New Donors … Garbage In, Garbage Out
The Agitator’s theme this week has been donor retention. Thanks to those of you who have responded so far to our simple survey question: What percentage of your nonprofit’s 1st time donors make a second gift?
[Only today and the weekend left to take the survey here. Hey non-responders, is the answer too embarrassing to confess?]
We’ve received some fascinating responses and comments to this series of posts and the survey itself. Most deal with how to treat donors once acquired. More on those comments next week.
But another chunk of fascinating comments deals with the quality of donors being acquired.
In essence, these commentators are saying: garbage in, garbage out.
In other words, more and more nonprofits, feverishly attempting to grow their membership/donor bases, are reaching farther and farther out into the prospecting universe. And/or they are using premium-driven offers (“Free polar bear plush toy”). In either case, lower quality (i.e., less committed) donors are being enticed to join, but they don’t really have their heart in it, and so they are far less likely to renew or make a second gift.
So these commentators are saying … Hey Agitator, the problem isn’t with our donor cultivation (really, we’re great at that), it’s with the harsh realities of donor acquisition. Some then go on to criticize low growth nonprofits. As in … Of course his nonprofit has a higher retention rate; he only acquired his Mom, his next door neighbor and his girlfriend last year, and two of them renewed … 67% percent … big deal.
This begins to sound a bit like a perverse dare. Go out and waste your money (like we do) chasing lousy quality donors, and then see if you can achieve a better than 40% renewal rate for 1st time givers, wise guy.
Of course, I disagree with that line of thinking.
One might ask exactly how much and how often does the ‘marketplace’ need to tell your organization it simply lacks appeal and cannot viably prospect before you get the message?!
It used to be that an organization using direct response would set a realistic cost-per-acquisition, usually involving a modest subsidy, and, based on the organization’s historical fundraising data, a relatively brief timeframe within which that newly acquired cohort of donors needed to yield a profit. E.g., we’re willing to ‘lose’ $10 per new donor on acquisition so long as we can make that donor profitable within one year. Then that payback window became eighteen months … and that became twenty-four months … and then … you can see where that’s headed!
Obviously, there’s a point at which the quality of new donors (if they’re coming in at all) is so poor that NO cultivation program will make them profitable.
Calibrating all this is critical. And most important, in terms of getting started, is knowing the established lifetime value of your donors by acquisition source. Then going back to the best value sources first (and repeatedly) for acquisition. Then moving out to less value sources until the payback simply isn’t there in an acceptable window. The first indicator of potential lifetime value will be your rate of success (or not) of securing second gifts.
Which brings us back to our starting point … how good is your 2nd gift program? And contributing to that, your welcome/acknowledgment program?
Of course the analytics will differ for every organization, but I’ll wager that if you can’t renew 40% of your 1st time givers, then either you are over-reaching with your prospecting, or your cultivation program sucks … maybe both.
Looking at it from that perspective, slow sustainable growth, emphasizing acquisition of quality donors, and retaining a high percentage of those, is not a bad strategy at all.
Perhaps another way of putting it … If you can’t get a second gift out of 40% of your first time givers, you’re ‘growing’ too fast.
Agree?
Tom
5 responses to “New Donors … Garbage In, Garbage Out”
Behavioral Science Q & A
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I’m not aware of any in-market tests specifically comparing recurring vs. gift frequency language. I suspect the answer might not be the same with all gift frequencies, nor with all people. It sounds like a great opportunity for you to test and find out what works for your audience. Based on the literature, here’s a couple […]
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Based on what we know from existing data, those renewal notices can actually be pretty effective in getting people to donate. They tap into our psychology – creating a sense of urgency, reminding us of past support, and using personalization to make the message hit home. They’re playing on our natural tendencies to feel obligated […]
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Interesting question. I had a quick look at the testing done on this topic. On the positive side, in all cases, over half of donors decide to cover the fee. In some cases, it goes as high as 65%. Not a negligible percentage at all. Here’s another test from iRaiser showing consistent results (see point […]
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There’s just one thing to consider when designing a supporter journey: the supporter. More specifically, you need to take into account: Who the supporter is i.e. their identity, which is the reason they support this cause, and their personality, which describes the way they “see” and process the world. These will determine the kind of […]
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I’m not an expert in this but a quick search surfaced this article on the effect of tax reforms on 2019’s charitable giving. The researchers didn’t find a reduction. Actually, they observed an “increase in charitable contributions in 2019, even with the lower tax rates and the dramatically smaller number of taxpayers who itemize their […]
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No I don’t agree, completely.
I work with a lot of different types of non-profits. None of them are still using the heavily gift-laden packages anymore, especially with low entry level ask strings.
While I don’t advocate an organization waiting three years for the payback on the cost of acquiring a new member, a 40% retention rate could be just fine, but it depends on the size of the initial gift.
There are plenty of organizations that have a 25-35% retention rate on first year donors, but because of the size of that first gift, the payback is in 12 months. And we are not talking about small organizations here, but large regional non-profits.
So yes, if your first year average gift is $15, 40% would be awful. But if it is $50, then not so much.
Helen, that works looking strictly at the numbers.
It doesn’t work as well looking at relationships – and at some point you’re going to hit up against that, aren’t you?
Perhaps not a problem for a national or int’l organization. But anything smaller does have a finite audience from which to draw, don’t they? And if 60% of your donors give once and move on (for some reason), that seems to me to be a troubling statistic. I know I’d surely want to know the reason!
But what if the donors are changing?
What if the Ken Burnett “relationship fundraising” and the fundraising pyramid era are moving into history?
I say the days of getting a donor for life are done, there will be no second gift.
The new generation of donors, highly exposed to masses of information and marketing-savvy will not give $100 a year to the same group for the next decade. They will give $10 to 10 different groups each year – supporting 100 groups over a decade.
They will give to the issue of the hour that touches them and then move on. And they will give via mobile and portals that deny you their contact details, and they will cut you off if you hassle them (not that you can as they only use Facebook messaging and priority inboxes).
So maybe it’s time to stop fussing over the second gift and how you raise $1 million from a 1,000 supporters over 10 years, and start freaking over how you get $1 million from 100,000 supporters in a day.
In my view, there has never been a better time to find and develop lasting–indeed, lifetime partnerships–with new supporters. However, I do think that direct response, paid advertising is, generally, not the best route to go. In fact, I think it is a poor route to follow in most instances.
The fragmentation of media means that most media concerns, particularly local TV, radio, and newspapers, lack the revenue streams to fund much original, let alone, provocative content. Most non-profits have compelling stories to tell. The media’s need for story and many non-profits’ wealth of them make for a convenient marriage. Stories come in many forms: protests, books, documentary films, articles, commentary, essays, interviews, letters to editors–the list is limited only by imagination. Consider any “story” that appears in any media as the “appeal”. By the way, self-serving, wide distribution media releases are not “stories” in this context. Indeed, they are usually a waste of time.
Good stories move people to action. These motivated people are the “high quality” supporters with whom a lasting, even lifetime, partnership can be made. These supporters are more than merely donors; they are also the motivated political constituency that can give a non-profit the power it needs to change public policy.
The non-profit now needs a means to capture the people moved to action by the earned media—the “response device”. And here we have the Internet, in particular, an organization’s website or sites. The goal is to get stories carried in all media forms, and make it easy for motivated people to Google anything or anyone in the story and find the non-profit’s website, a website dedicated to the earned media.
The traditional, ubiquitous, info-jungle-thick website’s won’t work here. A website, in my view, should be first and foremost a response device–a place where a potential supporter can go immediately upon seeing or reading an organization’s story and support the movement by making one easy click of the mouse. Arriving at a website that makes no mention of the story that motivated the potential supporter is almost useless. To be effective response devices, websites must be able to be changed within minutes of a story being picked up by media. Thankfully, free CMS software like WordPress, Drupal, and Joomla! makes that task very easy. Unfortunately, most organizations seem almost incapable changing their websites without the approval and input of all board members, most managers, and many staff over months and sometimes years.
Let me put the above into an analogy. The earned media from the “story” (protest, interview, letter to the editor, magazine article, book tour) is the “Dear Friend” letter. The website is the “response coupon”. And, then, of course, there is the excellent, personal welcome for the new supporter as the “thank you” letter, extended within a day of the supporter joining the organization. That “thank you”, if you want to keep the new supporter, should be a personal phone call or a real not fake personal letter. Don’t send an automated email. All the elements of traditional fundraising are there, but adapted for the omni-media environment in which we now operate.
Here’s the good news about the model suggested above. It can be tested very inexpensively, unlike most direct response advertising. Do a media event in a mall (an environmental protection protest, a mob dance for the local hospital, write a proactive op-ed piece, whatever you can afford) and make sure your dedicated WordPress website is up and running, and measure the results.
More good news: with the model above your prospecting becomes, not an expensive expenditure on print, postage or ads, but a truly useful program activity.
Here’s the bad news: most non-profits’ installed-base of fundraisers—staff and consultants—lack the necessary expertise to realize this model. Creating stories worthy of earned media usually entails people who understand narrative and media relations, as opposed to direct marketing and data crunching.
I’d only disagree with you, Stephen, when you say to forego an automated e-mail thank you after an online gift is made. Online culture is one that demands instant gratification, and without it a donor may think they did something wrong. Especially when donation forms are tricky or confusing to use.
Perhaps a simple tweak or clarification should mentioned that the key acknowledgement should be of a personal nature. Rather than thanking the donor online and walking away, the automated email should serve as a “heads up” to the supporter, notifying them that a personal contact will be made soon.
Of course then, one must ensure personal contact is indeed made, or you might as well keep the aumated acknowledgement, for fear of aggravating (and losing) the donor.