Survival at Stake? Be More Donor-Centric

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Finally the wake-up call for fundraisers is here: a bad economy.

Fundraising has been in trouble for years, but ignored by many.

Fundraising is one of the world’s most wasteful industries. It spends $2 to raise $1 from a new donor. Then 2 times out of 3, that new donor is lost and never gives again. And, there’s been a donor retention crisis for years.

If this information surprises you, that’s a problem. The fundraiser’s job – even if you’re the executive director – is to keep up with sector research and writings.

Honestly, the donor retention crisis is an embarrassment and we should all be ashamed. Yes, indeed, you and me and everyone working in the nonprofit sector should be concerned about this crisis.

Just ask yourself: what are nonprofits doing that we cannot get second gifts from first-time donors and can’t keep donors? This is really bad news. And you know what else? Research says it costs 10 times more money to acquire new donors as it does to keep current ones. (Hint: Spend most of your time retaining and upgrading your current donors!)

What are your retention rates? How many of your donors increase their gifts each year? What percent of your first time donors give a second gift? What’s your average gift size and is it increasing each year?

So many questions to ask. So much important information for you to collect, analyze, and discuss. Discuss the trends and implications of your data with staff and with your board, too.

By the way, even if your donor retention rates are great, today’s economy should still be your wake-up call. Why? Because in a tough economy, donors may have to choose which organizations will still receive gifts, and which ones won’t.

How will your donors choose? They’ll choose donor-centered organizations. Donors are loyal when they feel like giving to you makes a big difference. And your organization has to tell donors how their gifts make a difference.

The wake-up call means: Make sure your organization is donor-centered. Make sure you nurture relationships between donors and your organization. Donor-centrism produces donor loyalty. And loyal donors will pick you.

I’ll talk more about donor-centrism in future columns. Right now I suggest you read critical research about donor-centered performance. See Building Donor Loyalty: The Fundraiser’s Guide to Increasing Lifetime Value by Adrian Sargeant and Elaine Jay. This book summarizes Sargeant’s research findings from 20,000 individual donors.

For more information about donor centrism, read Donor-Focused Strategies for Annual Giving and Keep Your Donors: The Guide to Better Communications and Stronger Relationships.

  • John G. Fike, CFRE

    The first thing boards, executives and fundraisers in nonprofit organizations need to do to gather the money they’re leaving on the table (yes, even in the midst of the recession there’s money out there to be had!) is to re-think and re-write the case for support for their organizations so that their donor prospects can see how they can achieve their objectives through the nonprofit organization’s work.

    The Ike generation is about gone. We’re having to re-program ourselves to the Baby Boomers, the Gen-Xers, Gen-Y and the Milleniums — the generational cohorts brought up on television and the movies. So if the case for support doesn’t meet THEIR needs (forget about the charity’s needs), they’re not going to listen. And if it doesn’t talk and move, they’re not going to pay any attention. We must re-think our use of media. Yesterday’s color brochure is today’s video, podcast, web presentation. So, yes, costs of production are up because the media are richer and more powerful. But we’ve got to pony up and invest in our fundraising infrastructure in order to make the oxytocin run and get the money that’s out there.

    The second thing we need to do is invent metrics that tell us just how much real sustainable “good” we’re doing in society and how we’re changing society for the better. These demographic cohorts want to see progress; they want to know that their gifts are making a difference. Doing good is just not enough any more. We must know that we’re changing things, and we must report that to our donors and to the prospects we hope to solicit. We can keep new donors if we are attentive to their needs.

    Yes, we must be donor-centered. But in doing that we have a ton of work and a good deal of investment ahead of us. New metrics with with to judge the outcomes of our service mission, and new infrastructure for fundraising and reporting to our donors what they are accomplishing through our work; these are the tasks on which we should focus to keep our donors giving to our causes.

    Board members, executives and fundraisers need to think more about their donors than they think about their own needs and those of the organization they represent. But they also need to invest in new tools of infrastructure and capacity-building. Which means, in turn, that resources will need to apportioned differently and we need to scrap the idea that “every penny should be given to program.”

    Thanks for the chance to respond to a very good article!

    Regards,

    John G. Fike, CFRE
    President
    Philanthropy Solutions, LLC
    Ypsilanti, MI
    http://www.philanthropysolutions.com
    http://allthingsfundraising.blogspot.com
    734-484-2166

  • Simone Joyaux

    Hi there, John. I grew up in East Lansing, MI. Going to visit my mom next week, actually.

    Thanks for your great comments about the responsibility and accountability of board members, executives, and fundraisers.

    I agree that there’s lots of investment to be made: investment of energy and focus and time – which of course translates into money. Investment in staying on top of available research. I’m surprised at the fundraisers who don’t read research and don’t share the insights and implications with their execs and boards.

    And how come fundraisers never adequately learned how to talk about results? And that results are thanks to you, the donor?

    I’m also real interested in different measures for fund development. In my book KEEP YOUR DONORS, I wrote lots about new measures for relationship building. I’ll be talking about that in a future column.

    I look forward to your future comments and insights. Thanks.