Keeping the Ones Who Love You: Donor Retention

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Hello, my name is Robbie Healy. And it’s my pleasure to spend this time with you today talking about donor retention. Let me pause for a minute to share my screen so we Read More

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Hello, my name is Robbie Healy. And it’s my pleasure to spend this time with you today talking about donor retention. Let me pause for a minute to share my screen so we can all follow along together

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we talk a lot about donor retention. And we talked about growing our databases and the relationship between donor retention and our donor constituency growth. So a couple of the reasons why donor and retention is so important is to think about why organizations lose donors, what is it that we need to do to build donor loyalty? And how can we especially afford a small shop? How can we build and deploy leadership to help them help us build donor retention, so we’re going to focus on that topics in the next few minutes. One of the things we know from the research and the researchers, two of my favorites, Adrian Sargeant and Jennifer Xiang have done a lot of work on what causes donors to stop supporting us, some of them, we don’t necessarily have a great deal of control over if a donor tells us, they can’t afford it, that’s from their perception. Or perhaps, we can offer them options that make giving to us affordable from their point of view. So if someone’s been a quarterly or monthly donor of maybe 25, or $50, maybe we help them know that a gift of 10, or 15, would still be very helpful. So that even though they may want to change their giving level, they don’t stop altogether, the idea that they believe other causes are more deserving than ours, perhaps that’s a function of our storytelling, perhaps it’s a function of their shift of priorities and values. So if it is a function of our storytelling, that’s certainly something we can strengthen some of the ones that we really need to focus on preventing our non donors not believing we acknowledge their support, or telling them how we use their money, the idea that they no longer need support, we no longer need their support, that we ask them for an inappropriate amount, or the way we communicated with them was inappropriate. Those are things if we engage with donors, and help them along their donor experience, their donor journey, we can try to guard against that. And the fact that they didn’t know how we use their money, and didn’t honor their wishes, we have to always wonder, I believe whether those are linked, and staff not being helpful. I’d like to believe that development staff are always very effective stewards. But we need to involve everyone in our organization in understanding how donor stewardship works and their role in that. When we think about the segmentation of donors, the stakes to keep the donors we have are very high. When we look at the range of gift levels over income, and the number of organizations that a donor supports. Obviously, the average gift of a donor under $50,000 is significantly less than the average gift of a donor whose annual income approaches or exceeds six figures. But we also need to think about this in the context of the lifetime value of a donor on our house list. So if we look at emerging donor constituencies, younger donors, those gifts may be lower, but over a lifetime, they can be huge. So even though we do need to be mindful of household income, and the impact it has on a donors ability to give, we also need to look at the lifetime value on our house list. When we cross over and look at the number of organizations typically supported at different household levels, household income levels, that obviously is a variable as well. So the greater the income, the greater the ability to support a variety of organizations. When we keep in mind the two to three to four and four to five. Organizations will also need to think about who could be on their list. Often if they’re people of faith often one is a congregation and many donors are people of faith, of course, not all. And in many cases, at least one organization is a school. So if you are neither faith based nor a school, it ramps up the competition in your context. We think about the Fundraising Effectiveness Project. And if you’ve participated in workshops I’ve done in the past, you know, this is something I often like to look at, we really need to look at what segments of donors should we be thinking about, in the red column, the donors who cause our revenue to shrink, our donors we got and didn’t renew. So that’s a lapse to brand new donor, a donor who we had for a couple of years who then didn’t repeat, obviously, elapsed repeat donor and a donor who downgrades I think we need to be extremely careful in judging downgrade donors, especially in the current pandemic, climate, because there may be donors who love us just as much as they always did. But for reasons beyond their individual decision making and control, they are in a position where they have to downgrade for 2020. So I would be very careful with how we judge that segment this year. donors who add revenue to our bottom line are in three categories brand new, recaptured or upgraded. Today, with donor retention, the real focus is retaining and recapturing donors we already have, obviously, we’re going to want to add new donors to our list all the time. But if we’re only focused on that, or focused too heavily on that, we really miss the opportunity to leverage recapture and upgrade. When we think about what’s trending, and again, this is from the Fundraising Effectiveness Project, the news never gets very good. We tend to lose a significant percentage of donors every single year. But in terms of gifts, from 2017 to 2018, which was the last year that the full data set was available 2019 numbers are still in, in the crunching phase. We know giving did go up, we know that it went up marginally went up 4.2%. But when we look at where the growth happened, and where the loss happened, this is where we need to drill down on what losses can we attribute to the fact that we did not retain donors in 18 that we had in 17 or 19, that we had an 18 or that we will get again in 20 that we had in 2019. So looking at growth as a discrete number doesn’t tell the complete picture, we really need to look at did we retain the gifts and the donors that we had? Or are we only looking at dollars? I think oftentimes in our board context, they look at results, not the data driving behind the results. And the Fundraising Effectiveness Project, especially if you are using your DonorPerfect opportunity to put your data in the Fundraising Effectiveness Project. That gives you an even better data set to investigate your own results. What’s Trending with donors doesn’t paint such a rosy picture. From 2017 to 18. We lost almost 3% of total donors. We know donors are narrowing their priorities. We know donors are sharpening their discernment of who they want to support. But you need to be the outlier, the organization that does such effective stewardship, such customized outreach that you retain the donors you have, as you also add new ones to grow the strength of your database today and for tomorrow. And every time I do a training or a workshop or a seminar I say don’t start what you can’t sustain. This is especially important with new stewardship programs. So as you look at your critical segments, be certain that as you identify the ones you want to work with, you’re implementing tactics that you will be able to support over time.

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When we look at when we when we dig below the surface We know that it generally costs much less to retain and motivate an existing donor than it does to attract a brand new one. So investing as much if not more in stewardship programs, so that we retain our donors regardless of their giving level and an income cohort. taking positive steps to make sure we don’t lose them is the least expensive strategy for net fundraising gains over time, after all our our typical donor retention rate is under 45%. Last year 43. You want to be the the exception to that. So when we look at how to drill down how to look at the metrics, the nonprofit fitness report suggests that we look at donor retention rate the donors who gave last year and gave again this year. And of course, you calculate that rate by dividing the total number of donors last year, the new donor acquisition rate, another easy calculation, the donors this year divided by the total last year. The net gain then, is the number of donors than the net gain and the number of donors minus losses from last year to this year. So as you do those calculations, you can begin to look at your own trend analysis. If you have confidence in the quality of your database, you can certainly do a retrospective calculation, perhaps for three or as many as five years to see where your losses tend to be, what age cohorts what gift levels, what program functions for example, we can also look at the average gift size. average gift is also an interesting one because it can be so influenced by outliers. If you have a couple of unusually large gifts, or perhaps of unusually small ones, you may want to look at average gift by tactic. So average gift or invent average gift for direct mail average gift or any solicitation, average gift for some kind of special project for example, maybe giving Tuesday. So looking at average gift across the board may not paint as clear a picture as you need the growth rate of giving the net gains and losses from last year to this year. So you can look at how your growth rate is trending, whether it’s stable, declining or hopefully increasing lapsed donors. The donors who gave last year but not this year, obviously we want to focus on those people. And by calculating the lapsed donor rate, you can look at whether your lapsed donor percentage is shrinking or growing, hopefully growing or at least stable. So what do we do once we have all these data sets retention is king or queen, work on stewardship, communicating with donors in a clear and meaningful way? Asking them what they want to hear from us is certainly ideal. The workshop we did on the donor journey talked about what donors want what ways they want us to communicate with them what age cohorts cohorts want, what frequency so as you develop a stewardship plan, if you have the resources to do effective segmentation, obviously, that’s an ideal. We don’t want to ignore acquisition. We always want to be introducing ourselves to new people, new constituencies, new cohorts. This becomes one of those opportunities to invite leadership to help leverage their their networks, their reputations, their standing in the community. If board members aren’t yet comfortable with direct solicitation, the first step to that might be getting them to host a party in the COVID climate perhaps a virtual event to highlight your mission. So they personally invite a group of colleagues, social peers or others to hear more about what they are supporting through their efforts as a member of your board. Donor games, then, looking at following up the outreach efforts with good stewardship procedures would probably manifest in a personal outreach by an appropriate staff, or perhaps member of one of your volunteer Here, constituencies when your volunteer groups when we look at then average gift, what what’s happening when we put copy out to the donor marketplace, whether it’s direct mail or a solicitation, or perhaps a crowdsourcing kind of opportunity, like giving Tuesday, when we think about, are we offering donors too many choices too few choices. If we offer donors too many choices, they will often gravitate towards the lowest ones. So think about setting your sights higher than you think donors might give. If you start your giving options at $25, rather than $125, you’re gonna get a lot more 125 $25 gifts, if you start at 125, donors will still give you 50, or 75, because you’re always going to give them that choice of other. But don’t set your sights too low in the sergeant and Shang research. One of their variables was asking for an inappropriate amount. Remember, inappropriate can be too small, not just too big. Looking at growth and giving, we’re always looking at segmentation. Again, don’t start what you can’t sustain don’t so don’t build too many segments to manage. But as you segment and you think about the ways in which you reach out to your segments, understand what’s happening within each level, and create a specialized outreach plan for each level. lapsed donors, are you giving them the attention they deserve? Can you call them to say we’re so sorry that you were unable to respond to our appeal this year? Is there something we could do to help you get to yes for us spot checking your laps donor lists to identify those who really really can’t afford to lose, either because of longevity of the relationship, or size of the gift or particular programs that they support. direct outreach to them can be a really important and effective tactic in maintaining their engagement. And if you discover that they’ve had some kind of reversal and can’t give this year, thank them for their honesty, let them know that you’re very grateful for their past support, you would love to keep them updated and involved in understanding what’s going on. So that as and if their circumstances change, they might be able to return to you. So when we think about how we interpret the need for really robust stewardship and retention activities within our organizational budgets, these data may provide some benchmarks for you to help your leadership board and staff understand why a well supported stewardship budget is really in the long term best interests of the organization. If we look at results, category by category, and we look at where you fit, how do you compare and your rate of growth, if your rate of growth is less than 10%. It’ll take you eight, nine or 10 years to double your your results. If your retention rate, if your rate of growth rate, I should say goes up to 26%. It’ll only take you three years to achieve the same outcomes. If your growth rate was 100%, it would only take you a year to double I think that’s admirable but probably not realistic. So when we think about what it will really take to double your results, and we look at the giving you a say 33 year average, tends to hover under 8% 7.6. Realistically most of us are looking at if we’re average, and of course we’d like to be above average. The question is, if we set a goal to double our philanthropy in a year, what does that mean? It means we would have to literally double our

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our results we would have to look at retention and growth through a lens that’s probably not realistic. But if we have zero investment are only a nominal investment. In retention and stewardship activities. We’re guaranteed to struggle because we know that If we’re looking at 10 years, if we’re around 7%, that’s certainly a longer time horizon than most of us are given when we look at our annual goals. So get real, and maybe these data will help you set the stage for that conversation. The nonprofit research collaborative data are always interesting to me, because I think when you look at the broad array of tactics that most organizations can use, they fall into three categories, the very high value tactics, the ones that tend to have a great return, the entry level or starter tactics in the middle and the green bars, and the purple ones on the right tend to be the tactics that we as staff are wholly responsible for. So foundation grants, corporate giving gifts from other charities, often those are United Way Type, collaborative programs, combined federal campaign. And lastly, gifts from congregations. Not all organizations get those. But many faith based institutions do so many of us identify with this array of green bars in the middle. Those tend to be the entry level tactics, the starter tactics. And the question is, if we’re stuck there, and we never get over to the left into the blue, where we’re doing major gifts and plan giving an ever really robust, forgiving program. And the one of the 8% gifts from donor advised funds that one showed up for the first time last year, which I think is interesting, because when we look at donor advised fund grants, some of our donors are probably using donor advised funds in order to accommodate the tax changes in giving. So we really need to have that on our radar screen, even for our annual campaigns. So if you look at this broad array of tactics, no sharp unless you’re huge, can maximize all of them. So the question for us is, what ways do our donors prefer to hear from us? What are our resources and our capacity as an organization and as staff? And where’s our sweet spot? In that part of our Venn diagram? Where is our sweet spot? Which tactics fit with our age groups? Which tactics fit with our capacity? And where should we really focus? If you listened to the donor journey, presentation we talked about direct mail still has a strong appeal for many of our donors. And when we try to move entirely into electronic giving, we really shortchange ourselves and our donors, so there needs to be a balance. So how do we make a plan, I like to think of a plan as a cyclical process that never ends. So when we think about step one of our plan, assessing the current situation, Steff to drafting the plan with achievable goals and objectives, step three, identifying strategies and resources. Step four, monitoring obviously, we’re not going to keep something that doesn’t work, we may need to tweak it or abandon it. But we look at this as a four step process. And when we look at the process in step one, we need to look at two segments, our constituents and our donor retention rate. When we look at that, and we look at the donor retention rate, we need to look at segments. And when we look at the segments, we’re looking not just at today, but also what are we going to be investing in for our long term future? So looking at younger donors with smaller gifts always needs to be part of that. In drafting the plan, then we need to look at what are achievable goals and achievable objectives? What’s our what’s our potential growth rate? What’s our capacity to add staff or add volunteer hours? So being very honest about that, as we look then at those key strategies and resources, donor segmentation, and a supportive journey for each segment, robust stewardship, whether it’s print, electronic, telephone face to face when we get back to that, how do we do effective and robust stewardship, then making sure that our board can approve and we can fund budgets and staffing remembering that philanthropy is investment in growing revenue? Not is not an expense. Progress monitoring then looks at our established goals. What are our multi year trends if you can do a few retrospectively. So your timeline is more than a year or two, that’s great if you have a good data set within your sector, and some sectors do hospitals and health care tend to have good sector specific research, for example, comparing yourself with similar organizations can be very illustrative. So when we think about how we can increase donor retention, some of the real steps to acknowledge donor gifts first of all, gift acknowledgement, are they timely? Are they relevant? Are they infomercials about what outcomes our donors are creating? So when we think about gift acknowledgments, and we move to point two of the cycle, how are we showing outcomes? How are we starting that literally with our gift acknowledgement, and sustaining that through newsletters, social media channels, YouTube videos, all of the ways we have to make donors feel like they have met and touched the people they’re serving, showing donors, they truly make a difference. I know, we’re very concerned about privacy and confidentiality. But at the same time, we shouldn’t make a decision not to tell outcome stories. If a participant a client or consumer wants to be part of our storytelling, we need to let them do that. Making sure we build trust and this goes back to the surgeon and sharing data. We need to be transparent, testimonials, endorsements, our external partners, public agencies supporting us acknowledging our our effectiveness, are we clearly showing that our organization is just as honorable as our cause? Almost none of us work in a sector alone. So if a donor is evaluating who within their area of interest to support, we need to have a competitive advantage and stand out. We need to share our vision why we matter donors are aspirational people, they want the world to be better. So how do we communicate our vision and passion with stories that line up with their vision and passion? If we inspire them, they will join us on the journey? Keep asking, asking because when they give, they feel good, don’t go dark, don’t go silent. In the current climate, the idea of withdrawing from asking is the worst option. So keep connecting, keep asking. And as we close the cycle, make sure that we’re using every channel, we need to know which channels our donors want to receive information on which channels they want to give through because they may not be the same. We need to meet them on their own terms and give them a variety. But keep the cycle going acknowledgement outcomes, trust, vision, asking and multichannel.

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So what’s holding you back? When we think about what’s holding us back, sometimes it’s staffing. Sometimes it’s organizational culture. Sometimes it’s because the program staff and the board think we in the development program are the only people responsible for storytelling and stewardship. Sometimes it’s quite frankly, a lack of resources. But when we look at what’s holding us back, there are some ways to look through that when we think about whose job it is, and how we get others on board with us. I love the research from the Evelyn and Walter Haas Jr. Fund. In 2016. They published fundraising bright spots and it was a sequel to the work they had done called underdeveloped, underdeveloped being the report that talked about why development offices fail. And when they did their work on identifying and these are small to mid sized organizations that did very well in philanthropy. There were four primary variables, core to the identity distributed evenly authentic relationships with donors and characterized by a real discipline and intentionality. So when we think about fundraising being core to our identity, what does that really mean? Is philanthropy in a separate island, or is it something Every one thinks is an integral program, a program as important as every other program in our organization. Our donors as a constituency are as important as our consumers. And unless and until that cultural voice, that philosophical voice is really embedded in our DNA, we will never have the same level of success that we do when it is. So using the end, the reference to this report is in your bibliography. I think it’s really an important idea to introduce, knowing that it will take a while for people to get their brains around this as part of the culture change. The second point fundraising is distributed broadly across staff and board and volunteers, staff, including non development staff when we think about 2025 30 years ago, no one thought about marketing and the impact of brand in the nonprofit sector. We’ve begun to think about that we think about curb appeal, what does our building look like? We think about our phone messages. Are they easy to navigate hard to navigate? Do they provide a welcoming or a challenging experience, we now know that when people enter our buildings or when the phones are answered, we need to be open and friendly. That’s the branding and marketing corollary, I believe, to what’s emerging in fundraising. As everyone realizes they’re part of the fundraising team, our results will be much more successful. And of course, most people weren’t recruited with that as a standard or an expectation. So the learning curve will take a while for people. Fundraising in the bright spot organizations succeed because of authentic relationships with donors. Authentic being aspirational, genuine. We care about their ideas and opinions and they know that we do, and everyone from leadership to the most entry level or newest volunteer realizes that donors are an integral part of our mission success. They aren’t a nuisance that has to be managed. They are an integral part of our success. Fundraising is characterized by persistence and discipline and intentionality. And that goes back to one of my favorite comments, which is don’t start what you can’t sustain. If you know that you can only manage two segments. Don’t do an action plan for four. If you know you can only segment by two gift sizes, and two donor age groups, then you’ve got your plan. Because to start something in withdraw, makes the donor feel like they were dropped. I like to think about dating. How did it feel when you got dropped by someone you liked? So make sure that you are persistent and disciplined. And everyone is on board with this focus on intentionality. Don’t donors get excited to give and they get excited to give again and again and again, when we remember some of the basics. We tell them how their contributions make a difference in the lives of the people, or the quality of the environment, or whatever it is that we are supporting. We know that handwritten notes have the greatest impact some of Sargent and Chang’s research actually says a personal call from a sitting board member is often cited as one of the key considerations that donor gave in giving again, even if a board member can ask for a gift, I would certainly hope that they could all know how to say thank you. Make sure you script them so that they feel comfortable. Segmentation how do they want to give? What levels are appropriate? What frequency is important? And can they direct their gifts to the programs they want to support? Donors like to have an occasional surprise and inspiration. Don’t forget about the power of humor. And that old saying if you ask for money, you get advice. If you ask for advice, you get money. Ask for advice from your donors. What did they think about a particular program or project or event or experience? What would they like to see different? What would they like you to repeat? What would they like to never ever experience again? Remember that when you’re looking at donor retention and donor acquisition, donor acquisition is always more expensive than donor retention. Think about the lifetime value of a donor On your house list forever what we know, donors have given for a long time, even at a modest level are very valuable prospects for Planned Giving. So retaining those donors who have a abiding loyalty to us has a long term benefit. data stewardship and donor stewardship. Think about the sergeant and Shang. comment that what we know about a reason donors didn’t give is because we didn’t address them correctly. We don’t want to be the organization that doesn’t use the right salutation, the right title and the right spelling. I’ve already said this, but it’s one of the most important premises donors are constituents. Yes, clients and consumers and participants are constituents members or constituents. So are your donors and they are equally important to the clients you serve? Is philanthropy and seen as an organizational program as important as every other program in your portfolio? So Leah Eustace, the CEO of Blue canoe, philanthropy, did an interesting program and raised up 15, donor brain hacks, things to think about when you are trying to inspire and leverage the donor relationship. Some of these we’ve already talked about some of them, you know, but as you think about the 15, and you put your own donor engagement tactics, through the bright line of analysis, think about whether or not this is working for you. Use emotion, not logic, donors are emotional people 85% of American donors want Kumbaya, not metrics, first, loss of over gain, what has someone lost, that your gift will help replace? Ironically, and perhaps sadly, someone who was suddenly homeless tends to evoke more emotion in a donor than someone who is chronically homeless. So that may is probably part of the reason why some of the COVID appeals are particularly poignant, because the idea of someone becoming homeless and preventing that emotes differently with a donor, right for a 12 year old knocked me down, but simplified you stories really good stories that illustrate the facts, not charts and graphs. Focus on one individual if the end, if the individual is part of a massive group, the magnitude of the problem can seem too big for a donor to solve. So focus on one, use social proof. The fact that you have outcomes you’re creating that people acknowledge work, set your anchor, what’s your baseline, what’s your starting point and and set the donor sites from there? Speak from the voice of authority,

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you need to be the expert in what you do in your space and speak like that. limit the scope of the problem this goes back to the focus on one, how can you make it seem manageable, so that the donors gift has an impact? Don’t ask for $10 If the need is 10 million, ask for $1,000 If the need is 250,000. So make it feel like my gift will truly make a difference. Difference. Use visuals. Believe it or not a four page appeal letter tends to test higher than a one page one. donors who are asked you want one or four will always say one donors who are showing one in four will always look at four and say you know this gives me more information. That that’s because a really good four page appeal is mostly photographs and cut lines. It’s replaced the old standing brochure. So using visuals is is a really high impact tactic. Make sure you use think about whether or not the donors responding to scarcity is a scarcity of a problem and impact. Reciprocity can often work a match donors who want to aspire to be part of the group. A early donor or a new donor likes to be thanked for their donation. A donor of long standing wants to be acknowledged for being a donor of long standing. So think about that in your segmentation. Speak to donor identity To tes and the way they want to identify with you and your cause. So I promised a references page and it is in your materials. And as I want to thank you for the opportunity to share this time with you. And now we’re going to have time for your questions. I’m really grateful that you joined for this session today. And I look forward to engaging in our following q&a