5 Principles to Help Closed Loop Organizations Find More Donors

In my most recent post here I unpacked five principles to help open loop organizations find more donors. Today I want to pull back the curtain on how closed loop organizations can accelerate their acquisition.

As a refresher: a closed loop organization has beneficiaries that will one day be donors, while an open loop organization serves a different population than the donors. (More on that differentiation here.)

Because closed loop organizations are supported by donors who have been impacted by the organization’s missional “impressions,” they have the opportunity to leverage those impressions to create a donor relationship. If/when they do, they avoid the cost of creating new impressions purely for the purpose of finding new donors.

Leveraging existing impressions makes closed loop donor acquisition far less expensive than open loop acquisition if impressions are leveraged well. They rarely are, in my experience. The great benefit to closed loop fundraising is that the organization or institution doesn’t have to explain to the donor the value of the charity. They have experienced it firsthand. The great challenge is that their donor base is largely limited by the scope of their outreach—the number of beneficiaries they serve. So every impression is critical.

Here are five principles that can help closed loop organizations develop an effective acquisition strategy to find more donors.

1. Cultivate a culture of philanthropy.

Closed loop organizations must keep in mind that every interaction is a potential deposit into the bank account of a prospective future donor. The beneficiary may not have the capacity, inclination, or propensity to give at the moment they are being helped, but eventually they will.

So it is critical that those early impressions establish a strong desire in the beneficiary’s mind for a long-term relationship with institution. How can we encourage them to keep coming back, to resource the organization, to become part of our team, to volunteer when they can’t give, to learn more, to eventually give?

One approach is to think about how you can create a “culture of philanthropy”—a sense that the services the beneficiary is receiving are possible because of the generosity of a community of donors, great and small. “You stand on their shoulders, and someday, we would love to invite others to stand on your shoulders as part of this very special group of people.” In fact, the longer the period of time from being a beneficiary to becoming a donor, the more important the culture of philanthropy becomes.

For example, at higher education institutions, the culture takes shape the moment a prospective student first steps on campus for a tour, continues through their years on campus, and extends at and after graduation. Prospective students certainly aren’t asked for a gift on the tour! But they learn the opportunity to be part of the institution was made possible through donors who have effectively reduced tuition and expanded infrastructure so students don’t have to bear those costs. As well, the first impression is important to establishing a pattern of communication that will eventually create the culture we are talking about.

Current students might be encouraged to volunteer and make a small gift, according to their means, as a demonstration of their commitment to their class, a special project, a club, someone in need on campus, or some other institutional cause. The idea is to encourage the student to increasingly see themselves as part of a very special group, a community of people who have the honor of continuing the legacy of the institution they hold dear and that has had an impact on them. Giving as an alum becomes an extension of that commitment of support they first exhibited as a student, not an invitation to a brand new behavior.

Time and again, I’ve observed analytics that show donors who give two consecutive years are far more likely to continue that behavior. Getting students to give, while they are still in your care, dramatically increases the likelihood that they will make your institution a philanthropic priority after they have graduated. The same is true for other kinds of nonprofits. So find ways to make those initial gifts an easy decision.

2. Remember the process.

Like their open loop counterparts, most impressions fail to materialize in a new donor relationship because of a weak link in the chain of activities that lead from the initial missional impression to a gift. In fact, I’ve observed many closed loop organizations who have a sufficient number of impressions to drive their acquisition strategy. They just don’t leverage them well.

The secret lies in appreciating that acquisition is usually not a one-step process. Multiple steps typically are required.

Each step in the process should include an invitation to take the next step:

• Impressions should invite me to exchange my contact information for something I value, to connect and move from anonymity to identity.
• My contact information should never, ever be abused, but should include an invitation to a more personal level of engagement with your organization or institution.
• That engagement should invite me to volunteer my time or consider a gift. If I do choose to volunteer my time, that certainly creates an opportunity to invite volunteers to give.
• Donor stewardship and cultivation should include invitations to make a sustaining commitment of support.

But the reality of the acquisition process is often very different. My former colleague and dear friend, Buddy Williams, once equated a broken acquisition process to a neighbor who comes over to meet a new family that just moved onto the block. He knocks on the door and, when it’s opened, exclaims “Hello! Would you like to go on vacation with us?” It’s just wrong. Why don’t we just get to know each other first.

I recently heard about an organization doing direct mail acquisition in a way that produced phenomenal results. Their secret? They didn’t ask for a gift! Instead, they respected the acquisition process by offering a free subscription to their e-newsletter for three months. After three months, they asked for a gift of any size to continue the subscription. Response rates skyrocketed.

3. Think transformational, not transactional.

What’s missing in the silly story of the “Welcome Wagon” is any sign of a relational IQ. Nonprofits make the same mistake when they treat their donors as “walking wallets” instead of human beings, with desires, needs, frustrations, expectations…hearts and souls. This transactional mindset comes out in the way they communicate.

A lot has been written on relationship fundraising, so I won’t repeat it here. Suffice it to say, some organizations need to adjust their mindset if they hope to change their acquisition experience, especially with younger donors. Pursuant’s work with clients who take this approach has resulted in average donor retention rates of 75 percent and more from their longer-term donors.

4. Value-rich content.

The acquisition process involves a chain of activities that will help determine whether the prospective donor continues the process or not. Many websites, for example, fail to offer a prominent place where users are invited to provide their contact information. Those that do, often fail to offer an incentive for that exchange of personal data. News flash: no one wants to join your mailing list! You have to provide a valuable incentive, connected to your organization, to encourage people give you something of value in return: their name.

For closed loop organizations, you have content your beneficiaries value. Make some of it available to anyone who visits your website as a demonstration that you have something valuable to offer. Withhold the rest of your content for people who have subscribed, who have joined the tribe. You have to ask prospects to trust you with their name and contact, or you will never move the relationship beyond the initial stage.

So what do your beneficiaries value? What information do you have that will educate them?

Encourage them? Help them? Support them? That’s the valuable experience you are offering them if they are willing to trust you and take the next step to initiate a relationship.

5. Improve new donor retention with reminder cards.

Pursuant has had great success using response cards that are attached to a laminated, colorful, well-designed pocket-sized “reminder” card that prospective donors want to take home with them. The value-added card is easily detached from the response device, and its content should be written from the donor’s perspective, providing information they want to keep and/or share. Many organizations fail to address the chain of activities involved in converting an impression or an experience into an exchange of contact information or requesting a gift. Reminder cards are the offline equivalent of the website subscription process. Don’t hand out “mailing list” signup cards at your next event. Don’t tell prospects to go home and register. Don’t invite donors to respond at the start of an event before the impression has been made. 

Instead, distribute a response device towards the end and give people time to fill it out. Incent them to hand it in before they leave. Connect the sign-up device to a well-designed card prospective donors will want to detach and keep.

Content on these cards should be a demonstration of the value represented in having an ongoing relationship with your organization. “If this is an example of the kind of personal value that will be available to me by having a relationship with you, I’ll definitely sign up.” Sure, they are more expensive to produce. But I’ve seen responses increase response rates from 1% to 5-10% literally overnight by deploying a more robust response device like this.

Think about the nature of your organization. What would you like the donor to do over the next 30 days? What questions do you want them to think about? What story or facts do you want them to share with a friend? How might you summarize the impression or experience a prospect has just had in the form of a card? How might the card be written such that the donor wants to hold onto it, leaving them with the response device to fill out? These reminder cards essentially bridge the impression from an episodic event to a longer term relationship.

This kind of “long game” mentality is critical in fundraising.

Learn more about Pursuant’s perspective on relationship fundraising by downloading the four volumes of research we co-sponsored with Bloomerang earlier this year!

And if you’d like to start with the “cliffs notes” version, check out the Relationship Fundraising Pocket Guide.