“The ‘average donor’ doesn’t exist,” so say many nonprofit leaders. And yet, they construct fundraising programs that are built for precisely that. Is it any wonder why “average” performance is the outcome?

Treating different donors differently is the key to scalability in your fundraising system, says Larry C Johnson, Founder of The Eight Principles of Sustainable Fundraising®. Larry recently joined us for a webinar entitled “Beware of Bigfoot: Appreciating Donor Differences” in which he explained his sixth principle: Divide & Grow™ – the “why” that points to the “how” of scalability for your organization.

In case you missed it, you can watch a full replay here:

Full Transcript:

Steven Shattuck: – Good afternoon to all of you on the East Coast and good morning if
you’re on the West Coast. Thank you for joining us for
today’s webinar, “Beware of Bigfoot: Appreciating Donor
Differences.”

My name is Steven Shattuck and I’m the VP of Marketing here at
Bloomerang and I’ll be moderating today’s discussion. And
I’m joined today all the way from the beautiful state of
Idaho by my new friend Larry C. Johnson. Hey there, Larry.

Larry C. Johnson: Good morning or afternoon as the case may be.

BigfootSteven Shattuck: Yeah. Good morning to you. Thanks for joining us
today. And for those of you who don’t know Larry, Larry is
the author of the award-winning book, “The Eight Principles
of Sustainable Fundraising.” The Association of Fundraising
Professionals has named Larry the Outstanding Development
Executive in 2010. And the Wall Street Business Network
ranks him in the top 30 of fundraising consultants in the
United States. And with 25 years of experience in
professional philanthropy, Larry has worked with leaders of
hundreds of nonprofits organizations and philanthropists
seeking to improve the lives of those around them.

So, this is just a real treat to have you with us, Larry and to share
in your knowledge. So, thanks again for taking an hour or
so out of your day.

Larry C. Johnson: It is my pleasure, Steve.

Steven Shattuck: So, what we’re going to do today is Larry has got a
great presentation for all of you. He’s going to talk about
creating sustainability and scalability in fundraising and
a little bit about Bigfoot as well. I know you’re all
curious about what Bigfoot has to do with all this. So,
Larry’s going to roll through his presentation and then
when he’s done, we will jump right into an interactive
question and answer session as we always do on these
Bloomerang webinars.

So, as you’re listening to Larry, please don’t be shy about sending
any questions or comments through that chat window right
there on your screen. I’ll see those and Larry will see
those and I’ll be pitching those questions to Larry a
little bit later on. So, don’t be shy. Send any questions
or comments our way and we’ll try to answer as many
questions as we can within this 1:00 segment.

As always, I will be sending out the slides and a recording of this
presentation for you to reference later. So, don’t be too
worried if maybe you miss a tidbit or don’t see a slide for
as long as maybe you wanted. We will be sending those
materials out a little later this afternoon.

So, I’m not going to waste any more time. Larry, I’m going to hand it
off to you. So, take it away.

Larry C. Johnson: Well, thank you. I just want to reinforce what Steve
said. We’re going to go through the slides fairly rapidly.
I don’t want to spend a lot of time just talking. Once we
have done that, probably in about 20-25 minutes, I would
like to have a pretty open and engaged question and answer
session. That’s where we often find out what’s really on
people’s minds and be able to relate content to them that
works for them.

That is one of the things that I feel very, very strongly about-
sustainable philanthropic revenue is possible for any
nonprofit, regardless of their size. I stand by that
assertion. So, with that being said, we’re going to be
looking at just a small wedge of what I call the eight
principles today. But it’s focused on something that I
think may relate directly to how you use your CRM system.

Bigfoot-Bigfoot is a prehistoric mythic creature said to roam the
forests of North America. I think it’s similar to the
average donor. We all hear about the average donor-that
person that sort of meets all the medians and the means and
the normal. We often pitch our appeals to that person. Yet,
does that person really exist? Are they really out there?

Well, I would assert that they’re not. They don’t exist. But yet, the
way a lot of fundraising programs are built, either by
design or by default, they assume that, “It’s in the
background. It’s there. We’re going to make this grand
appeal to everyone in the same way, in the same manner, in
the same timing with the same content.” So, where’s this
disconnect? If people don’t believe that they’re really out
there, why do they go ahead and continue to do it the same
way? Well, we’ll try to answer that question in a little
bit.

Whether we acknowledge them or even are aware of them, I’m going to
assert to you that there are timeless principles that act
upon all fundraising efforts, for good or for ill. Let’s
talk about what principles are for a moment. They are
timeless. They are unchanging. You either work with them or
you work against them. I’ve sort of quantified these and I
call them the “Eight Principles of Sustainable
Fundraising.” It’s also the title of my book. So, I say
that there are eight of these. You may be able to name some
more. But I think I’ve covered the waterfront pretty well
with these.

Whether we know it or whether we are even aware of it, these are
things that are operating in the background, much like
gravity. We’re all subject to gravity. If we go and throw
ourselves off a three-story building, unless we have some
aids, we’re not going to fly. So, it’s best if we behave
ourselves in a manner that will work with gravity and will
work with some of these principles rather than against
them. Yet, we often don’t start or really begin to
understand what they are. We’re so focused on process.

Every day in my mailbox are this technique, that technique, this
software, that tool, “Do this, do that, it’s the latest and
greatest silver bullet.” And yet, that’s not the right
place to begin if you’re looking to build a program that is
sustainable over time and one that really scales anything
close to your true potential.

You need first to understand what are the sort of laws of fundraising
that are operating in the background. Once you’ve done
that, begin to form-we’re not going to talk about it today,
necessarily-what I call the paradigm, the mental construct,
that works for your organization. This is where it becomes
organizationally specific within these principles.

And once you’ve done that-that’s the hard part, that’s the work-then
choosing the right tools, choosing the right techniques,
choosing the right approaches, even choosing the right
calendar is going to be almost a no-brainer. So, don’t
start with process. Let’s start at the principle end.

So, as I said earlier, a principle is universal. It’s timeless. It’s
often self-evident. It’s external to us. We don’t control
it. We don’t have any impact on it. It’s just there. And
it’s in effect whether we’re even aware of it or whether we
agree with it. It’s the way it is. These sorts of things
have predictable outcomes. You know that it’s going to do
certain things because of the way it is, just like I
mentioned with gravity a few minutes ago.

“One size fits all” fund development programs spring from a lack of
awareness and appreciation of one of these principles. That
one we’re going to talk about today is what I call
“Principle 6: Divide and Grow.” What is Principle 6 all
about? Let’s just talk about that for a minute. Divide and
grow essentially says-and we’ll go back to the beginning at
the end-that you treat different donors differently. That
sounds pretty commonsensical. These things are not rocket
science but yet they’re often ignored.

So, divide and grow-number one, your donor constituency divides or
segments itself-and I use the fundraising term there-
according to a couple of things: ability and affinity.
Ability is financial ability. Affinity is the values or
linkage to your organization. Those two things working
together will determine how you should be treating your
donors. Our presupposition is if you want to build a
program that sustains itself and scales, you need to work
understanding that this is happening even if you’re not
aware of it.

So, you want to work with donor behavior, not against it. This is
something that when I work with clients it’s often very
difficult for them. They understand it but acting upon it
is tough. The reason for that is simply that they’re so
driven to do the good things they want to do that they
become what I call program rather than purpose-driven
organizations. They’re so focused on delivering that they
sort of project out to their donors, “Here’s what we’re
doing. Here’s the way we’re doing it. This is what I want
you to support: A, B, C.”

Effective, sustainable fundraising is the reverse of that paradigm.
It is inviting donors whom you already have some affinity
with and who have some level of ability to share your
vision. And together, you solve the challenge. Now, it’s
more than words because you’re really inviting them in. So,
you’re not projecting out. You’re inviting them in and they
will, by virtue of their involvement with your organization
both temporally and financially, influence the way the
organization delivers on its mission.

That’s the key because they’re the investors. They’re the ones who
are driving this. That’s another one of the principles-
owners are the drivers, which we’re not going to get into
today. The idea is to work with those donors and work with
the behavior.

Let’s look at one other concept here. There are really four building
blocks to any scalable program. You have to acquire new
donors. There were some cutesy animations on these slides
but unfortunately, the software we’re using have taken
those out so you won’t get the benefit of those.

When I say these, imagine these words are going to pop out at you a
little bit. You have to acquire new donors. You have to
retain as many of those as you can. This is a particularly
sore spot in today’s fundraising climate because donor
retention rates have been dropping pretty dramatically over
the past decade. We can talk about what some reasons are
for why that’s happening.

You need to progress donors. What I’m saying here is that there are
two kinds of progression: progressing them to of their own
lifetime of giving to you-if you’re retaining them, they’re
going to give over a period of time-and then also
progression them toward their natural top giving potential.
Even if a person is capable of writing a five-figure check
for you, they’re not going to do that first off-very rarely
will that happen. So, you have to move them to that point
and there are ways of doing that.

And the last thing-and this is involved when you have all these
competing fundraising vehicles and programs and plans-where
sometimes if they’re not coordinated with one another, they
actually work against each other. They actually work to
reduce what you’re raising.

People think, “Oh, well if we just go and do all these six or seven
different things independent of each other, we’ll raise
more money.” Well, nothing could be farther from the truth.
Remember, we’re looking at engaging people on two levels-
their ability to give and their affinity, which is their
value linkage. We need to know both of those things.

So, any program that scales and is sustainable will have these
building blocks built into it somewhere. That is something
that acquires donors that is specifically designed to do
just that, something that is designed to retain those
donors at as high of a rate as possible. You can’t retain
100 percent. People die, people go away, people change
their interests. Something that is designed to deliberately
progress donors, both in terms of giving size but also in
terms of where they are in their life. And then fourth,
something that overarchingly coordinates all the things
you’re doing so you’re not working at cross purposes.

Let’s look at a chart here that I think may be illustrative. This is
what I call the “Donor Progression Pipeline.” Donors enter
from the left side of this chart and they move over time to
the right-hand side. At the left-hand side, they come in as
brand new donors. They’re acquired that way. As you can
see, there are generally three ways of getting there:
direct mail, email, telephone. You could also say face-to-
face visit, although generally that’s not the case.

Although, I will say that the most effective-meaning the highest
rates of success and the highest level of giving kind of
approach-is the face-to-face approach. But given the
numbers and given the resources, it’s impossible to
approach everyone that way.

So, once a donor is acquired. You’ll notice there are lots of little
dotted areas. That’s a cost to revenue proportion. So, it’s
very expensive to acquire new donors. In fact, the
acquisition programs of nonprofits who have fairly mature
fundraising programs, they consider that program to be a
success if it’s simply covering its cost. They’re not
really even making any money, per say, out of it. What
they’re really looking for there is to bring new donors
into the fold because they know that further down that
pipeline is where the donors grow and where they begin to
contribute in a real meaningful and substantial way
financially.

So, the next thing is you have your donor progression and retention.
This is a lot where you have your high cash in giving, your
face-to-face direct asks for five-figure cash gifts. From
that, you get what are often called major gifts. Now, let
me be specific about that. People use that term very
loosely. I use it very specifically. Often people say a
major gift is a major gift-how’s that working, Steve?
Pretty good?

Steven Shattuck: Yeah. That’s beautiful.

Larry C. Johnson: Okay. All right. I’m just kind of working with this.
They think it’s major simply because of the size. Well,
size is relative. For some organizations, a major gift is
$10,000. At my alma mater, a major gift is a seven figures.
So, that’s a relative term. For me, a major gift is a gift
that’s out of the donor’s assets, whatever they might be.
So, then you’re looking at all different levels.

Why do I say that? In this area here, you’re looking at gifts of
income. People can write a check for these things, even if
it’s a multiple-year ask. They’re writing a check out of
income. Here, you’re looking at gifts that are out of
accumulated assets, either money in the bank, appreciated
securities, real estate-anything that has some sort of
capital value.

The reason I call it major gifts is because this requires a higher
level of emotional commitment by the donor. Donors will
write you checks all day long, even at a fairly substantial
rate. When you start getting gifts that represent part of
their accumulated capital, you’ve moved up the scale in
terms of their commitment to you as a donor. And this is,
of course, where you want to move to. And these are
usually, of course, done face-to-face and they’re
cultivated over time before the ask.

And then here you have this wonderful thing we all know, planned
giving, which I would simply say to you is simply a subset
of this kind of giving-major giving. That’s because they
still are gifts out of assets. The difference is they’re
given in some deferred manner or they’re given with some
sort of secondary criteria that is not related directly to
the nonprofit. But the motivation remains basically the
same. You get a face-to-face negotiated ask. I say
negotiated because it’s these other criteria that usually
come in here.

You see here that you have this stewardship cycle. You have to
constantly be moving people back through this pipeline. For
those of you who represent organizations that have lots of
what I would call modest but regular givers, this area of
giving represents a real opportunity for you, that is if
you are watching.

If a person is giving regular cash gifts at a fairly modest level,
then often times this is a place where a person can make a
deferred or conditional gift, either upon their death or
upon a trust or an annuity because they can only do it
once. And they’re giving you, then, a big chunk of what
their accumulated assets are.

So, don’t let this fool you if a person is giving you $30-50 a month
for 30 years. In fact, for me, the largest deferred gift
I’ve ever personally negotiated was about $3 million from,
of all people, a single, unmarried public school librarian-
a spinster lady. She had given $35-40 to an organization
for over 40 years. She made this gift through very careful
investments. Of course, she doesn’t fit the profile of what
you’d call a typical major donor.

And then you see here this line at the bottom here. This is the
accelerator line, I call it, or the turbo line. This is
capital campaigns. Capital campaigns are designed to raise
capital gifts for specific purposes. However, what
universities discovered a couple of decades ago was they
also have a very important secondary, if not more
important, benefit. That is what’s been noted is if you
have a successful capital campaign and you manage it
appropriately, you’re going to have a halo effect in terms
of elevated overall giving from that campaign at least 5,
10, even 15 years out from the pledge period.

So, that’s why you see what universities have gone to. They call this
the continual campaign so that you’re not either staffing
up, doing a campaign and going away. You’re always in some
phase of campaign management, either planning/executing or
collecting. You’re back into that cycle again. So, this is
where you can really also raise the overall level of your
giving.

Let’s look at the next slide here. One thing that’s very important
when you begin to develop your fundraising program is that
you have the right business model. Let’s look at retail
groceries, for instance. The retail grocery market depends
on a couple of things. It depends on very high volume. It
is very price-sensitive. For it to work, that volume must
be there and the margin must be just enough. There’s not a
lot of loyalty there either, by the way. If the supermarket
down the street can undercut the price a little bit, people
will go there.

Now, if you think about that for a minute that looks a lot like a
type of fundraising that we’re all in love with. That’s
what I call transactional fundraising. You see it in its
manifestation in the fundraising events, the gala, when you
buy and sell things-when there’s a material exchange. It’s
a very high-cost way to raise money. There’s no
renewability. It’s very price-sensitive.

And the other thing about that is it doesn’t scale. It’s very
difficult to-go back to why people give through ability
and affinity-it’s very difficult to get people progressed
up to a higher level of ability because you’re treating
people all the same, or at least at one middle level.

Now let’s look at the aircraft model. The air frame business-Boeing,
McDonnell Douglas, Lockheed, these people-they build a
product that has about a 20 year or two-decade lifespan.
It’s a very expensive product. It’s a high price going in.
But it’s a very long-lasting product. Now, when I first got
my start when I got out of school, I worked for
Westinghouse in large scale transit projects. It was very
similar to aircraft in that you had a long-term, high-cost
product with a long lifespan. It was a very custom-designed
product.

When Boeing designs a new airframe, they have been working on it for
years. They have poured a lot of money into it upfront.
Some would say that’s a company-to develop a new airplane
every time they do it. So, when they begin to take orders
for those planes and they begin to deliver them, all
they’re doing for much of the time is simply recovering
their costs. That’s all they’re doing. In other words,
they’ve done all this work to acquire donors.

So, now they’re beginning to recover some of that cost. So, you say,
“Okay, so where’s the payoff?” Well, the payoff from a
financial point of view if you have maintained relations
with your customer or, in this case, your donor is that
when that customer comes back to look for renewal parts-and
there are lots of renewal parts that constantly have to be
replaced on these airframes-they’re going to come to you.
They’re not going to the aftermarket. That renewal part is
a standard inventorial item that has very little overhead.
So, that’s where you retain your margin.

In the same way in fundraising programs that are built on a longer-
term cycle like the aircraft business, where you’re looking
at a 3-5 year overall cycle, this is where the cash-
generated income comes in. That’s very difficult for a lot
of nonprofits because they’re so focused on current use
cash that they cannot break away from that insidious cycle.
It’s like running in a bicycle in low gear. They’re going
down the street but they’re expending a lot of effort get
there. If they let up even for a minute, they’re going to
lose serious momentum.

So, this is what I invite you to think about-the difference between
groceries and aircraft. This is something you have to sell
to your boards to approach it differently. We can talk
about that. There’s a lot to unpack here.

Okay. So, the foundational principle of divide and grow is
structuring fundraising efforts around the natural
divisions of your donor base. How do they divide
themselves? By both giving capacity and giving affinity-
what relationship do they have? What affinity do they have
for your values? That’s how you need to structure your
program. That’s essential for maximizing your growth. It’s
not that you won’t raise money other ways. These other ways
that I’ve suggested all raise money. They do. But we’re
talking about raising money in a sustainable way that
scales over time.

Let me give you a comparison of what I’m speaking about. In the last
recession, which was pretty bad for everyone, depending on
where you were on this continuum, it had a lot to do with
what your revenue looked like and from a philanthropic
point of view. If you were very steep in the transactional
end of this business-that’s not to say that you never do
any of it but that’s where you were focused and putting
most of your efforts-depending on where you were, you could
have seen a drop in income from that source of at least 50
percent. That’s jaw-dropping.

On the other hand, if you look at what happened with the philanthropy
that was mostly relationally-driven, which is what I’m
talking about, the net from ’07-’09 was two percent
decline. Well, that’s something that’s manageable.

So, what are the paradigms of the appropriate mental constructs that
you need to be putting in your head as you begin to design
a program like this? Well, in general-obviously there are
ones that are specific to your organization-but in general,
you’ve got to be concerned about the affinity the donors
have to you. This is why it needs to be values-driven, not
transactionally-driven. You need to know the ability of
your donors.

And you need donors of all levels. It’s not just about deep pockets.
Although as you can see from the 80/20 rule there, it’s the
larger donors that drive the numbers and overall receipts,
it’s the smaller numbers that also give you the legitimacy
that you must have in the larger market to move forward.

So, it takes all gifts. It’s not just about the big guys. However, 80
percent of what you raise or 70/30 or 90/10 is going to
come from 20 or 10 or 5 or 20 percent of your donor base.
That’s just a given. That’s one of those things that’s just
out there. That’s donor behavior. Work with it.

This has been several years ago now, but I had an executive director
say to me when I talked to him about this, “Oh, we believe
in the small gifts model. I said, “Well, what’s that?”
“Well, we ask for small amounts from everyone.” Well, okay,
that’s great. But why would you do that when you’re often
discouraging the very people that would give you larger
gifts if you asked them for large gifts. You don’t flatter
people by asking them for too little. You flatter them by
asking them appropriately for what they’re truly capable of
giving you.

And then, of course, sustainability and scalability do require long-
term focus. This is where your board becomes either an
active contributor or detractor to this process. They need
to understand how to read their dashboard. You need to be
giving them the right variables to evaluate. Current-use
cash received in the last quarter is an accounting figure.
It’s not a finance of fundraising predictor.

My wife is an accountant. It’s a financial number. It’s important.
Without cash, you’re not going to keep the lights on. I
couldn’t agree more. But in terms of evaluating where your
fundraising program is going and how healthy it is and what
it’s capacity is and how it’s delivering, that is not an
effective number.

So, we need to get away from that from looking at it as a fundraising
number. It really isn’t, not if you’re looking for the long-
term. If you’re doing this long-term, the money that came
in from the last quarter is money that began to be
generated 18-24 months ago.

So, Principle 6 is Divide & Grow: “Achieving scalability in
fundraising efforts requires the focus and discipline to
treat different donors differently.” It sounds easy, but
when you start doing it and you realize you have to sort of
invert the way you’ve been thinking about this process, it
can be a little tougher.

And remember, every program in order for it to scale and be
sustainable, has to have components that address each of
these four pieces. You have to have something that is
definitely designed to go out and get new donors. That’s
what it’s designed to do. This isn’t a “one size fits all”
thing. You can’t be all things to all people. You have a
program that’s specifically going to be designed and
evaluated based on how well it retains new donors. Do they
keep coming back again and again and again?

You have to have something that is consciously progressing donors and
following them through their lifespans, but also
progressing them through financial ability. Can you
evaluate that? And then lastly, you have to create goals-
and this is often where the coordination tends to be
competition-you create goals that coordinate towards a
common end. So, the fundraising gala isn’t undercutting the
annual fund, which isn’t undercutting the special gifts
fund, which is undercutting whatever.

You’re working together. Donors get confused really easily. They
aren’t there all the time. All they see is what comes at
them. If you begin to evaluate it on that basis, then
you’ll begin to see, “Oh, wow, we’re competing more than
we’re coordinating.”

So, what’s the role of a CRM system like Bloomerang? Believe me, they
did not pay me to say this. I want to make that very clear.
When I first got into this business, CRMs were big hulking
pieces of software that ran on large mainframes, were
expensive and only the very large, sophisticated
fundraising programs would even think about purchasing such
a thing. Then they went to PCs and a lot of them are now
web-based. They’re a lot less expensive. They’re a lot more
nimble and they’re very useful, even for very small
nonprofits.

What does it do for you? Well, it provides the structural framework
for treating donors differently. You can build into your
framework of your system for allowing for these kinds of
differences. It also gives you tools for executing those
for processes. You can begin to structure your processes
and it will track those for you. And then, of course, what
we want all the systems to do is we’ll help coordinate them
and give you some accountability. You’ll know where things
are falling apart or where you need to reinforce or where
things are really succeeding.

So, that’s where a CRM system can be very useful. It is not a silver
bullet in and of itself. It raises no money whatsoever. But
it is a very powerful tool if it’s used appropriately.

And now we’re ready for questions.

Steven Shattuck: Well, great. Thanks, Larry. We’ve got a lot of very
positive comments in the chat room. So, thanks for that
great presentation. I think people really enjoyed the
pipeline graphic as well. Very good.

So, let’s jump right in to some questions. We had some come over the
chat room. For those of you who were maybe withholding some
questions, feel free to send those through the chat as we
talk as we go through these first few questions. Larry is
here at your disposal for the next 20 minutes or so. So,
don’t be shy at all.

So, Larry, we’ve got a few questions here in the chat room. But I
wanted to ask something before we got into that, something
that I was wondering especially as you were showing that
pipeline graphic. Let’s look at that. You’ve worked with a
lot of organizations in your career. You’ve seen people be
successful. Are there any organizations that come to mind
that really just nailed this that you’ve worked with? What
were some of the reasons for that? What were some of the
characteristics that made those folks successful?

Larry C. Johnson: Well the two that come to mind are both large,
mature organizations. However, let me hasten to issue a
qualifier. They didn’t start out being large, mature
organizations. They ended up that way by doing these kinds
of things consistently over time, again and again and
again. I want to stress that.

It’s like momentum. It’s like a locomotive. Well, back when they were
steam-in my day. So, you put enough energy into that boiler
but it takes a long time of inertia of that boiler sitting
there before it has enough push to begin to move those
pistons in the engine. Once you get over that initial
inertia, then you can, by just little increases or
maintenance of energy, you’re flying down the tracks. And
it’s getting to that initial point, that critical mass,
over that standing inertia where a lot of those
organizations go, “This isn’t working. This isn’t working.”
They’re not waiting enough.

So, to answer your question, the organization that comes to mind
immediately that does this extremely well is Habitat for
Humanity International. They’re very clear about who they
are. They know their donor profiles inside and out. They
know the affinity and ability answers down to the third
place and have a pipeline just like we’re looking at right
here or something very similar to that. This is a federated
charity, so I’m talking about the international
organization, not the individual chapters. But the
international organization-70 percent of their income is
generated through individual giving. That’s pretty
impressive.

Steven Shattuck: Yeah.

Larry C. Johnson: And as a result, they have tremendous retention,
tremendous throughput and they have a lot of cash coming in
the door.

Steven Shattuck: Right. Well, cool. While we’re on this graphic, you
mentioned capital campaigns. We had a few questions in the
chat room about capital campaigns. One of them comes from
Lita. Lita, if I’m mispronouncing your name, I’m so sorry
about that. But she was wondering, “Larry, what strategies
do you have for not losing annual donors through the
capital campaign?”

So, I think the concern there is maybe you have an annual donor, you
present the capital campaign to them, they gift to that but
then they stop renewing afterwards. So, how do you keep a
hold of those people but still get them to give to that
capital campaign and stay in that cycle over the years.

Larry C. Johnson: Okay. I think I heard two questions. Is the question
asking them for an annual gift at the same time you’re
asking for capital?

Steven Shattuck: I think retaining gift.

Larry C. Johnson: Well, my experience has been-of course, it’s very
counter-intuitive because you said the concern is, “Blah,
blah, blah”-my experience has been that if it’s positioned
correctly, if people understand what the annual fund is for
and they understand what the capital campaign is for, they
will make a rational decision based on their affinity to
the organization about where their dollars go.

Now, add in the fact that studies at Boston College and at the
University of Indiana’s Center for Philanthropy all
demonstrate that philanthropy is an elastic variable. It is
not static. So, it is not a matter of, “If you get yours, I
won’t get mine.” It’s a matter of, “How do we pick up more
of the money that’s out there that’s being left on the
table.” That’s really hard for a lot of people to grasp.
Part of it is a scarcity mentality. “There’s just not
enough out there. I can’t get enough.”

My experience has been that it’s actually the reverse. But you have
to take that step of saying you have to be very confident
with it. Not that everyone is going to step up and do
exactly what I said-absolutely not.

But overall, if you look at the universities because they are the
ones that are probably the most sophisticated with this
kind of ask that you’re talking about, is they’ve managed
very well to maintain or grow annual funds at the same time
that they’re having capital campaigns. Actually, if it’s
managed appropriately, it’s a way to bring new donors into
the fold in an annual fund type of giving at the same time
that you’re running a campaign.

Steven Shattuck: Right. Rita just said, “The excitement of the
capital campaign is usually more attractive than just being
an annual donor.” Would you agree with that? I think that
makes sense.

Larry C. Johnson: Oh, yeah. People want to be a part of a winner. They
want to be part of an organization that’s doing things. Let
me give you one example of how the demography of
philanthropists is changing. When I first got into this
business, you never ever-or I never did-get the outcome and
effectiveness types of questions for a gift unless you were
dealing with someone who was considering a gift of at least
six figures.

Now, with people under the age of 40 or definitely under the age of
30, they’re asking those questions for a gift of $50. This
has caught a lot of nonprofits off balance. They don’t know
quite how to respond to this, mainly because a lot of them
are still driven by this program model, “Give to my program
and let me do it and I’ll get back to you.” Well, that’s
not going to work with today’s philanthropists.

Steven Shattuck: Absolutely.

Larry C. Johnson: So, yeah. Excitement-“Let’s be fun. Let’s make it
exciting.” You see, you’re really giving donors an
opportunity to share in your vision and to realize their
own values. That’s what you’re doing. You’re not going with
your cap in hand. You’re not begging these people under
duress, at least you shouldn’t be or trying to. You’re
really giving them an opportunity. The subtitle of my book
is, “Eliminating Fundraising Anxiety.” If you begin to look
at fundraising this way, a lot of the anxiety goes away
because you’re not actually taking. You’re actually giving.

Steven Shattuck: Yeah. That’s great. So, I really loved what you said
about progression being something you should worry about
after retention. I think that also piqued some people’s
interest. So, regarding your core building blocks-and you
mentioned that, “Hey, you’re not going to impress anyone by
asking for a small gift.”

And Nancy in the chat room was wondering, “How do you determine what
that top potential gift is? How do you determine what the
ceiling is when you’re going after ‘major gifts’ and trying
to avoid asking for a small amount?”

Larry C. Johnson: Well, this is where there is some science to it, but
this is also where we get into some of the art of
fundraising-that gut feeling. There are lots of services
that will give you-you can buy lists, you can do marketing
screening, you can do asset, income screening. These things
are not perfect. They’re better than they used to be.
They’re less expensive than they used to be, but they’re
not perfect. They’re simply rough cuts that begin to break
down your donor base.

But a lot of that is really fine-tuned when you look at donor
behavior. You bring somebody in the door and you ask for
what’s considered to be an entry-level gift. And depending
on where you are in your general constituency, you’re going
to know what that is. You’re going to know whether it’s $50
or $500. You’re going to have a sense for that.

So, once people start giving at that entry level, the key, of course,
is to keep them giving. One of the things that you need to
do is find out why they’re giving to you in the first
place, which no one ever does. Well, how do you do that?
Well, one of the easiest ways to do that is to get on the
phone and ask them. They will tell you. You only have to do
a few of these to begin to see a pattern. Then you can
begin to know why and how important it is to them.

Based on that, if you see a pattern like they’re giving a couple
hundred dollars a year, you can begin to progress those at
a pretty healthy increment. And you can give them options
if you’re looking for an annual fund gift. It’s when they
get to that four-figure level, in my book, that they
warrant a face-to-face visit, even if it’s for a fairly
brief one.

Of course, the other thing I want to say is that you don’t want to
solicit people too often. That is the number one negative
that comes back on all the surveys. It’s soliciting people
to often. That’s why they often want to be solicited for
more but less frequently. The donors will tell you that if
you will ask them. Did that answer the question?

Steven Shattuck: Yeah. That was great. Don’t be afraid to ask, right?

Larry C. Johnson: Don’t be afraid to ask. The thing is you’re asking
them to share in your vision. If your vision is big enough
and expansive enough but not unreasonable-we’re not talking
about pie in the sky and totally out of bounds-but if it is
challenging, then they’re much more likely to respond
favorably. You’re not demanding. You’re not button-holding
people. You don’t want to push them up against the door so
that the next time they see you they cross the street.
That’s not what we’re trying to do here.

Steven Shattuck: Great. Well, Barbara has an interesting question
here. She’s wondering if you can mix transactional
fundraising donors and long-term consistent donors. I think
she’s asking how can you strike that balance between
transactional donors and those folks who give long-term?

Larry C. Johnson: Well, you need to make sure that they both qualify.
Let me respond to that. A lot of people that attend these
transactional events aren’t really donors at all. I call
them responders. They’re there for some other reason. The
boss told them to go to fill up the table. Somebody invited
them. It’s a place to network for business. There are all
sorts of reasons people show up for those things that have
nothing to do with why you’re raising the money. So, let’s
put those people off to the side for a minute. I would also
suggest to you that that is the bulk of people who come to
these things, number one.

The others who are there for some sort of mission-based reason-you
need to make sure that the event is designed in such a way
so that it opens the door for more things, that there’s
follow-up, that it’s fun and exciting but you don’t send
the message that you’re raising great tons of cash here.
You can also do it through something called the reverse
auction. You’re not really selling anything. You’re really
inviting people to make direct gifts in a top-down sort of
way. That requires some advanced planning.

I had a client that was really steep into this transactional
fundraising. They had one event that people clung to. It
was emotional for these people. You didn’t dare get rid of
this thing. I said, “Well, what are we going to do here?” I
said, “Here, why don’t you do this? Why don’t you do a
reverse auction?” So, what we did was we looked at some
giving patterns that already existed.

We knew some people that were going to be attending this thing
because it was a fun thing to do. We went out and in
advance we created an 80/20 chart like you would for a
capital campaign only at a lower level. We got a couple of
people at each of these levels to agree to make gifts so
that when we got into the event and all the excitement was
going and the auctioneer says, “Can we have a direct gift
of $10,000?” We had a stray person in the audience that
said, “Yes.”

And it stunned a lot of people. As a result, they raised six or eight
times more than they ever raised in that event in its 30-40
year history because, again, there was some peer
competition.

Some arts organizations do this very well. The premiums or the things
that are simply props, for instance the value of something
may be $1,500 and the bidding starts at $20,000. So, it
ceases to be a transaction. The whole dynamics and
psychology of the event have changed.

Steven Shattuck: Great. Well, we’ve got a question here from Pablo.
It sounds like Pablo works in the higher ed sector. He’s
got a question about wondering what a good approach is to
getting new young donors interested in giving back to their
alma mater. Is that a type of organization that you work
with, Larry? What kind of tips do you have for getting
maybe a new graduate to give back to their school?

Larry C. Johnson: Well, that’s actually where I had a lot of my
experience. I served as Chief Advancement Officer for four
institutions of higher learning. This is always an issue.
High alumni participation rates are the coin of the realm.
There are all sorts of ways of doing this. I would suggest
to you that if you’re serious about improving your numbers
there, it starts while these people are in school. It
starts a couple of ways.

In one of the institutions that I served, a small liberal arts
college, we instituted a young philanthropy council, where
we had a foundation that made an ongoing grant to give
away. And these students were empowered to do that. But I
added a requirement to that. They had to be donors
themselves, even if it was coffee money. They had to be
participants in the process themselves. It’s amazing what
that does.

Now, this also assumes that students are having a reasonably positive
experience. There’s nothing that undercuts fundraising than
for someone to have a negative experience. In higher ed,
you don’t have a lot of control over that.

As a fundraiser, you can do all the right things and if they’ve been
really alienated by a faculty member or a bureaucrat or
somebody else, it’s tough to turn them around. But barring
that, you want to get them involved before they ever leave
school. So, they had this idea of these senior giving
projects.

And then the key, of course, is relentless, continual follow-up and,
of course, asking them questions. “What did you like about
your experience? What could we do better?” And then at my
alma mater, it’s very well-developed in terms of how you’re
involved in the lives of other incoming students or other
activities. It’s a sense of being a member of the tribe.

But as far as a young person, it starts before they leave and then
it’s that first year or two after they leave school that
you really have to keep close contact on them, even if
they’re going to graduate school or someplace else. Giving
may be a really minor thing. Fine. Wonderful. Stay with it.
Keep with it over time. That’s the difference.

Steven Shattuck: Great. I love those ideas. That was great. Well,
we’ve got a question from Kate. It’s a question that we
usually get at least once on all of our webinars that we do
once a week. It’s one of my favorite questions and I’m
really excited to hear what your answer is, Larry.

Larry C. Johnson: I can step my foot into this one fast.

Steven Shattuck: You’ll be great. She’s asking about buy-ins. So, how
do you convince management and your board and all those
folks that this stuff is important, that all the things
you’re saying are important, that fundraising should be
about the long-term? What advice would you have for Kate
who’s trying to get buy-in from leadership on this kind of
stuff?

Larry C. Johnson: Well, let’s take it at two levels. In terms of basic
philosophical approach, in order to be successful these
individuals you just mentioned all have to be active donors
themselves. They have to be. Now, for those of you out
there that are poker players, you know that to sit at a
table with the game, you must participate in the blind. You
have to or else you’re not there. You don’t get dealt a
hand.

This is where the peer pressure can be very, very useful, say, on a
governing board where it becomes, “It’s something that we
do here.” And that doesn’t mean that everyone gives it a
deep figure at a deep pocket level. People give at a
commensurate level. That’s why I’m not an advocate for
minimums and this kind of thing. But it’s real a
commensurate level because groups seek their own natural
equilibrium.

That’s the goal-that everyone on a governing board or everyone on a
staff are as close to 100 percent as you can get. Then,
they’re giving at a level that makes sense for them in
their situation. Other people know that. You don’t have to
go around with a sandwich board on your back. Other people
know. It’s just there.

Now, how do you get there if you’re not there now? Well, can become
touchy. It’s something that doesn’t happen immediately.
Since fundraising is an inside-out, top-down kind of
enterprise, the best way to do that would be to begin to
get a core group of two or three of your board members to
really get this idea and embrace it and begin to work with
it on the board and change the culture of the board over
time. If you’re serious about it and you’re consistent with
it, people that have been enlisted on your board without
that being part of the social contract will begin to self-
select off.

Once they do that, then the key is that when new people are enlisted,
that active, ongoing financial contributions are a part of
the job description and you don’t vary from that. That’s
just a non-negotiable. It’s not that you’re in your face
with them, it’s just that you don’t negotiate that. Then
you’re going to gradually turn that wheel to where you need
to be.

There’s nothing more powerful to a donor than knowing that the
leadership is 100 percent committed with their own funds
and that staff give at a high level. Not that staff at a
nonprofit make a lot of money-that’s not the point. The
point is that they believe enough in the organization to
say, “Hey, even for a small amount, I’m in. I belong.”
That’s very, very powerful.

Steven Shattuck: Great. Well, we’ve probably got time for a couple
more questions. I know we’re approaching the 2:00 Eastern
hour. But we’ll try to get to as many as we can in the next
five or ten minutes or so. So, we’ve got a question from
Doug. He’s aware of how powerful social media and email can
be for fundraising. But he’s wondering if direct mail still
plays a major part.

So, Larry, what are your thoughts on using direct mail, like
postcards and newsletters for communicating some of these
things? Is it still useful? Is it something that people
should maybe not focus on as much? What do you think about
direct mail?

Larry C. Johnson: Well, let’s go back to looking at his donor base. I
would say the first thing I would find out is who the donor
base is, what their demography is, what is it that they
want? For instance, this person over 65 is generally going
to want something in the mail. They’re going to want
something hand-addressed. The young man or young woman
who’s 23 or 24 probably wants it in a text message on their
smartphone. The key becomes what does your donor want?

Let’s go back again to the whole premise of our webinar today, which
is that you have to treat different donors differently.
There is no one size fits all. So, to answer the question,
yes there’s a place for direct mail. Yes, there is a place
for text giving. Yes, there is a place for social media. It
all plays a role in a complete package. How it plays in
your particular program has a lot to do with who your
donors are or the kind of people you’re trying to attract.

Steven Shattuck: Great. Great. We’ve got a question here form Dale
about your 80/20 rule. He wrote a lot here and I’m just
going to get to the meat of his question. He’s wondering
about that 20 percent. How do you transition the 80 percent
into that active 20 percent or so? What are some strategies
you would share with Dale and some of those people on the
other side of that?

Larry C. Johnson: Well, I’m not sure I understand the question. Here’s
where I’m going with that. When I say 80/20, what I mean is
that without fail, when you look at gifts that are given in
any program-and you have to look at it in terms of the
total program-that 80 percent of the total that you’re
receiving in any given time period is coming from roughly
20 percent of the sources that are giving. That will vary
depending on the kind of organization that you have.

For instance, arts organizations tend to be more narrow. They tend to
have a higher percentage with fewer people. Community-
based, youth-based, social service types of organizations-
that is a little flatter. It can be 30/70 or even more.

So, what I say there is that’s a given. That’s going to happen. It
goes back to treating different donors differently so that
you want to maintain and maximize what’s going to come your
way. The 80/20 is just what comes in naturally. That’s
what’s going to be there even if you try to contrive it.

Steven Shattuck: Yeah. I think that works. I would just add a follow-
up question. For that 80 percent that’s not giving as much-

Larry C. Johnson: Or giving a smaller amount.

Steven Shattuck: Yeah. Do you think that people necessarily have to
spend a lot of time trying to get them to give more or do
you think that time should be better spent on maybe
retaining that 20 percent who’s giving a little bit more
and a little bit more often?

Larry C. Johnson: Well, you definitely want a high retention.
Absolutely that is key for scalability. People do what they
want to do. One of the things that’s probably the most
important thing that’s driving that 80/20 is that people
have different giving capacities. There are some people who
can write a five-figure check for which that would be a
weekend out. For others, that would be a lifetime of
savings. So, naturally, you’re not going to convince the
person for whom five figures is an unreachable goal to get
anywhere close to that.

What you want is people giving at a commensurate level. That’s the
key-whatever that level is. What I would assert to you is
that very, very few organizations ever get close to that
with the bulk of the people who make gifts to them,
whatever that is. Even given that, if they were to approach
that, I think you’d still see some formula of this 80/20
operating, simply because of income distribution.

Steven Shattuck: Right. Well, we’ve got about five minutes left. I
think we’ll do one more question and wrap things up. I know
we didn’t get to all of the questions. I feel like Larry
and I could probably talk about this stuff all day but I do
want to keep it to an hour just to be respectful to
everyone’s time.

So, why don’t we end it with one last question? It comes from Ginny.
She’s got an all-volunteer organization that’s just getting
started. So, Larry, I’m wondering what advice you would
give to an organization who is just getting started with
all this? What are some tips you would have to have them
dip their toes into this water and get some things going
that you’ve suggested here?

Larry C. Johnson: Her name is Jenny?

Steven Shattuck: Ginny. Yes.

Larry C. Johnson: Ginny. So, Ginny, I think you’re in a very enviable
position. I say that in all sincerity because of several
things. First of all, volunteers are the lifeblood of
philanthropy. The most effective fundraising, if it’s done
appropriately, are done through volunteers. All the
professional stuff aside, I can tell you that they are the
lifeblood. So, having volunteers who are well-motivated and
who believe in the cause for whatever it is you’re doing is
wonderful.

The fact that you’re just starting-you don’t have any bad habits to
undo. And that’s often more difficult. It’s like, I don’t
play golf very well and I’ve had lessons a couple of times.
It doesn’t seem to have taken on me. One of my golf pros
said to me, “Well, Larry, the good news is you don’t have
any bad habits to undo.”

Well, it’s the same way in this. You don’t have any bad habits. So,
the key for you is going to be to start off in the right
way knowing where the boundaries are, and that would be
with your governing board, the people who believe in this
cause and want to make it happen and have them do the right
things all the time and begin to give their time.

You see, a lot of people think that fundraisers are like bounty
hunters or gunslingers. The most effective ones are much
more like program managers. They’re staffing a lot of
different people who have a place in the whole process. For
instance, one of the reasons you have a board is for them
to advocate the organization to everyone they know. People
kind of think, “Oh, fundraising is all about asking.” Well,
asking is a very small part of it, actually.

So, for you just starting out, I’d make sure that you have a board
that’s committed, both in terms of time and money to the
extent of their ability, and that they are willing to start
building their network of people that they know that they
can share what a wonderful, great organization this is and
they want them to be a part of that. That’s the place to
begin. It’s an inside-out thing. Principle 5 of the eight
principles is, “Work from the inside-out.” That’s what you
do. You don’t have to reach everybody out there. Start with
the people that you know support you and begin working out
slowly.

Steven Shattuck: Great. Well, Larry, this was just a lot of fun for
you to be here and have this lively discussion with us. So,
thanks again for joining us. I know we didn’t get to all
the questions. But maybe in the time remaining, you could
let folks know how they can learn more about you and maybe
how they can contact you. I know you’re a Twitter guy. So,
maybe some folks can send some questions over via Twitter.

Larry C. Johnson: Well, I’m on Twitter, @Larry_C_Johnson. I’m on
LinkedIn. You can go to my website, which is
TheEightPrinciples.com. The book is available in any number
of formats in any number of places-Amazon, iBooks, it’s
available on the website, it’s on Barnes & Noble. I even
discovered that Walmart is selling it.

Steven Shattuck: Nice.

Larry C. Johnson: That was a surprise. It’s electronic or hardbound.
You can reach me via email. It’s simply
Larry@TheEightPrinciples.com. And to Steve-if you’ll supply
me with a log of unanswered questions and emails, I’ll try
to respond to those that we’re not able to respond to.

Steven Shattuck: Definitely. And for those of you who have joined us,
when this webinar ends, you’ll be presented with a little
survey form. So, feel free to send any questions over
through that form. I’ll be sure to send those over to
Larry.

And please do share your feedback with us. I do these webinars once a
week here at Bloomerang. I’m always looking for feedback
and suggestions. You won’t hurt my feelings at all. I don’t
think you’ll hurt Larry’s feelings if you share some
feedback with us. So, do fill out that form and we’ll be
back in touch with you a little later on.

This afternoon, I will be sending out the slides and a recording of
this presentation. So, look for that to hit your email
inbox a little later today.

And just in the few seconds we have remaining, we’ve got some really
great webinars scheduled for December. These are all free.
They’re all totally educational. So, we’ve got three
planned. We’re going to be talking about NCOA and some mail
merges and email and all those great things. We’ll be
talking about content marketing the week after. And then
we’re going to have Jeff Jowdy, who’s going to talk a
little bit about planned giving plans. So, visit our
website. Register for those, for sure. You don’t want to
miss any of those. They’ll be great presentations.

So, I want to send just a final thanks to Larry Johnson. Larry,
thanks for joining us again. A really fantastic
conversation-I hope you enjoyed it as much as I did.

Larry C. Johnson: It was my pleasure. I wish a happy Thanksgiving to
everyone out there.

Steven Shattuck: Yeah. Happy Thanksgiving. Well, thanks to everyone
who joined us. Have a great rest of your day. Have a great
Thanksgiving holiday and weekend. Bye now.

Larry C. Johnson: Bye, bye.

Major gift fundraising

Kristen Hay

Kristen Hay

Marketing Manager at Bloomerang
Kristen Hay is the Marketing Manager at Bloomerang. From 2018 - 2020, she served as the Director of Communications for the Public Relations Society of America's local Hoosier chapter. Prior to that she served on several different committees and in committee chair roles.