have their donation doubled or even tripled by employer matched funds. In the USA about ten per cent of all donors work for companies who will match their employee’s gifts. By benchmarking with other NGOs you can work out if you’re getting your fair share of these donations, or not. Most nonprofits are not, with many getting matched gifts from less than one per cent of their donors while similar organisations get five to six per cent. Often, this is simply because nonprofits don’t specifically remind these employees to match their gifts.
One leading US nonprofit raised $800,000 per annum extra, just by tightening up these straightforward business practices.
A moving story
If you change address and don’t tell them, how long will it take your favourite nonprofit to find you? Two years ago a major donor moved house. As he’d recently given a very substantial gift to one particular charity he was surprised when, coincidental with his move, he stopped hearing from them. After about six months he contacted their head of membership. ‘Oh my goodness,’ she told him, ‘I’ll personally look into it.’ Which she did, calling back quickly to say, ‘Don’t worry, we have your change of address correctly noted.’
A further six months passed and still the donor had heard nothing from this favoured cause. He called the head of membership again.
‘I just don’t understand it,’ he was told. Then the awful, almost unbelievable truth emerged. Because he’d made a truly substantial gift he’d been moved from the normal cycle of donor communication to the major donor department. There the fundraisers had hand-built their own database using a different system. So membership had the donor’s correct address, only they weren’t allowed to contact him. That now was the responsibility of the major donor department who, it turned out, weren’t doing even basic list hygiene, so had no record of the donor’s new address. As a result this donor hadn’t given again, not because he had lapsed but because the charity had effectively stopped asking.
How many of your lapsed donors might fit into that segment? Find out why your donors have stopped giving. You might be surprised by the answers!
* For readers unfamiliar with the concept, revenue retention is how much of first year gifts is retained from one year to the next, across all donors. For example, if 100 new donors gave you $100 each, you received $10,000 from the acquisition campaign. If the following year 25 of those 100 donors each gave $200, you received $5,000. Your donor retention was 25 per cent (25/100) and your revenue retention was 50 per cent ($5,000/$10,000). What Penelope discovered and Chuck confirmed is that by calling and thanking new donors, they give approximately 40 per cent more in the following year. So if you called and thanked the 100 donors in the example above, you would have received $7,000 in year two (40 per cent more than the $5,000). This increase would have been realised by increasing the number of retained donors slightly as well as increasing the average gift slightly, say, 30 donors instead of 25, and $250 per donor instead of $200.