Tiny Essentials of Donor Loyalty is the latest in the “Tiny Essentials” series and is written by one of philanthropy’s premier scholars, Adrian Sargeant, professor at Indiana University’s Center on Philanthropy. True to its title, the short book is excellent, focusing just on the key issues and underlying factors that impact loyalty. What sets Tiny Essentials of Donor Loyalty apart is that it is research-based, much like another book that should be on any fundraiser’s short list, Donor-Centered Fundraising, by Penelope Burk.
Sargeant sets the stage by describing donor loyalty as “the single biggest challenge facing our sector today.” Nonprofits will lose a third of their donors (those who have made at least two gifts to the organization) in the course of a year. Only around half of an organization’s new donors will ever make another gift. “We should all hang our heads in shame,” he writes.
These appalling rates of retention become even more alarming when considering the potential lifetime value of your donors. The author explains that even small improvements in donor loyalty can pay huge dividends. For instance, a 10 percent increase in the level of donor loyalty can increase the lifetime value of your fundraising database by 50 percent. When factoring in the savings in donor acquisition costs (knowing that new donor recruitment usually produces a net loss), the 10 percent improvement in donor loyalty can increase your database’s lifetime value by as much as 100 percent.
But there’s still more. Loyal donors often increase their giving amounts over time. Thus, the 10 percent improvement can yield as much as a 200 percent increase in the lifetime value of your database. It’s quite clear that nonprofits are leaving money on the table with such high levels of donor attrition.
The author suggests that we consider our overall quality of service to donors rather than focusing only on specific aspects of our approach, such as appropriately thanking donors. Additionally, he recommends that we make it a priority to measure donors’ perceptions about the quality of service provided to them. Do you ask your supporters about the communications they receive and the different ways that they interact with the institution?
According to Sargeant, “Maintaining a dialogue with supporters about these issues is key in fostering retention and offends no one. While organizations are sometimes reluctant to conduct this kind of research for fear of alienating donors, research tells us that folks like to be asked and will actually exhibit slightly higher levels of loyalty as a consequence.”
This is noteworthy because research indicates that donors who are “very satisfied” are twice as likely to make a gift the following year as those who are just “satisfied.” Donors who are merely satisfied may be displaying “passive commitment.” They may believe in the work of your organization, but they are not excited by it. Conversely, “active commitment” builds loyalty and is characterized by an “enduring passion” for your mission.
Although it’s counterintuitive, we should “encourage dissent” among our donors, not just related to quality of service, but about any aspect of the organization in which the donors may be interested. Why? Encouraging donors to complain provides wonderful opportunities to build loyalty. Research here is consistent with customer service research in the commercial sector, suggesting that donors whose complaint was appropriately resolved will demonstrate significantly more loyalty than those who never had an issue in the first place. Interestingly, even donors who merely voice their complaints (but do not get them resolved) are more likely to give again than those who didn’t have a problem at all. The moral of the research: “As fundraisers we need to create appropriate mechanisms for donors to voice their concerns.”
The book also offers some sound strategy for fundraising communications. Do your donors think they receive disjointed communications and requests from your institution? “In contrast, those who feel that the organization is taking them on a coordinated journey, designed to deepen their understanding of the cause and what needs to be accomplished, will be significantly more loyal.” Are new donors suddenly thrown into your institution’s routine cycle of communications? Or, do they receive tailored communications specifically designed to educate and engage new donors? I also liked Sargeant’s reminder that everything communicates, not just fundraising communications, and his advice to manage all “touch points” with the organization’s brand.
He also asks if your organization has looked at the profile of loyal donors, not just high-value donors, to define target audiences for acquisition and lapsed donor appeals. It seems like such a simple point, but few organizations take the time and effort to do it. Targeting those who may exhibit higher levels of loyalty shifts the focus to donors’ actions after they have been recruited and considers their lifetime value. As the author states, “Taking decisions with an eye to the longer term would have a profound effect on loyalty.”
Tiny Essentials of Donor Loyalty is a powerful book full of insight. If you adopt just a few of the ideas presented, I’m convinced it could make a big difference in your organization’s long-term fundraising performance.