The likelihood of boosting retention in your organization will occur only when fundraisers, communications folks, donor service managers, program officers,  CEOs and board members — virtually everyone in the organization — understand why donors stay or leave and what steps the organization can take to assure maximum retention.

Getting to the point where you can definitively state ‘why’ donors stay or go and ‘what’ steps your organization can take to retain them is likely to require a change in mindset, metrics and methods.

Looking back over the years, I now understand what made me so uneasy with offering advice on how to improve retention and donor value. Why, for the same reasons, I suspect so many others resist tackling what they consider this very ‘fuzzy’ area called retention.

Historically, most of us have based our conclusions about what works and what doesn’t almost solely on the transactional behavior of the donors. By that I mean we focus on the recency of donors’ contributions, the frequency of their donations and the amounts of money they give.

In the jargon of our trade, this combination of transactional behaviors is referred to as ‘RFM’. It’s the most commonly used metric in direct response fundraising. Many fundraisers use this as a proxy or substitute measure of loyalty. The assumption being that a donor who gives frequently, in generous amounts and has made a recent donation is likely to also be highly loyal and will, therefore, have a high retention rate.

While there’s no question that some high retention donors can be identified using RFM, unfortunately this metric is not very helpful when it comes to understanding the cause of that loyalty or predicting how loyal the donor will be in the future.

The Problem With RFM

To understand why transactional behavior (RFM) won’t get you very far when it comes to improving donor loyalty and your organization’s retention rates, let’s begin with the definition of ‘loyalty’.

Pay particular attention to the phrase “a feeling or attitude of devoted attachment” in the definition above because it’s the essential ingredient in understanding ‘loyalty’ and retention.

In short, donor attitude is the ‘cause” of good donor behavior (giving and other transactions) that leads to the ‘effect’ — loyalty and retention.

The problem with focusing only on transactional behavior (RFM) is that it represents a snapshot of the past. It provides no insight as to cause and effect in terms of donor behavior. Consequently, if you want to identify those donors who are likely to stay or those who are likely to abandon ship, RFM has little or no predictive value.

In order to understand what causes loyalty and boost retention it is essential to understand cause and effect. Thus using transactional behavior to define loyalty is like trying to grow a tree by watering the leaves. The focus is on the wrong end of the plant.

Watering the wrong end of the plant is what happens in an organization-centric environment. We assign prime importance to the attributes of the nonprofit organization ( ‘unique’, ‘best of class’, etc.). We want to believe that success is attributable to the quality and visibility of the organization … the creativity and power of the fundraising appeals and case statements … the ‘benefits’ offered, such as newsletters, magazines, giving clubs, events, etc.

For too long this organization-centric view — along with the premium we place on how that offer is executed — has predominated.

As a consequence, primary attention and the bulk of marketing resources are focused predominantly on techniques and tactics.

After all, we reason, if results weaken we can solve the problem with more mailings, bigger or smaller envelopes, better creative and messaging.

To put it another way, most fundraisers are good at measuring donor behavior. Recency of gifts, frequency of gifts, monetary value, up-grades/downgrades, almost anything related to transactions the donor makes with the organization.

However, few fundraisers are familiar with the importance of donor attitudes.

Yet it is the donor’s attitude that influences the donor’s behavior — the donor’s willingness to give again, to give more, to stay or leave the organization.

Most importantly, the creation of good or poor donor attitude is the one factor the nonprofit itself can control and influence.

Why Attitudes Are So Important?

• Donor attitudes dictate ‘why’ donors behave as they do.
  

• You cannot understand the ‘why’ by looking at RFM segments or other behavioral or demographic markets.

• The only way to strengthen the donor relationship is by focusing on the ‘why’.

Direct response fundraisers are quite good at measuring donor behavior, but we fail to recognize or appreciate that the donor behavior we seek to influence with these techniques and tactics is, in reality, driven by the donors’ attitudes — the feelings they hold toward the organization — and what role they expect the organization to play in their lives.

For nearly 30 years the commercial world has understood the importance of ‘attitude’ and has spent literally billions of dollars in understanding what and how to drive customer attitudes toward greater and greater customer loyalty and commitment.

The result? The commercial world enjoys customer retention rates approaching 90% while the national average of nonprofit retention rates hovers around 45%.

So, when you’re drawing up your plans for 2014 and want to answer the boss’s question on how to spend more money effectively to boost retention, make sure your budget includes a provision for finding out why donors stay or go and what actions your organization can take to keep them and build their value.

Roger

P.S. For an explanation of how this process works, see the donor commitment summary over on the DonorVoice website.

And if you want to dig into it deeper, ask the folks at DonorVoice for a free 30-minute briefing.