What is the donor retention problem and how do nonprofits solve it?
In this video, Amy Eisenstein sits down with Claire Axelrad, fundraising coach, blogger and creator of Clairification — her own mini online fundraising school, to discuss how you can increase donor retention at your nonprofit.
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Amy: Hi, I’m Amy Eisenstein. Today, I have Claire Axelrad here with me. She is a fundraising expert. Has been in the field for more than 30 years, and now runs the site Clairification where she has one of the most popular and well-respected blogs in our field. I am thrilled she’s here with us today. Hi, Claire. Welcome.
Claire: Hi, Amy. It’s a pleasure.
Amy: Welcome thanks for joining us. So today we’re going to talk about donor retention. So tell me why this is such a hot topic and an important topic?
Claire: Well, if you’re familiar with the fundraising effectiveness project they’ve been studying donor retention since 2006. And it’s been getting worse and worse and worse every year. The results are just totally depressing. There’s so many nonprofits that focus on retention, and then the average is you’re keeping 23% of those donors you bring in.
Amy: Yes, and just in case somebody doesn’t know what we’re talking about in terms of donor retention, it’s the donors that you keep from year to year who give to you year after year after year. And I think it’s interesting that you say so many nonprofits are focused on donor retention because I think the problem is that, so many nonprofits aren’t focused enough on donor retention. But I didn’t mean to cut you off keep going.
Claire: Well, if I said that I thought they were all focused on retention, I misspoke.
Amy: No, you said a lot of them are, but that’s okay.
Claire: I think what they are focused on is complaining that they’re losing their donors. But what they’re not focused on is prioritizing, fixing the problem. And a lot of nonprofits actually don’t even know that they have a problem which is one of the reasons they don’t focus on fixing it. So that’s one of the things I tell people is you’ve got to face this problem head-on. Do you even know you have a problem?
Amy: Yes, because if they don’t what do they do? How do they figure this out?
Claire: Yes, I mean you can’t just go, “Oh, we got a thousand new donors in last year. Woohoo. We’re so happy.” Because by the end of five years you’re going to have 30 of those people left. And if you think of that as a bucket full of water, a bucket full of donors, if you only had those donors, 30 of them and you wouldn’t be able to point your organization.
Amy: Walk us through the math. What do you mean if you’re starting out with this many donors and in five years you’re only going to have 30 donors? How’d you get there?
Claire: Okay, thousand donors you retain 23% of them, first-time donors. So you have 230. Once you retain them once though, you keep 60% of them. So retaining them that first time is like crucially important.
Amy: Yes. So if you can get them to make a second gift, your retention rates go up significantly. In fact they double.
Amy: So then you’ll do much better. So the important thing is to know how many of your donors are coming back year after year.
Claire: And then you’ve got to get your head in the game. And I say this because commercial enterprises understand it is way more cost-effective to renew an existing customer than try to get a new customer. And they keep 9.4 out of 10 of their new customers. We keep 2.3 out of 10.
Amy: That’s terrible.
Claire: It’s terrible. So what are they doing that we’re not doing and that’s why I say, they’ve got their head in the right game. They’ve got their head in the customer retention, customer support game. They say the customer is always right. They do all sorts of things oriented to two things. Building donor loyalty or building customer loyalty, and building relationships with them.
And they study this. They put lots of money into it. They know it’s that important. So I say, hey, let’s borrow from some of their research, borrow from some of that money that they’ve spent and look at what is working to keep people loyal.
Amy: Good. What are a few things that nonprofits that don’t have money to do research can do to keep their donors loyal?
Claire: It’s not that hard. There is a study that just came out by the Temkin Group. Bruce Tempkin calls himself a customer relationship transformist. And I think we should be donor relationship transformists. And what he found is, this is going to sound very common sense, positive emotions drive loyalty. So they looked at all these interactions that customers had with a whole range of businesses and the number two and three emotions that drove loyalty were, they felt appreciated, they felt excited, and they were happy. And the two emotions that drove them away, they felt frustrated, they felt disappointed.
Amy: Interesting. So how can we make our donors feel happy and excited and not disappointed or frustrated? So do you have any easy tips for nonprofits, the actions they can take?
Claire: Well, the easiest one is just to ask that old, what’s in it for the donor? The donor is always asking that every time they consider even opening an email, what’s in this for me. So you always have to be asking that question. You have to be thinking what is the donor going to feel when they read this. What do you want them to feel? And there there’s been other studies that have shown that what donors want and what we want to tell them are completely different.
Claire: They want to know you made a great investment, you’re smart, you’re a hero, you’re appreciated, and most fundamentally, you solved a problem.
Amy: So what I hear you saying is be focused on the donor and not on the organization. We know that too many organizations, their newsletters and their communications are all about what we did as the organization as opposed to what you did the donor. So really focused on the donor and thinking about how can we be talking really to the donor.
Claire: Exactly, and not, it’s time to put out a newsletter because its May and we always put out a newsletter in May and like what can we stuff it with and your ED says, “Oh, we just won this award. I want that in there. We just started this new program. I want that in there.” But you go like, “No. We have to put stuff in there that the donor would care about,” and maybe May isn’t a good time. Maybe there’s nothing even really that new but fill it full of what I call content marketing gifts.
If you want gifts you have to give gifts and we as nonprofits have so many gifts we have stories that make people feel all warm and fuzzy, we have things that are just hiding in plain sight. I used to work for a comprehensive human services organization, one day I went into our parent’s place program, I was waiting for a meeting. They have tips for moms and dads, and I was sitting, there was a file drawer there and it said, “Tips for new moms and dads.” So I opened it up and there was like tip sheet after tip sheet after tip sheet how to baby proof your home, how to stop bullying, and I thought . . .
Amy: Really useful stuff.
Claire: Useful stuff our constituents would want to see.
Amy: Yes, that’s great. Excellent. All right. So organizations need to focus on donor retention and if they can focus enough on their new donors to make them second time donors, so if turning first-time donors into repeat donors is key for success in terms of retention. So okay good. What’s another takeaway?
Claire: The most important one that anybody can do is send a thank-you, a prompt, personal, powerfully evocative of the impact of the work thank you. And this in psychological terms it sets up what’s called a functional satisfaction based connection. In other words I gave my gift, you’ve satisfied me that you got my gift, you’re going to put it to work the way I wanted it to be and all is good. I’m not sitting there wondering what happened to that.
Amy: Okay. So thank your donors promptly and personally.
Claire: Personally gets into the next driver. All the other drivers our relationship building drivers. When you think about it, relationship is fundamental because imagine you go out on a blind date or an online dating site and you go to coffee with somebody, and you meet, and you have a nice time. And then you go away, and you don’t thank them.
Well they don’t know that you had a good time. But let’s say you do thank them, text them, “Nice date.” After that they’re left wondering and if you do nothing after that to build the relationship if six months down the line you come to them and say, “Hi, want to go on a date?” They’re kind of like, “What? You forgot about me.”
Amy: Great analogy. So stay in touch. Good. One more thing that our organizations can do?
Claire: Gratitude. I would say there’s a lot of talk about culture of philanthropy. I call it a culture of gratitude. Gratitude, sort of it’s a shift, it’s a cultural shift, and it’s an individual mental shift of thinking about your donors in a sense of, what am I grateful to my donor for very specifically. And it’s not money. It’s what they help make possible and what I really like to do . . . because it’s a practice and gratitude is so powerful. There’s been so much research on it that it makes you happier, it makes the gratitude recipient happier, it makes you healthier, it brings down your blood pressure. I mean it’s like so many things that are good.
But you have to practice it. It’s not that easy, so I like to keep a donor gratitude journal, just have it on my desk and make it a practice like at least once a day to write down something really specific, I’m thankful to one of my donors for, and it could even be, “Thank you, Joe, for bringing in coffee cake at the meeting.”
Amy: That’s interesting. Really focusing on seeing your donors as an integral part of your organization. They’re the ones that are helping find a cure. They’re the ones that are helping solve homelessness. They’re not just ATM machines that you go to when you need an infusion of cash, but really being grateful, expressing that gratitude. And I think it is hard sometimes for development directors who are frustrated when the donation maybe isn’t as big as that they hoped. So I think it does come back to gratitude over and over again. All right. Good. Last words of wisdom for our viewers on retention and what they could do.
Claire: I think what I always tell people is that fundamentally the business that we’re in is the happiness delivery business. So it’s really not about emptying people’s pockets. It’s about inviting them to join us in doing something where they can enact their values in a meaningful way, in a way they really want to, but they don’t know how to do it by themselves, so we are philanthropy facilitators.
Amy: I love that.
Claire: We are helping them with philanthropy, meaning love of humankind. It’s what they really want to do, and you have to hold donors at the heart of your mission. They don’t serve us, we serve them. We give them meaning, and they give us something meaningful in return. And that’s really the fundamental value for a value exchange that is at the heart of all successful fundraising and building of long-term donor relationships.
Claire: Be a happiness deliverer.
Amy: I love it. I think from now on when people ask me what I do, I’m going to say I’m a philanthropy facilitator. How fabulous is that? Listen, thank you so much for joining me. I’ve loved having you. Thanks for being here.
Claire: Thank you, Amy. It was a pleasure.