cultivation

Welcome step three: Ask again

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Now you have thanked someone for their gift, you’ve used both asking and revealed preferences to learn about your donor, and you have given your donor opportunities to learn about you.  Once all of this is established, you should ask again.

I’ve said earlier that the welcome series time doesn’t matter too much to me, as long as you are accomplishing all of these objectives.  I’m going to give lie to that here to say that you should be trying to get to this point fairly soon (within 15-30 days online; within 30-60 days offline).  Contrary to your intuition and the indignant cries of your board members that they would never give again so soon after making a first gift, this window is actually your best opportunity for getting that second gift.

And it is critical to get that second gift, for a couple of reasons:

  • Your likelihood of retaining a donor goes up significantly after a second gift.  This is why I advocate not looking at a monolithic retention rate.  Instead, it’s best to break down into retention among new, first-year, lapsed reinstated, and multiyear donors; the retention rates among these are really that different.  Indeed, that’s why on Monday I said that a one-time giver is not really a donor.  Retention rates after first gift are really that low.

  • The second gift sets the tone for the rest of their relationship with you.  Looking at one of the studies we’ve discussed on ask strings, you can see that first-time donors are fluid in terms of their giving. They are in a place where it is literally better to ask them for anything but what they gave previously.  Multidonors, on the other hand, need to be asked for what they were asked for previously.  Ask them for too little and they will downgrade; too much and they will not give.

1280px-Blacksmith_workingImage source here.
It’s a metaphor for a reason: cool metal hardens — only when it is hot is it pliable.

If you have done your welcome series/letter/email/whatever well, this ask should be natural.  You’ve learned about them, you’ve customized your ask to specifically what they want to hear about and who they are, and you know that what you are asking them for is something they will support.

Because of this, and because of the fluidity of first-time donors, I strongly advocate that this second ask be an upgrade in amount or degree.

After all, your ask now should be improved from your semi-blind graspings in acquisition, where your goal was to cast your net far and wide.

And you can drastically increase the value of your donor (to you and hopefully to them) by upgrading them to a monthly giver.

There are some who advocate for acquiring with a monthly giving ask (and, in fact, acquiring with only a monthly giving ask).  As I’ve mentioned, I don’t have the guts to try this yet, other than in means like DRTV where the medium is too expensive to try anything else.  (If you’ve done this, please write in the comments or to nick@directtodonor.com.  I would love to share your experiences with the readers of this blog and/or to read them myself).

But post-acquisition, you may have the perfect storm of factors to lead someone to become a monthly giver:

  • They are still in the glow of their first gift
  • You’ve created a customized experience for them
  • They have not yet become set in their ways of how they give to you.  We’ll talk more about mental accounting at some point, but suffice it to say that people have different boxes of finances in their heads.  Once you are in a box, it is difficult to break out of it unless the person’s finances or perceptions of you change.

We’ll dedicate a week to monthly giving, but you’ve already seen some of the tactics you can bring to bear in this upgrade ask:

It’s definitely worth testing against a more traditional upgrade strategy that would ask for a larger one-time gift.  So test away, but make sure both versions incorporate what you know about the donor.

Welcome step three: Ask again

Welcome step two: Learn more about your donors and engage them

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You’ve now created a gap between now and your normal communication stream for your new donor.  What do you do next?  As any Londoner can tell you, you now need to

bakerloo_line_-_waterloo_-_mind_the_gap

We know in case after case that personalization increases the effectiveness of direct marketing.  And not just making sure the person’s name is spelled correctly: it’s about making sure you know why they are giving and are thanking and soliciting them under those auspices.

With a new donor, you will have a single data point with which to start.  They responded to theme A through medium B.  You can leg your way into donor knowledge as we recommend by changing one thing at a time, but that won’t help you get that second gift.  And even if you are doing well, 60-70% of the time, you won’t get that gift.

Previously, I’d talked about the two ways of getting information about your supporters: watching their behavior and asking them.  It turns out those are the two things you should be doing in your welcome communications as well.

The critical step, and the one most often missed, is setting up opportunities for behavior watching and for feedback.  Or sometimes we go to the opposite extreme and send an email for every little bit of our mission we can think of, drowning the donor or prospect with a deluge of did-you-knows.

The way to maintain that balance with your supporters is to give them three major opportunities:

  • To use you as a resource.  People are more likely to support organizations that solve their problem.  This can range from “I want to eat more sustainably but I’m drowning in a sea of cage-free, organic, cruelty-free, etc. labels and don’t know how” to “I donated to suicide prevention because a friend committed suicide, but now I’m having these thoughts…”.  We nonprofits are (or should be) experts in our area and we can help in these areas.  And, as a much secondary effect, it allows us to see our supporter as a person. 
  • To use you as means to accomplish their goal.  If they donated to a particular issue, they may also want to write their legislator about it — that may give them the same (or similar) warm feeling that donating did.  Or they may want to volunteer in a very specific way that helps them achieve the same end their donation did.

 

  • To learn what they think.  You want to know how you can serve them better.  This can be through a survey or an open-ended question.  Or this can be an opportunity to bring in a different medium by having a human call them, thank them, and ask for why they gave and why to you.

The larger point here is that these should be framed in how they help the donor or cause, not how they help you.  It’s amazing how much of a difference there is between “We are also on social media, so like us on Facebook and follow us on Twitter!” and “Our Facebook community helps parents of children with autism support each other, so please join in if you’d like to hear from others who have been where you are.”

It goes without saying that you should track these activities.  If someone sends back the petition in their mail package, advocacy is something that appeals to them.  Thus, the way to get them to be a higher value donor may not be to get a second gift through the mail (although you should try); it may be to get them to be a frequent online advocate, then ask them after an online petition to become a monthly giver to support the specific advocacy activities they enjoy.

It’s even easier online.  If someone clicks on your link for more information for parents of kids with autism, you know they almost certain fall into this category themselves.  This is a programmatic opportunity as well as a fundraising one, but all boats will lift if you have this information and use it to help the person in question.  Links that you send should be trackable and appended to each supporter’s record so you can customize your messaging.  

The alternative is to become the cable company that asks you for your phone number with their automated system, then has a person ask you for it, even though caller ID is a thing that has existed for a while in this universe.  If someone tells you something, they will expect that you know it.  And clicks are, believe it or not, communication.

There is a lot of ink and virtual ink used on how many emails or mail pieces you should have in a welcome series, how long it should last, etc.  You’ll notice that I don’t cover any of that here, because I don’t find it to be all that important.  If you can accomplish the thank you, learning, and engagement all in one communication, go for it.  On the flip side, as long as a welcome series is about supporters’ interests, it’s difficult to say that it is going on too long.

Welcome step two: Learn more about your donors and engage them

And you shall know your constituents by their deeds

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There are two ways to know your constituents better: listening to what they do and asking them what they think. Today, I’ll talk about the former; tomorrow, the latter.

Yesterday’s piece talked about how you can roughly define an individual’s responsiveness by medium, message, and action.  The trick is that we often segment by only one, possibly two, of these.  We have medium covered: most large-scale programs of my acquaintance distinguish among people who are mail, telemarketing, online, multichannel, etc. responders.  And many small-scale programs haven’t begun to integrate medium, so in a way this is its own segmentation.

Sometimes, we will use action as a determiner.  We’ll take our online advocates segment and drop it into one of our better-performing donor mail pieces (frequently not customizing the message to advocacy, more’s the pity).

We rarely segment by message, even though picking something that people care about is the most basic precondition of the three.  After all, you may not like telefundraising, but you’d at least listen if it was immediately and urgent about something that you care about.  And it’s much easier to get someone to do something they haven’t done before for a cause they believe in than to get them to do something they’ve done many times if they don’t believe in the message.

The good news is that you have your constituents’ voting records, of a sort.  Consider each donation to a communication a vote for that communication and each non-donation (or, if you can get it from email, non-open or non-clickthrough) as a vote against that communication.

[tangent] This is also a helpful technique for when your executive director comes into your office and says “I’ve had five calls today from people who aren’t happy about [insert name of communication here].”  If you reframe it as five people voted against it by calling and five thousand people voted for it by donating, the noisy few are not nearly as concerning.[/tangent]

A proper modeler would use the data from these votes to run a Bayesian model to update continually the priors on whether or not someone would respond to a piece.  As you can probably tell, I’m not a proper modeler.  I prefer my models fast, free, and explainable.  So here’s how I’d use this voting data:

  • Take all of your communications over a 3-5 year period and code them by message.  So for our hypothetical wetlands organization from yesterday, this might be education, research, and conservation.  Hopefully, you don’t have too many communications that mix your messages (people donate to causes, not lists), but if you do, either take it by the primary focus or code it to both messages.
  • Determine the mix of your communications.  Let’s say that over five years this wetlands organization did 25 conservation appeals, 15 education appeals, and 10 research appeals.  This makes the mix 50% conservation, 30% education, and 20% research.
  • Take your donor file and pull out only those people who donated an average of at least once per year over that 3-5 year period.  This will ensure you are looking only at those people who have even close to sufficient data to draw conclusions.
  • Take the coding of communications you have and apply it to the pieces to which the person donated.  Generate a response rate for each type of message for each person on your file.
  • Now, study that list.

In studying that list, you are probably going to find some interesting results:

  • There are going to be some people (a minority of your file but likely a healthy segment) that only gave to one type of message.  And you’ll see the pattern immediately.  Someone who gave eight times over five years to education appeals and never to conservation or research appeals is clearly an education donor.  You will look at all of the other communications you sent this person and all of the people like her in the X-issue-only segments and you will weep a little.  But weep not.  You can now save your costs and these people’s irritation in the future by sending them only the communications about their issue area (with the occasional test to see if their preferences have changed).  It’s only a mistake unless you don’t learn from it; if you do learn from it, it’s called testing.
  • You can also probably lump people who gave rarely to other messages in with the X-issue only people.  So if someone gave to nine of the ten research appeals and to only one each of education and conservation, they clearly have a strong research preference.  This is why it’s helpful to look at these data by response rates — you can see where people have ebbs and flows in their support.
  • You will also see people who like two messages, but not a third (or fourth or however many you have; I will warn you to minimize the number of buckets, as you will not have a large enough sample size without).  So if someone gave five times, three to education appeals and two to research appeals, education and research both appeal to this person with a 20% response rate.  However, conservation doesn’t apparently appeal to them, so you can reduce communications in this realm.
  • You’ll also see a contingent of folks who donate to communications in roughly the same proportion that you send them out.  These people can probably be classified as organizational or institutional donors.  It will take far more digging than mere file analysis to figure out what makes this donor tick.

This leads into an important point: these will not get you to why.  Even things like how often a person gives for how long or Target Analytics Group’s Loyalty Insights, which can show if the person is giving uniquely to you or to others, are transactional data.  While useful proxies, they can’t tell you the depth of feeling that someone has for an organization or let you know what ties bind them to you.  To do that, you must ask.  That’s what I’ll cover tomorrow.  But hopefully this gets a little closer to information that will help you customize your donor’s experiences.

 

And you shall know your constituents by their deeds

Understanding and using Facebook’s algorithm

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Facebook is the nexus of a lot of debate as to how best to incorporate social media into other marketing efforts.  My argument will be there is a twofold Facebook strategy: 1) using organic content to engage your superfans and 2) using addressable media to reach everyone else.

the-social-network-movie-poster-david-fincher-381x600

500 million users.  How quaint.

Like Google, the base of the Facebook algorithm (EdgeRank) is fairly easy:

  • Affinity: How close the person creating the content is to the person receiving it.
  • Weight: How much the post has been interacted with it, with deeper interactions counting more
  • Time decay: How long it has been since it has been posted.

These interactions are multiplied together and summed, roughly.

Like Google, however, it has been altered over time significantly.  There are now significant machine learning components baked in that help with spam detection and bias toward quality content.  Additionally, now users can prioritize their News Feeds themselves.  Finally, because of the sheer amount of content available, the organic reach of an average post is single digit percentages or below, meaning that if you have 100,000 likes, maybe 2,000 people will see your average post.

The implications of this base algorithms are stark:

 

  • Organic reach on Facebook is for the people who really love you.  Many people think of Facebook as a new constituent acquisition system.  However, people who come in dry will almost never see your posts.
  • Consequently, only things that connect with your core will have any broader distribution.  Think of who is in the top two percent of your constituents: employees, top volunteers, board members, and that may be about it.  If those people don’t give the post weight, no one outside of this group will see it.
  • What you have done for them lately has outsized weight.  Research into Facebook interactions shows that Facebook gives outsized weight to what a person as interacted with in their last 50 interactions.
  • Facebook is not for logorrhea like Twitter.  Think of your posts as a currency you spend each time.  If your post gets above average interactions, you will move your average up and interact with more people; if not, your reach will lose.  Posting too many times (which varies from organization to organization) will diminish your audience as average reach will decline).  Additionally, all of the things you have to post for organizational reasons (e.g., sponsor thank yous) are spending your audience and you have to assess how much you are willing to spend to fulfill those objectives.
  • This all adds up to the uber-rule: Facebook is for things your core supporters will interact with quickly.  If they don’t, it won’t reach your more distant supporters and it will lessen the likelihood that your next post will reach them as well.
  • It also relates to the second uber-rule: because Facebook can change its algorithm as it wishes, you should not build your house on rented land.  The best thing you can do with your interactions is to direct them to your site, to engage your content and sign up for your list.

This all sounds a bit dire, so I should also highlight how to reach the other 98%(ish) of your Facebook audience as well as some of your non-Facebook audience on Facebook: addressable media.

Facebook allows you to upload a list of your supporters and target advertising to them specifically whether or not they are current Facebook likers of you.  You can learn more about this on my CPC ads post here.  This also goes into lookalike audiences, a way of getting people who aren’t who you talk to currently, but look a lot like them, a nifty acquisition trick.  Since organic reach won’t get you to these loosely and non-affiliated people, this is the only way to achieve that reach.  And, since it is cost-per-click, you can control your investment and your results.

But like discussed above, these campaigns should be to build your relationship to people outside of Facebook.  For the same reason companies advertising on CBS don’t work to build a greater relationship to CBS, but rather to the advertising companies, your advertising on Facebook shouldn’t be aimed at getting Mark Zuckerberg et al more friends — they have over a billion of them already.

Understanding and using Facebook’s algorithm

How to structure your matching gift campaign

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Matching gift campaigns work. But are they necessary?

Whether it’s a grantor’s challenge fund, a campaign match, a fund set up by a generous donor or donors, matching gifts are a frequently used and frequently successful tactic.  Most of the time, it’s set up as a “double your impact” campaign.

Three researchers — Huck, Rasul, and Shepard — looked at whether a lead donor increased the success of a campaign and how the structure of the match impacted that success.

They did this for the Bavarian State Opera House.  (BTW, if you are a researcher and want to run a test with donors on your dime, email me at nick@directtodonor.com; I’m usually game.)

300px-mc3bcnchen_nationaltheater_interior

The Bavarian State Opera House.
Fundraising motto: hey, these inlays don’t gild themselves.

Here were the six test treatments:

  1. Control: No lead donor, no match commitment
  2. Lead donor: A generous donor has already funded part of the program for 60,000 Euros (remember, Bavarian State Opera House).  We need your help with the other part.
  3. 50% match: A generous donor will match your Euro with .5 Euro.
  4. 100% match: Euro for Euro match
  5. Non-linear matching: A generous donor will match any gift made over and above 50 Euros.  (Which is to say if you donate 120 Euros, the donor gives 70.  If you donate 70, the donor gives 20.  If you donate 40, the donor gives nothing)
  6. Fixed gift matching: A generous donor will match any positive gift made with 20 Euros of his* own.

Got your guesses of what will do what?  Good — here we go with the results**:

Response rate Average gift Revenue per piece
Control 3.7% 74.3 2.79
Lead donor 3.5% 132 4.62
50% match 4.2% 101 4.19
100% match 4.2% 92.3 3.84
Non-linear match 4.3% 97.9 4.18
Fixed gift match 4.7% 69.2 3.27

Yeah, not what I thought either.  I figured, from all of the virtual ink I spilled in social proof and authority last week, that the presence of a lead donor would help. Presumably, there was another mechanism in place — that of anchoring.  I’ll dedicate a full post or five to anchoring effects at some point, but now, suffice it to say that by throwing out the number of 60,000 Euros you can trigger the idea that a person’s gift should be closer to that number.  For some, that may turn them off (although the decline in response rate wasn’t statistically significant).

What surprised me was that the matches didn’t help revenue per piece (unless of course the match is generating marginal revenue).  The matches increase response rates, but the average gift was significantly lower in all of the matches.  The authors’ hypothesis is that the match has a bit of a crowding out effect — that is, the donor feels like their 50 Euros is actually 100 Euros, so they need not make the donation of 100 Euros to have the impact they wanted to have.  This is certainly plausible and consistent with previous research.

What to make of this? Like, I’m guessing, many of you, I’d only tested matching gift language versus control language. However, there is some evidence here that simply stating that a lead gift has been made can increase the anchoring effect and support the idea that a program is worth funding without potential negative byproducts of crowding out donations.

That’s for the general case.  You might also take a look at a fixed gift match depending on your goal.  Generally, I prefer quality of donors to quantity.  However, if you were running a campaign like lapsed reactivation, you might legitimately want to maximize your response rate at the expense of short-term net revenue.

Based on this, I’m going to be looking at testing this against our typical matching gift campaign.  If you do likewise, please let me know at nick@directtodonor.com or in the comments below.  It would be great to see additional evidence on this.

*  The gendering is from the original — not my own.

** The rounding is in the original paper and throws off the revenue per piece variable a bit, but I chose to stick with what they had in the original paper.

How to structure your matching gift campaign

Onboarding for donors and supporters

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According to the Online Fundraising Scorecard, 37% of non-profits did not send an email within 30 days of a person signing up for emails. Only 44% asked for a donation by email within 90 days.

Let me put this in an approximate pie chart:

online supporter pie chart

We’ve seen this week that getting the second gift (or lack thereof) is where there is the greatest retention leak – people who donate once and don’t get enough out of the experience to donate again. Online donors, in particular, are the most fickle and least likely to retain.

This could be because of the medium. But it also could be that over half of all non-profits do engage people right when they express the most interest in the organization – immediately and unequivocally. To demonstrate this, try to remember what email newsletter you signed up for a month ago today.

Chances are, you can’t. Thirty days is a long time to remember you signed up for something, especially if no one reminds you that you did. Replace “the guy” with “the donor” in this quote and you have a pretty good idea of how people think about your organization, at least initially:

Never assume that the guy understands that you and he have a relationship. The guy will not realize this on his own. You have to plant the idea in his brain by constantly making subtle references to it in your everyday conversation, such as:

— “Roger, would you mind passing me a Sweet ‘n’ Low, in as much as we have a relationship?”
— “Wake up, Roger! There’s a prowler in the den and we have a relationship! You and I do, I mean.”
— “Good News, Roger! The gynecologist says we’re going to have our fourth child, which will serve as yet another indication that we have a relationship!”
— “Roger, inasmuch as this plane is crashing and we probably have only about a minute to live, I want you to know that we’ve had a wonderful 53 years of marriage together, which clearly constitutes a relationship.”

Dave Barry, Dave Barry Complete Guide to Guys

You want to strike while the iron is hot – this person cares about your cause now. So you want to set up a welcome series for your donors online. There are some great guides on how to do this and I promise to write one in a future blog post. For now, here are some key tips:

  • Start with a thank you. This person is interested in your organization. They have given you their time and attention. They sound like a pretty cool person who is giving you a fairly valuable thing. This should be rewarded with good manners.
  • After that, if you have a key offer, lead with it. For some, you may be emailing them a temporary membership card. For others, it’s an opportunity to get involved with advocacy. Surveys are also good. Whatever people like to do with your organization online, use it to build their engagement and learn about them.
  • Yes, within the first 30 days. If they donated already, ask them to become a monthly sustainer. In fact, you may want to test whether a sustaining ask works better generally.
  • Test getting them into your mail, telemarketing, and other direct marketing channels. Just because someone started with your organization online doesn’t mean they don’t also have a mailbox and a phone.

This gap of time can be even acuter in the mail. At least with an online donation, you get (or really really should get) an immediate email receipt. With an initial offline gift, there’s the time that it takes the mail to get to the cager (or another person who will open it), the time to deposit the check, print the thank you, batch it, and send it, and the time it takes to get word back to that donor. That alone is pretty bad.

But what happens next is worse: nothing. Let’s say someone makes a donation on January 1st. They may not get into the data pull for a mail piece until March or April, depending on the lead times you have in printing. Picture making your donation, getting a thank you three weeks later, and then radio silence for months afterward. Doesn’t sound like a recipe for retaining that donor or striking while the iron is hot, no?

So instead, create a couple of mail packages that fill that gap that are sent automatically post the initial gift. The same principles apply here as online – things that help you and that your donors like are the perfect here: petitions, member cards, new supporter surveys, etc. You can expect these pieces not only to help your retention rate but also to provide some additional net revenue as well.

Onboarding for donors and supporters

Why do people stop giving?

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This has, unlike so much in the fundraising realm, been objectively researched and I commend the paper to you.

This paper tested six attributes of connection between people and causes they support.  Guess which ones actually mattered to donor loyalty (I am paraphrasing their points somewhat):

  • The nonprofit shares my beliefs
  • I have a personal link to the cause
  • The nonprofit’s performance is strong
  • I trust the organization
  • I have a deeper knowledge of the organization
  • The quality of the donor services they provide me is high

A hint: four of these matter; two don’t. I’ll pause here why you contemplate.

(pause)

I’m Henry the 8th I am.  Henry the 8th I am I am.  I got married to the widow next door.  She’s been married seven times before and all of them were named Henry – HENRY.  Henry the 8th I am.

Second verse!  Same as the first!  Little bit faster and a little bit worse!

henry the eighth2
Does anyone else find it weird that in this “romantic” movie, he got his first date with his wife by aurally torturing her. Stalker much? (Also, this is Ghost for you young’uns.)

Oh, you’re back.

The four that were important were:

  • The nonprofit shares my beliefs – One of the key drivers of giving and support is the desire to be a part of something bigger than yourself. Knowing the organization is like you and has a similar core system to you is vital.  This is something you can use in your writings – “You know how vital art instruction in elementary school is to raising creative, happy, and well-rounded children and that’s why we…”
  • I have a personal link to the cause – Not surprising. Those impacted by a disease, an injustice, a crime, a whatever, are going to likely be among the strongest to support a cause about these things.  The next step, however, is not done often enough – you often can see a significant retention lift if you can reference this: “You know better than most the heavy toll of…”  Beyond this, if appropriate for your cause, work with those who have a personal link to the cause to celebrate this.  Techniques like anniversary cards (congratulations on three years cancer-free today!) can work well, but more than that, peer-to-peer fundraising can allow a person to celebrate those anniversaries on their own behalf.  You cannot craft a message better than: “I believe in X because of Y. Because you are a person like me, please support X also.”
  • I trust the organization. Trust is, I would argue, a necessary but not sufficient condition of support. No one who does not trust you will support you.  You can borrow trust with social proof techniques like the BBB seal on your donation form, but generally, running a tight ship nonprofit is sufficient.
  • The quality of the donor services they provide me is high. Another necessary but not sufficient condition.  In my experience, a good donor relations person can help turn around a less positive donor experience more easily than trust can be repaired, but it’s important to treat the people who help you serve people well. This starts with customization and if you missed the initial post on this, here it is.  Letting the donor know you know them is critical to quality donor services.

The converse of these is what causes people to lapse: if they no longer trust you, they think you share their values, their link to the cause is diminished or severed, or have a bad donor experience, they are more likely to not give in the future.

What of the two that don’t matter?  Performance of the nonprofit is what the Charity Navigators of the world attempt to quantify, first by pretending that percent of overhead means anything to impact, second by feigning that checkboxes around transparency mean someone is active in their community, and now with Charity Navigator 3.0, which has non-subject-matter experts reviewing the statements of subject matter experts to gauge impact and achieving the same level of impact as me commenting on neurosurgical techniques. It turns that those who can’t don’t teach; they rate.

It’s this type of performance that doesn’t seem to matter as much to loyalty.  People give to something because it feels good to give – to plant the tree whose shade you may never enjoy.  Getting into performance and numbers and such can sap the joy from the process.  Or at least that’s my theory on what that didn’t rate.

As for depth of education, it’s great to educate the people who actively want to learn more about your cause.  Donor telephone town halls, reports back, impact statements and the like are all good ways to do this.  But so much of education from nonprofits comes from the false belief that “if only people really understood the problem, then more of them would give.”  In fact, it’s probably that curse of knowledge I mentioned a couple of weeks ago that makes you speak in buzzwords and feel like you can educate the passion into someone.  A story, told well, means far more.

So now you know a little about why people lapse.  And it should be no surprise that retention is worst after the first gift.  There isn’t a built up trust.  There may or may not be a connection to the nonprofit (and if there is, the nonprofit may not know about it yet).  Communications haven’t been established and you haven’t told the donor the great things they did with that first gift yet.

Increasing that percentage of second gifts is the biggest area for almost any retention effort.  So I’ll cover that tomorrow.

Why do people stop giving?

How to measure retention

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Often, you will see people ask “what’s your retention rate” and get answers like 50% or 60% or whatever.  But there are different types of retention that add up to that overall retention rate.

Yesterday, I said that your direct marketing program was like a bucket with a hole in it.  We’re going to change this a bit today to say that your program is like a pipeline with a bunch of holes in it.  This is the lifecycle of your donor.  To define some terms:

  • Prospective donors are people who haven’t given yet, but might.
  • New donors are donors who are giving their first gift to your organization. I said we’d be defining terms.  I didn’t say they’d be hideously complex.
  • Converted donors/second gift donors/first-year donors are all terms for people who have gotten over the hump and given to your organization within the next year
  • Multi-year donors are people who have given reliably over multiple years
  • Lapsed donors are donors who haven’t given in a while. In a lifecycle analysis, this is frequently put at a time horizon (e.g., given the past year or past two years), but in reality it’s often militated by a broader analysis.  For example, if someone donates $5, you will stop trying to retain them much sooner than someone who donates $100).
  • Deep lapsed donors are lapsed donors, only really lapsed. Again, when this is is defined by your organization.
  • Lapsed reactivated/reinstated are people who were lapsed and have since given a gift. This is an important category often overlooked, in that these reactivated donors can’t be treated like people who just gave their second gift, but neither are the part of that key multi-year donor group.

Blackbaud indicates that the average retention rate is about 50% — that is, of your file, half will give you a gift in the next 12 months.

But as you can see, that’s oversimplified.  First-time donors are less likely to retain with a retention rate about 27%; multi-year retention is 58%, according to Blackbaud’s white paper on the topic.

But they only look at these two categories for retention.  It’s best to look at your retention rate in four buckets:

  • New
  • First-year
  • Lapsed reinstated
  • Multiyear

This is why retention rate as an overall metric camouflages what is happening in your file.  You may have a higher overall retention rate than you did a couple of years ago, but lower retention rates in all of these categories, similarly because you have more multiyear and fewer new donors than you did in years past.

If you prefer, lapsed could be included in here; I don’t because I think of lapsed retention as reactivation – there has to be an effort to reacquire donors, rather than talking to those whose attention you have already.

The other reason it’s important to look at each of these groups separately is that they require different strategies for retention.  With new donors, you have been a first date.  You have learned a tiny bit about them and they about you.  Also, to stretch the dating analogy, your relationship at first is new and exciting.  You can explore things early on like sustainer asks and that person might be in the afterglow of giving and your outstanding onboarding process (more on this later this week) and willing to entertain that notion.  Testing different messages and learning instruments like surveys are par for the course.

Conversely, for your multiyear donors, you should know what they like and don’t like.  Do they give only in the fall and when their gift is matched?  Do they love advocacy appeals?  Is your calendar hanging in their house and are all of their mailing labels yours (i.e., premium donors)?  Not only can you know these, you are expected to know and play back to them – see Ellinger’s Peak of Ideal Customization for details.

One additional retention metric to be aware of is an output from retention rate: lifetime value.  Here’s the formula for lifetime value:

clv-equation
Because everyone loves calculus

Wait!  Please don’t leave!

This is the overly complicated version.  You can ignore discount rate because the cost of money is so low. What you really want are “what is the net value of a person’s donations to an organization going to be?”  The key inputs to this are:

  • What are they giving?
  • What does it cost to get them to give that, initially and ongoing?
  • What is the likelihood that they will give gift 2 from now (and three and four and five) – that is, what is their retention rate? That’s the calculus portion of this – you sum each donation that someone will give, discounting it by the likelihood that they will give it

Retention rates, like compound interest, are magical, rippling through your program for good or ill for years to come.  Tomorrow, we’ll look at the inverse of the retention rate – why people stop giving.

How to measure retention

The basics of retention

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I had the pleasure of speaking on an excellent panel last week with NonProfit Pro on the topic of donor retention, so instead of our regularly scheduled week, let’s look at retaining our donors.

As direct marketers, we often have every bit of data about an appeal or campaign at our fingertips.  We can track average gift and response rate, test versus control packages, open rates, click-throughs, conversions, and so on.

The thing that is often forgotten is that each number represents people.  Everyone who gets a piece of mail, email, phone call, or text (or fax blast, carrier pigeon, telegram, etc.) votes on it by their action or lack thereof.

Lost in the numbers of an appeal or campaign performance are the metrics that matter in the long-term: are our strategies helping you love those who support you more and/or helping your supporters love you more?

Yes, it sounds a bit hippie-ish, as if I’m going to get the drum circle out any moment.  And part of it is – these are the people who make our work possible.

But even if we must look at this from under our green eye shades through our decidedly non-rose-colored glasses, it makes both sense and cents to make donor retention a top priority.

Our direct marketing programs are like a bucket with a hole in the bottom of it.  If you want the water level to rise, you can only do one of two things – poor more water into the bucket, or decrease the size of the hole.  Given this analogy, you might wonder why you would bother to pour water into a bucket with a big hole in it.

Hand pouring water from a glass into a leaking pail
The image of a leaky pail of water that is legally required
to accompany all retention commentary.

And you would be right – retaining the donors we have is of greater importance than acquiring new ones.  While you certainly can’t stop acquiring to focus on retention (less you get down to one very very very loyal donor), keeping with donors with your organization is vital for several reasons:

  • It’s cheaper. There are very figures for this.  Some say it’s twice as expensive to acquire a donor as to retain one.  Others say it’s 12 times as expensive.  Someone out there right now is working on a study that definitely concludes that it is a hillion jillion times more expensive.  Bottom line, it’s cheaper to retain a donor than to acquire one, by a factor of X, where X is big enough to be important.
  • It’s easier. Picture addressing your acquisition package, email, or phone call to someone that you know already knows what your organization is, what you do, and kinda likes it.  Cuts a few sentences, maybe paragraphs, out of it, no?
  • Retained donors are of greater value than new donors. We’ll talk retention rates tomorrow, in that people who have only given one gift are far less likely to stay with your organization.  They also tend to give more gifts and more per gift.
  • Retained donors are of greater value, part 2. Major donors rarely come from the ranks of people who made one gift to your organization; that’s something that comes from a longer-term association with you.  Additionally, more than half of bequest givers have given to an organization 15 times or more.

So this week, we’ll talk about donor retention: how to measure it, why people stop giving, how to get that elusive second gift, and how to reactivate a lapsed donor.  Like many of these topics, each one of these could be its own book (and some are), so if there are areas of particular interest to you, let me know by email or in the comments and I will work to dedicate a week to the topic.

The basics of retention

Ellinger’s Peak of Ideal Customization

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There is a concept in aesthetics called the Uncanny Valley. The idea is that generally we like things to be closer and closer to human likeness to maximize emotion and empathy. That is, until the thing reaches a point that is not quite human, but too close to human, for comfort. So, things that look somewhat human, but clearly are not (think C3PO from Star Wars or a teddy bear) look fine to us. But getting close without quite being right is highly offputting or creepy.

uncanny valleyYour dislike of clowns, explained.

For some, this is part of a dislike for ventriloquist dummies or clowns or porcelain baby dolls. It’s also why even in these days of high-tech CGI, you will see animated movies that make cartoon characters to be, well, cartoony and not human looking. Efforts to make hyperrealistic animations have fallen into the Uncanny Valley (e.g., Polar Express, Beowulf).

polar express

This girl has come for your soul.

I posit that there is a similar dynamic in personalization.

On one side of the spectrum, you have the cable company. Long after most people have heard of the concept of caller ID, the first thing they ask you to do in their automated system is to put in your phone number.

What is the first thing the person on the other end of the line asks for after your brief 47-minute wait listening to the instrumental version of “My Heart Will Go On”? Your phone number. That isn’t just not knowing your customer; that is Memento-level forgetting.

On the other side of the graph, you have the Target Knows You Are Pregnant story. To make a long and interesting story short, there was a man who called Target irate that his minor daughter was getting coupons for items that would imply that she is pregnant. Shortly thereafter, he called back to apologize, letting them know that there were things going on in his house that he didn’t know about. Target “knew” his daughter was pregnant before he did.

This story is a bit creepy: that Target’s algorithms would “know” something like this. After other coupons were a little too overpersonalized, Target has started putting in random dummy coupons into its coupons, so they look a little more random. (Even though they know what you really want).

“Even then, retailers learned early that shoppers prefer their shopping suggestions not be too truthful. One of the great unwritten chapters of retail intelligence programming featured a “personal shopper” program that all-too-accurately modeled the shoppers’ desires and outputted purchase ideas based on what shoppers really wanted as opposed to what they wanted known that they wanted. This resulted in one overcompensatingly masculine test user receiving suggestions for … a tribute art book for classic homoerotic artist Tom of Finland, while a female test user in the throes of a nasty divorce received suggestions for a small handgun, a portable bandsaw, and several gallons of an industrial solvent used to reduce organic matter to an easily drainable slurry. After history’s first recorded instance of a focus group riot, the personal shopper program was extensively rewritten.”
― John Scalzi, The Android’s Dream

So here is the Ellinger Personalization Satisfaction Curve (I figure if I keep trying to name things after myself, one will stick):

ellinger curve3
I spent upwards of 42 seconds on this graph

As personalization increases, you like it, unlike a point where you stop liking it.  The three big implication for nonprofits are:

  1. This curve is moving right. It used to be an innovation to have a person’s name included in the salutation. Now, unless you are going for an ultra-low-cost package, it’s table stakes. Donors used to be OK with the Super Mario Bros. excuse for not knowing entire gift history (“Thank you for calling, donor. But your data is in another database.”); now it is inexplicable. We now live in a world that knows our name and who we are (or can look it up quickly enough to simulate this).
  2. But people generally don’t like you to know things that aren’t logical leaps from their existing relationship. For example, if you are using acquisition lists from advocacy organizations, it’s almost certain fine to send them an advocacy piece from your organization to them. However, you don’t want to say “Because you support other advocacy organizations, you may want to help support our cause.” This is a part of the sausage making people don’t need or want to see.
  3. This sweet spot is different for everyone. Some people still get weirded out when people know who is calling from caller ID. Others wear their digital hearts on their sleeves, inviting everyone to know everything. The best you can do is aim for the middle for the general population at first, but then test up and down to see what each your donors prefer.

I’ll talk about a few positive customization techniques tomorrow.

Ellinger’s Peak of Ideal Customization