The cost of acquiring donors is 5 times the cost of retaining existing donors.
Retain just 5% of your donors and donations increase by 25%.
I’ll repeat that: the cost of acquiring donors is 5 times the cost of retaining existing donors. Retain 5% of donors and you’ll increase donations by 25%.
Taking a longer term perspective, Dr Adrian Sargeant says “a 10% increase in donor retention can increase the lifetime value of your donor database by 200%.”
With projections like these, it’s surprising that focused investment in the ’Renew Me’’ stage of the donor relationship journey, is often limited in comparison to other strategies designed to create and retain long-lasting donor relationships.
When understanding donors is the first step to renewing them, why are we not deepening donor understanding not a strategic priority to drive better results?
A fundraisers retention conundrum we commonly experience across our LemonTree member organisations is: “do you invest in better measurement on the impact of your fundraising activities and identify those donors at risk” OR “do you invest your limited resources on the likely low hanging fruit and measure later?” A chicken or egg dilemma.
Our March 2019 Donor Centricity Collective (DCC) survey on the biggest challenges fundraisers face showed a resounding focus on retention, retention, retention! So why is deepening donor understanding through scoring and segmentation, not given the time and effort it deserves?
Let’s drill into our conundrum.
I really like a fundraising strategist from the US, Mark Rovner, when he simply answers effective retention as “Authentic engagement: No bullshit like tote bags or fake emergencies. Deeply understanding why the donor supports you and delivering on her (or his) expectations. Superb content. Great donor service.”
So why is deepening understanding and segmenting donors accordingly often seen as a will-do-soon rather a must-do-now?
We believe this can be answered by examining the 4 main fundraising levers:
Research tells us the Channel lever receives the biggest focus, primarily because the channel list is long: eDM, mail, call centre, face to face, peer to peer, social, SEO, SEM, etc..
Lots of time goes into deciding which channels to utilise and how much to spend.
The timing lever also takes up a lot of decision focus. What time of year; what time of day; how much time to spend?. Then coordinating and executing timings with mail houses, call centres, and tech platforms takes more time!
After the first two levers, the message lever is often not leveraged fully. Messages become all-purpose to all-donors. One size fits all. Why? Whilst the biggest perceived barrier to varying messages is the perceived cost, we believe that an even bigger barrier is the depth of donor-understanding and therefore the capacity to segment donors and deliver a message that’s for more targeted – and relevant – to them. Which leads to the fourth lever…
Typically, when it comes to segmenting an audience, static segmentation are all that time, budget and/or donor understanding allows . As a result, the same message goes out to all, aside from perhaps a small number of higher value groups such as major givers, frequent givers, and bequests.
And herein lies the opportunity: because how can donors be renewed and retained without changing priorities or operating rules to start with audience understanding and working backward from there? (Refer great book by Eliyahu Goldratt who wrote “Theory Of Constraints”).
Certainly in the commercial world linking the engagement/attrition score closely to the customer journey is a real differentiator to most engagement/attrition outcomes. Why should this not be the same for NFPs?
How to renew donors
Firstly flip your thinking and turn your planning process upside down to start with understanding your audience: your donors. This is the “Connecting” the first part of our sustainable fundraising CCC model.
Machine learning is at our fingertips now. Start scoring your donors beyond Recency, Frequency, Value (RFV ). Use machine learning to deepen your understanding of what motivates your donors. Then apply these insights to predict who is at risk and who values your cause the most.
Renewing your donors becomes much more viable if you can widen your understanding of them through collaboration across each cause your donors have a relationship with. “Collaboration” – the second stage of our CCC model-increases your breadth of understanding, enabling you to make more informed, targeted decisions about how to build, retain and renew your relationship with your donors.
A final action – and third “C” in the LemonTree model – is to truly “Care” about your donors by acting on your enhanced understanding of them. For example, saying “Thank You” is often cited as the most powerful communication you can deliver to a donor – how can your “Thank You” message be said in a way that will mean something specific to them so you truly renew your relationship?
If you can successfully renew your donors and achieve a 10% increase in retention, you’ll be well on your way to increasing the lifetime value of your donor database by 200%…and that could make a world of difference.