On September 16th, the Fundraising Effectiveness Project (FEP) released the findings from their 2013 survey. For the first time in five years, charity respondents saw positive gains in giving, but still continued to lose donors faster than they gained them.

Erik J. Daubert MBA, ACFRE, a key contributor to the FEP report, joined us to discuss the data from a fundraiser’s perspective and explain why understanding donor retention is so vital to every fundraiser. In case you missed it, you can watch a replay here:

Full Transcript:

Steven Shattuck: All right, Erik and Jay. I’ve got one o’clock. Do you want
to get started? Okay, great. Good afternoon to those of you
on the East Coast. And good morning if you’re on the West.
Thanks for joining us for today’s webinar, “Why the FEP
Donor Retention Data is So Vital to Every Fundraiser.” My
name is Steven Shattuck, and I’m the VP of Marketing here
at Bloomerang. And I’ll be monitoring today’s discussion.
And today, I’m just really, really pleased to welcome our
special guest, Erik Daubert. Hey there, Erik.

Erik DaubertErik Daubert: Hey, Steven. Thanks for having me.

Steven: Great of you to be here. And for those of you who don’t know
Erik, Erik is regarding as a leader in the areas of
financial development and nonprofit management. In addition
to having a broad-based career in non-profits, he’s also
served as a consultant and a founding partner in multiple
nonprofit and for-profit organizations. And he’s written a
lot. He’s written several publications on fundraising, on
nonprofit management. He’s written books and articles on
topics ranging from capital endowments to major gifts,
donor cultivation, volunteer management, all that good
stuff. His latest book that he coauthored is entitled
“Strategies and Tools to Raise Money,” which is published
through Wiley.

He currently serves as chair of the Growth in Giving
Initiative and is an affiliated scholar with the Center on
Nonprofits and Philanthropy at The Urban Institute. And
what he’s going to do today is he’s going to talk a little
bit about his work at those organizations and some of the
work he’s done with the Fundraising Effectiveness Project.
Erik, it’s just really a joy to have you here, so thanks
again for taking an hour or so out of your day to share
some knowledge. We’re really excited to have you.

Erik: And thrilling for me, Steven. And thank you for that very kind
introduction. The Growth in Giving Initiative is a project
that is really very, very close to my heart, and I’m
excited to be with you talking on it.

Steven: Cool. And also joining us, as he always does on our webinars,
is Jay Love. He’s the founder and CEO over here at
Bloomerang. Hey there, Jay.

Jay Love: Hey. Good afternoon, Steven.

Steven: Thanks for being with us. This should be a really fun
discussion. What’s going to happen is Erik is going to go
ahead and kick things off. He’s going to share his
presentation. He’s going to talk about the FEP report. He’s
going to talk about donor retention. And as soon as he’s
finished, Jay’s going to share a few thoughts he has about
donor retention as well.

Following their presentations, we’ll jump right into our
Q&A session, as we always do on these Bloomerang webinars.
So, if you hear anything during the presentation you want
clarified or maybe explained a little bit further, do not
hesitate to send any questions over through that chat box
right there on your screen. I’ll see those, and so will
Erik and Jay. And we’ll try to answer just as many
questions as we can before the two o’clock Eastern hour.
Last bit of housekeeping before we begin; I will be sending
out the slides and a recording of the presentation a little
later this afternoon. So, look for that to hit your email
inbox a little later today, in case you have to leave early
or want to review the content a little later. Erik, I’m not
going to take up any more time. Go ahead and kick it off
for us.

Erik: Again, thanks, Steven, for those kind introductions. I’m excited
today to be able to talk about a project and initiative
that is really very, very close to my heart, because I see
the magnitude and the power of change that it can bring to
philanthropy and the philanthropic sector, not only
potentially in the United States, but also the world.
That’s really a big introduction, but let me show you on
the slide a little bit about what we’re trying to do
through the Growth in Giving Initiative. What we’ve done,
through the help of the Urban Institute and the Association
of Fundraising Professionals and sponsors like
DonorPerfect, the software and the Seventh Day Adventist
Church, is create a Growth in Giving Initiative Project.
And it takes a bunch of nonprofit and for-profit partners.
We are currently tracking the data of thousands of
nonprofit organizations through partnerships with
organizations like Bloomerang to understand the
philanthropic behavior of donors and the whole
philanthropic sector as a whole. And because we’re able to
track anonymous gift transactions, we’re able to really
begin to understand and really get a good look at the
entire philanthropic picture that is philanthropy in the
United States. So, that’s kind of a big, bold overview,
which kind of feeds into the second bullet of our goal,
which is, our goal is to understand the philanthropic
sector. In fact, Jay Love serves with the IU Center of
Philanthropy through the Lily Family School of
Philanthropy, and they’ve been tracking what percentage of
GDP goes out to philanthropy. And over the last 50 years,
that has maintained a steady number of about 2%. And our
goal is to figure out ways to move that needle.

There’s lots of things that we can learn from research, and
there’s lots of projects that we have involving this. One
we’re going to talk a little bit about today is the
Fundraising Fitness Test. And I’ll introduce you to some of
the key concepts that come out of maybe running a
fundraising fitness test on your own organization. I’m
going to show you how you can do that free of charge by the
end of this session. Some other things we’re doing is we’re
really going deep into the world of fundraising analytics.
I’ll show you some breakout analysis of what some of our
fundraising analytics might be able to do for your
organization. From this, we’re working on various research
projects. We’re convening groups of people around the topic
of donor retention, gift retention, key concepts such as
these in the Growth in Giving world. We’ve compiled a
database, again, with probably, I think at this point we
have over a hundred and ten million gift transactions. The
Urban Institute is parenting this project in many ways and
building a database that we can use to build

[inaudible
06:55] and new training and education like this one. And
we’re even doing some peripheral projects such as FEP
Canada, which is beginning to understand the philanthropic
landscape of Canada.

On top of that, we’re also doing the Fundraising
Effectiveness Project, which is really a project we’ve
become very well-known for in the philanthropic sector.
It’s been talked about in places like Money magazine and
the Wall Street Journal and other places and more
mainstream publications. Really one of the things that’s
most exciting about it is it helps nonprofit organizations
really compare their annual growth in contributions by
understanding their gains and losses in giving. And I’m
going to go into this a little bit more in a couple future
slides, but the essence of the idea is that there’s a lot
more happening to your fundraising goals and to the
fundraising at your organization than is just understood by
“Hey, we made our dollar goal” or “Hey, we made our goal,”
however you have typically summarized that. And the thing
that we’re really beginning and have understood for many
years now at the Fundraising Effectiveness Project is that
the way you increase your net growth in giving is by
maximizing your gains and minimizing your losses. This
sounds like kind of a basic concept, but you’ll see,
hopefully, by the time we’re done that it’s really kind of
revolutionary. And hopefully, by the end of this session,
you’ll be looking at your fundraising a little differently
than when you started.

I’ll start off by, how do a lot of us look at fundraising?
I know as a professional fundraiser, a lot of the typical
metrics that we’re measured on are the things like the ones
on this slide. Did we make our goal? I can’t tell you how
many times as a professional fundraiser I’ve been asked,
“Oh, you’re a fundraiser? What’s your goal for this year?”
And then you say, “Well, it’s X dollars.” And at the end of
the year, people say, “Did you make your goal?” And you
say, “Yeah, we raised X plus one dollars” and everybody
celebrates – or X plus a million dollars or whatever your
numbers are. And you say, “Hey, we did a great job.” This
is one very viable way to look at fundraising. I’m not
saying this is a bad way to look at fundraising. What I’m
encouraging you to do is, again, to understand that there
are deeper, maybe better ways to look at fundraising goals.
A lot of questions that we ask in our profession are: Is
our board satisfied? Did we make our budget? Was our
mission fulfilled enough? I use the word “enough,” because
we tend to go, “Well, for an organization of this size, I
think we’re doing really well.” Organizations tend to do
that whether they’re a big organization or a small
organization. And of course, this next one, one that all of
us have lived with is, “Hey, is my CEO happy? If my CEO is
happy with the amount of money that we’ve been raising,
then I’ll probably have my job for another year, and won’t
this be great.”

These are all viable ways to look at fundraising, but
here’s how we look at it at the Fundraising Effectiveness
Project. And these are just a very few of some key
indicators that we use to say, “Hey, how are you doing
really?” So, let’s just talk about these very quickly. A
few I’m going to talk about today are in here, but one
let’s start off, which is a big one, is donor retention.
Now, the Fundraising Effectiveness Project has been talking
about donor retention for many years. And we’re very
excited that the language is catching on a little bit more
in the landscape – that is, the philanthropic community and
even the broader community at large. So, again, donor
retention – how are you doing retaining your donors? Gift
retention – how are you doing retaining the actual gifts
that people make? If somebody gave you a thousand dollars
last year, how are you doing at getting that gift again in
this year? What are you doing to upgrade your donors? If
somebody gave you a $50 gift last year, do you have a
process? Are you being intentional? How are you doing with
upgrading your donors, which is a very [inaudible 10:43] in
the annual campaigns and regular fundraising efforts? And
then, what are you doing to prevent downgrades in lapsed
donors? It’s common sense that it takes more money to get a
new donor than to retain an old one. And there is some
research out there that shows this that I won’t quote
today, but our goal should be to keep as many donors and
gifts as we can, regardless of what our ultimate dollar
goal is at the end of the year. And I’ll show you some ways
that we can do that moving on.

One of the things I’m going to talk about – just a few key
areas. I’m going to bring a little bit of focus, if you
will, to these areas and talk specifically about donor
retention, gift retention, and upgrades. These are a few of
the more basic, easy to understand concepts that come out
of the Growth in Giving Initiative and the Fundraising
Effectiveness Project. And my goal will be to introduce you
to these concepts today, but also show you how they can be
very important in making your actual fundraising efforts
better at your organization. Let’s start off with donor
retention. Donor retention, to use a very simple
definition, is really the donors you keep versus the donors
you lose in any given time period. If you think about it,
that’s again, kind of a basic concept. The bottom line is
you really want to keep your donors and not lose them. All
of us work hard to get donors, and donors work hard to
connect with us oftentimes. Sometimes it happens by
happenstance, but there’s often a lot of good work that
goes on before you get a donor. Think about all the things
you do in terms of developing a case, developing
solicitation strategies, whether it’s direct mail or online
giving or personal face-to-face solicitation at your
organization. A lot of work goes into getting a donor, and
you want to keep them. And what the FEP does is it helps
you measure how well you do at donor retention.

So, let’s look at this concept a little bit further. It’s
really important to understand that not all donors are
created equal. And I wish I could say differently. I wish I
could say all donors are equal. But in 2014, it’s been said
that about 20% of the United States population owns about
90% of the US wealth. In whatever country you might be
listening in on for this particular webinar, there’s
usually a sector of society that is the haves, and there
are sectors of society that are have-nots. And that’s not
to say that we should disregard the have-nots at all, but I
want you to think about your donors in terms of who are the
donors your organization cannot afford to lose. Think about
those donors who make those major gifts to your
organization year in, year out. Who are these people?
Identifying them is first. So, now you’ve got to put
together your list of donors that you can’t afford to lose.
Then you need to look at those names, organizations,
entities, foundations, corporations – whoever they may be
in terms of donors – and say, “Which of these donors can
our organization affect positively? Who could we build a
better relationship with? Who could we connect more deeply
with? Who could we bring closer to our organization?” And
think about the strategies that you can devise for
individual groups of people. And this is another thing that
the Fundraising Effectiveness Project does. It shows you,
your organization, specifically, which donor segments you
can really move the needle on and have a tremendous impact
on your bottom line fundraising results. I’ll show you that
works in a minute. But again, your goal should be to
identify and design strategies specifically for your major
donor groups. And this is a group that we often remember
because they’re the big donors. They’re our biggest donors.
And organizations, if they do this well, tend to do donor
retention strategies well with that group. But what can you
do to build better donor retention strategies for mid-
sized, but very important donors, or even smaller donor
groups. So, we’ll talk about that in a second.

Let’s look now at the strategies you can use actually in
your specific development efforts. And what I kind of tried
to do in this slide was just point out the fact that you
need to first figure out which donor segments you can’t
afford to lose. And of course, that top one is always the
place that jumps out. So, think about what you can do in
your top donor levels to keep your largest donors. A couple
of just quick notes on this – if you can develop real and
personal relationships with these people so that they
understand who you are – and more importantly, oftentimes,
you understand who they are – you can really build strong
connections with these donors and understand what makes
them tick. And they can understand what makes you tick. You
can understand their pros, cons, strengths, weaknesses,
faults, blemishes, all the rest. And they can do the same
for you. I’ve found in a lot of my major donor
relationships that people understand that we’re not
perfect, but they love us anyway. I think when you build a
great relationship with a major donor, that’s how they
often feel.

And the idea here is to have regular and personal contact
so that they know what’s going on at your organization.
They know the great things that are happening in the
organization’s life. They know the great things that are
happening in terms of the day-to-day, the month-to-month,
the year-to-year – on whatever level of communication is
appropriate for them, because remember this is personal.
And you do the same with them. You know about the big
events that are happening in their life. You know when
their company goes public, or you know whatever their thing
might be in terms of working with them as a major donor.
The second bullet really speaks to a nugget, I think, that
comes out of the Fundraising Effectiveness Project, which
is you really want to understand what area of your donors
you can have the most impact on by improving donor
retention.

Now, here’s what I like to call the punch line of this.
Oftentimes, people think it’s just going to be the next
level down. And it might be. For this example, I’ve said it
could be $2,500 to $4,999, but the fact of the matter is it
might just be another level. I’ve seen organizations, where
what I’ll call the “sweet spot” of donor retention
improvement might actually be in this example more like
$250 to $499 donors, because there are so many $250 to $499
donors that if you could build a better donor retention
strategy for that segment, you could actually raise a lot
more money than you could if you improved your donor
retention in the $2,500 to $4,999 pool.

So, again, that kind of thinking can help us say what group
has the most potential – who within our donor database has
the most potential to improve and increase and enhance our
contribution and fundraising efforts at our organization.
And then as you look at this people – because remember,
donors are individuals. They are people just like you and
I, with resources that they want to give to charity. And
you need to look at them and ask yourself, how can I
connect with them in meaningful ways? What can I do to
improve our personal solicitation? What can I do to make my
solicitations more personal? Can I invite these people to
group gatherings if I can’t always have time for one-on-one
meetings? What can I do in the power that I have as a
development professional to improve the relations between
these donors and their gifts? There’s lots of things you
can do, and a couple are mentioned here.

The next thing I want to talk about is gift retention. Gift
retention is a lot like donor retention, but it’s just a
little bit different. And again, this is defined as the
gifts you get. It’s not just the donors anymore. Now we’re
looking at the behaviors of donors and their actions
through their gifts. So, it’s the gifts you keep versus the
gifts you lose in any year or set of years. And obviously,
we want to keep our gifts. We don’t want our $1,000 donor
to become a $50 donor. We don’t want our million-dollar
donor to become a $100,000 donor. Gift retention is about
“How am I doing in retaining my gifts?” And, again, it’s
important to understand that not all gifts, like donors,
are created equal. What gifts can you not afford to lose?
What gift ranges can you affect positively? And again, same
concept. What can you do with the strategies around major
gifts, mid-sized but very important gifts, and then the
smaller gift range groups?

So, again, having strategies for each one of these
development efforts is key. So, again, first step – define
what gifts you can’t afford to lose. And again, the
Fundraising Effectiveness Project and the Fundraising
Fitness Test can help you figure out these answers. They’re
not always as obvious as they seem. And then what you do
once you define the gifts is, again, develop strategies.
Same thing; personal, regular contact. It’s important that
you really understand the meaning of the word
“stewardship.” I think there’s an old adage, which is,
we’ve got to learn to say “thank you” better than we say
“please.” And it’s important to use “thank” and report back
on how gifts are used. “Thank you so much for your gift of
$1,000. That $1,000 changed the lives of children and
families in the following ways. Your gift means so much.”
And ideally, there’s that word, do that without asking,
again. Try to do the step of thanking and reporting back.
Penelope Burk has some outstanding research around this
topic that shows that 94% of donors always feel like we’re
coming to them when we want money. This is an opportunity
to say, “Hey, we value you. We value your gift. We’re
thanking you and reporting back, and we’re not asking.” So,
try and make that extra step every chance you can. And
again, ideally develop a stewardship plan that is specific
and intentional for every gift level. It’s not just “What
can we do for our largest donors?” It’s “What can we do for
those segments of donors where we have more potential?”
When there’s potential, always try to do more. If you’ve
got a major, major donor, potentially, who’s only giving
you a small gift, if you do a little bit more for them or
treat them more like a major donor, sometimes you’ll be
surprised. You’ll end up with a major donor gift.

One thing I wanted to touch on there is, as a development
professional, we have to segment our time. We’re always in
a challenge of “What’s the best way to use my time right
now?” And one thing that has helped me a lot in my career
is what I call, for lack of a better term, the 10% rule.
Basically, what this is, is if I’m working with a donor
population of a hundred donors, I say, “What’s my top 10%
of donors?” So, I look at all the gifts. I look at all the
donors. And I say, “Who are the top 10 donors?” And I go,
“Do I have time to build personal relationships, given all
I have to do I in my job, with 10 people?” And if the
answer is yes, then I go with those 10. If the answer is
something else, then you build from there. So, let’s say
that I have time to build with my top 25 donors. I go, “If
my top 10% is 10, I could do more. Well, what the next top
10%? Well, the next top 10% would be 9, which would be 10%
of 90 of the donors that are left.” And then I go from
there to ultimately get to the number of people that I can
deal with. Your goal, again, is to develop personal
relationships and develop strategies around each gift
level. So, if you can be really personal with the top
level, then what can you do to be somewhat personal with
the next level? And on and on it goes.

The last group I want to talk about is upgrading. And
ideally, again, upgrades are what gifts are growing bigger
through your efforts in your fundraising each year versus
the ones that stay the same or downgrade. And obviously, we
want to upgrade our gifts when we can. So, again, same
system. What gifts can I upgrade? What areas of gift range
can we affect most positively? Again, sometimes it’s the
$100 to $199 group that if you could just figure out how to
upgrade that segment, you could bring in a lot of money for
your organization and change a lot of lives.

So, looking at the segments of your gifts in terms of
upgrading can be a very helpful thing. In terms of
strategies, one of the things you want to do is say, “What
are we doing to bring donors closer to the organization?
How are they getting to know us better? Do we have regular
newsletters? Do we have regular reports? Do we have regular
recognition opportunities? What are we doing to make these
things as personal as possible?” Are you sending out the
“Dear Friend” letter, or are you sending out the “Dear
Erik” letter? And it may be even better with a little note
on the bottom. Again, the more personal you can make it –
and Jay is going to talk a little bit about this in his
segment – the more personal you can make it, the better.

Another thing each of needs to do is to find which gifts
are we going to try to upgrade this year. If we can put a
label on them and say, “We’re going to try to upgrade
Erik’s gift,” then we know that we’re going to try to get
Erik to raise his gift. We think he can give a larger gift
this year. And I’ve found that in annual campaigns, about
20% is a good metric. So, if you’re raising money on an
annual basis with people, about 1 out of 5 donors should be
a target as a minimum. Just say, “Are we upgrading about
20% of our donors?” And I want you to begin to think about
who can help us with this strategy. It’s not just you. It
takes a village to raise a donor, and all of us stand on
the shoulders of the work that’s been done before us and
during our tenures at organizations. What can your
volunteers do to help you in terms of donor stewardship, in
terms of donor thanking, in terms of donor recognition, in
terms of helping figure out which donors are the most
important ones to keep? Which gifts are the most important
ones to keep tends to jump off the page a little bit more.
But then also, what gifts should be upgraded? Who has the
potential to give more? Who could and maybe should be
giving more to your organization on a yearly basis?

And then, ultimately, you come through this and you look at
your human resources, and you look at your donors. And
again, the FEP can help you analyze those donors. And I’ll
show you how you can do that in a second. But then you
design a plan that works for your organization in terms of
utilizing the board and volunteers and, quite frankly,
family. I can’t tell you how much my wife has helped me in
my various fundraising jobs over the years. You use the
resources at hand. I guess as a closing slide for my
segment, I wanted to put this slide up because it really
represents an extremely powerful public resource tool that
the FEP tool is promoting out in the world and landscape.
And I thank Bloomerang for the opportunity to speak today.
This is an address where you can actually download what’s
called the “Fundraising Fitness Test.” And you can actually
run your data anonymously through this tool. And you can
come out with your own organization’s results to see your
areas of opportunity. It’ll run you a very, quite frankly,
fairly complex report that will show you things like “How
are we doing in donor retention from Year 1 to Year 2? What
donors didn’t we retain? How did we do in terms of upgrades
and downgrades and lapsed donors and so many other
entities?

So, I encourage you to check out www.afpnet.org/fep. Take
the Fundraising Fitness Test, and take the car for a test
drive. And if we can help, let us know. My email is at the
end of this session. We’ll be glad to help you there as
well as try to answer any questions today. So, thanks for
that part. And Jay, thanks again for letting us do this
segment with you today. We feel it’s so important for the
philanthropic community as a whole. And we appreciate
Bloomerang and you, Jay, for being a partner in making this
project happen.

Jay: Well, thank you very much, Erik. I can’t say enough, too, on the
difference it’s made for the whole Fundraising
Effectiveness Project and the work that is being done by
the Urban Institute and AFP with Erik’s involvement with
that as he came on board there. All of a sudden now, we’re
seeing the amount of data that’s being compiled exploding
and so many wonderful things happening. And we thought the
kick-off of the year would be a good time to bring up the
results here because the latest results that are in this
next slide here were really just recently updated by the
Fundraising Effectiveness Project. And unfortunately, for
many of you, you’ve seen this slide before, and it used to
say 41% was the retention rate. And it’s now fallen to 39%,
which means the attrition now, instead of being slightly
below 60% is slightly above 60%, which I think, in a better
way of looking at it, that now more than 6 out of 10 of
every donor of all the donors from the previous year did
not donate at all the next year. We’re seeing that happen
more and more, that people are now becoming acutely aware
of this and applying some of the strategies that can make
this change in going forward [inaudible 28:04].

One of the strategies is based upon just looking a little
bit deeper at the results here for that. You can see the
overall numbers that I was talking about up above there,
but here’s the first area of digging just slightly deeper
here. The rate has gone over the last seven years from 50%
down to 39%, and not once in any of those years did it
actually go up. We had a year or two that stayed relatively
stable, but it’s fallen a full 11% during that time period.
And one of the other areas that I think’s really insightful
about this is taking a look at where that 39% comes from.
The first year of donor retention or new donor retention is
22.9%. Whereas the repeat donor retention – those in the
second, third, fourth, fifth year, etc. – is 60.8%. and it
really points out for all of you that are watching here how
vitally important it is to get people to make that second
year transaction with you to have that second time gift
come in from those individuals. Because once someone has
moved beyond just attending a special event with you or
buying something at an auction or running at a race or
making something of that, they now are starting to buy in a
little bit about what your mission is about and how we can
support you on a longer term basis. And I think there’s
nothing more insightful than to take a look at the vast
difference between these two. When you look at the 22% here
down to the 60% here, nearly 61%, that really points out
one of the key strategies to come into play there.

Now, some of you that have heard me speak before, you’ve
heard me refer to this very important statement by Dr.
Adrian Sargeant, our chief scientist, that a 10%
improvement in this retention rate can double the lifetime
value of your donor database. And for some organizations,
they’re not really sure what the lifetime value of the
donor database is to know what this can really mean,
because it’s a rather profound statement. So, let’s define
the lifetime value for this. For all of you, if you’ve
never brought this up as part of a strategic discussion at
a board meeting or at a board retreat, I would strongly
encourage you to do that, because it’s the total net
contribution that a donor generates during his or her
lifetime in your database. So, it really means that you
have to have two important metrics to have this come to
life. You need to know what is the average gift that’s made
to your database – and most of your board members are not
going to be aware of that. And in addition to that, you
need to know what the average amount of time in your
database is. For probably 90% of the nonprofits in this
country, the average time that a donor is in your database
is just under two years. Very seldom does that average,
except for the more exceptional nonprofits, go above two
years as the overall average for that. That can be quite
telling as you take a look at that. And when you put that
together and figure out the lifetime value, it is based
upon this retention rate. And the retention rate for you is
based upon these two numbers – the number of donors in the
current 12 months divided by those same people that were in
there in the previous 12 months.

Putting an example mathematically to it – if you had a
thousand donors in 2012, and 450 of them donated in 2013,
then your retention rate is 45%. We’re getting ready to
publish some results on this, but we have found that as
we’ve surveyed the marketplace here at Bloomerang, that
literally 95% to 96% of the market does not know what their
retention rate is at any particular point in time for that.
And we think it’s very, very important, whether you’re
using something like our Bloomerang product where you can
see the retention rate as you log in each time. And that’s
what we’re referring to here with this wheel of just
exactly what that retention rate is for the last 12 months.
Or you figure it some other way.

Only by letting your team and your staff and your
fundraisers, as well as the executives involved in the
relationship-building process, and even the board members –
once they know what the retention rate is, and how we go
about moving it from one time period to the next, either up
or down, then you can start to figure what factors are
going to affect that. One of the really key factors that we
have found that affect that is the way that you thank
donors. And we’re going to just hone in on one factor that
I think can make a huge difference here. I’m going to go to
a slide here that “Retention begins with the thank you.”
One of the things that I think everybody out there
listening and looking at the presentation today can do is
take a look at your database and break it into four
quadrants. The left side of this line – we’ll draw the line
down to the center here – the left side of this are your
people that are first-time donors, the new donors. And the
line across the middle here, what we’re looking at – those
that are above your average gift versus those that are
below your average gift. So, you have four different groups
that you can segment and take special care of in various
ways to do that.

Let’s say your average gift for your organization is
$167.52. Anybody that’s at or above that $167.52 is in a
separate group and below that. And then as you define your
strategies, you can decide, “Okay, if someone comes in
above our average gift amount and is a first-time donor,
what do I do that’s different than somebody that’s perhaps
in this quadrant down here?” We want to treat them all very
special, of course, but maybe the people that are brand-new
donors that come in there, we want to ensure that we have
either a phone call or a face-to-face meeting with, that
they’re not going to get that same standard boilerplate
thank you letter. And for those of you that have heard me
speak before, you’ve heard me tell this story. One of my
customers that I had implemented a database system for up
in Chicago – I went back seven years later when I was in
the city for a user group meeting. And one of the things I
took a look at was the thank you letter. And I asked them
had they changed it at all during the last seven years. And
the answer was no, they had not done that. Part of the
reason for that not occurring was that the person running
the database – that position had changed six times in seven
years – nearly on an annual basis, the person responsible
for running the database. And then when I dug a little bit
deeper, I found out that they were using that same seven
year-old letter, no matter which quadrant that people came
into here. That same letter went out. And one of the first
things you can do is sit down with your staff and decide,
“What letter do I use for this group here versus this group
versus this group versus this group?” And then have
different types of other practices that come into play for
that. So, some of the things that I have sort of pulled
together are the “Five Acknowledgement Principles.” And
these have come not only from Dr. Sargent, but from Mr. Tom
Ahern, our donor communications guru that we work very
closely with, and bring their best practices to life.

Let’s take a look at these five principles. The first one,
the 48-hour rule – making sure that for any gift that comes
in that we have a response going back in a 48-hour time
period for that. The more personalized, the more segmented
that is, the better, but the first and foremost rule is
make sure that there’s something on the way back to that
donor within a 48-hour time period. As I was alluding to
earlier, no matter whether you’ve got two segments, three
segments, four, eight, nine, or ten segments, map out a
track of communications for each segment. What are we going
to do? Let’s say that that’s a first-time donor that’s
below our average gift amount if we use the four segments I
was referring to a little bit earlier. So, are we going to
send our standard thank you letter for that, and then are
we going to have someone contact them a few weeks later
through some other means and try to explain a little bit
more about our mission? Are we going to sometime in the
first 90 days maybe throw a short survey out to them and
see how they would like us to interact with them and how we
would like to make that come to life in other ways for
them? As you sit with your staff, figure out what your
resources are, and then what you can apply to each group
and do that. It’s also a very neat way that you can conduct
some experiments.

On the food bank board that I’m on here in the state of
Indiana, one of the experiments we did involves this third
point here – be different from the rest. A handwritten note
can make a huge difference versus any type of letter. In
one of the experiments we did, we had the members of the
board at the board meeting write X number of handwritten
notes to go back. And we tracked the results from the
people that got the handwritten notes versus a standard
thank you letter versus a personalized thank you letter.
And I think for your organization, once you figure that
out, you may ensure that those resources are made available
to do that. And the nice thing about it – just think about
it – rather than having that next special event to try to
bring new donors in and keep ourselves on that acquisition
of donor treadmill that so many people are on, what if we
took all the volunteers that worked for that event and all
the time that was expended, and for every new donor over
that previous three months leading up to that, we wrote a
handwritten thank you letter going back to them, thanking
them for their investment in our organization, and going on
to the next item here, we stated exactly what project they
were funding or what the monies were going to be used for
to do that. And that’s another very key part of the
acknowledgement, is letting people know that those monies
were going to be used for. And that can be combined with
these other areas up above there.

And then, last but not least, as we talked about and
referred to when we talked about a track for each segment,
call or see in person as often as possible those people
that are supporters of your organization. Like I said,
those efforts – if you can move that retention 10% or more,
you will not have to be on that acquisition treadmill. You
will not have to be having as many of those acquisition
events as you have been having in the past. It can make a
huge, huge difference in making that come to life. With
that in mind, Steven, I think I’m going to throw it open to
questions. I just wanted to relate those few tidbits there
and also publicly thank, once again, all of the people
involved with the Fundraising Effectiveness Project,
because I cannot tell you the difference of being able to
share concrete data versus just survey data. The difference
is astounding here. And it’s finally making so many of
these key metrics come to life for everybody in the sector.

Steven: Thanks, Jay. That was great. And, Erik, also, thanks again for
your portion of the presentation. Lots of good advice in
all those slides, lots of meaty information there.
Hopefully everyone enjoyed that and will be able to review
that. And hopefully, run retention rates a little higher
than the average. So, why don’t we go right into our Q&A
session. I know there’s a lot of questions that have been
asked already. And if you were maybe sitting on a thought
or are too shy to send something over, please do. You’ve
got two of the world’s foremost experts on donor retention
on the line here for the next 15 minutes or so, so don’t be
shy about asking anything. And why don’t we just get right
to some of the questions here in the chat room. Erik, since
you were so heavily involved in that FEP report, can you
talk a little bit about how that data was gathered? I know
you mentioned that you pulled from some software vendors
and some other places, but there were a couple questions in
the chat room wondering if it was broken down by sector in
terms of higher ed and healthcare and social services and
things like that. Could you just a little bit about how
that data was gathered and what it actually consists of?

Erik: Absolutely. It’s my pleasure. This is a very unique partnership that
the Urban Institute and FEP, and again, DonorPerfect
Software, and Seventh Adventists and other sponsors have
helped make happen. And what they’ve done is they’ve
partnered with great programs and software like Bloomerang
to acquire anonymous gift transaction data. And to make
this as simple as I can, we don’t care about people’s
names. We don’t care about people’s addresses. That
information is not shared with the Fundraising
Effectiveness Project at all. But what I’ll say more
responsible donor software companies are doing with us is
sharing their anonymous data so that we can use it for
research. By making partnerships with some very special
companies like Bloomerang, we’ve been able to acquire
anonymous gift transaction data. And we actually have
accumulated over 110 million lines of gift transaction data
from the last many years and put that into a very robust
database. So, what that does is it enables us to look at
human behavior and donor behaviors over a multi-year or
single year or single period timeframe and ultimately come
out with things like donor retention rates and gift
transaction behaviors that are typical for organizations,
let’s say this size.

Now, the second part of your question is, are we able to
segment out by arts organization or college or university
or healthcare? And my quick answer is not at this point.
Because the donor information has been anonymous, and we’ve
not specifically put it on to types of organization at this
time, I would say the answer at this point is no, not at
this time. But that is something that we’re looking at
doing in future potential surveys. We can tell
organizational size behaviors, but we can’t tell, at this
point in my mind, at least, the difference between a
university and, say a small arts organization. With that
said, there is tremendous opportunity for that. And again,
I’ll just take one last piece to say thank you to
Bloomerang for being a responsible software partner and
participating in this study, sharing anonymous gift
transaction information.

Steven: Yeah. Hopefully, that percentage will go up in the next one
with all of the users that are using Bloomerang. Hopefully
that’ll go up a little bit. So, Erik, you talked a lot
about gift retention. And there was a question from
Jennifer here in the chat box. She was wondering how you
would deal with gift retention during a capital campaign.
Do you think all those things still apply? And I think what
she’s getting at is, perhaps during a capital campaign,
you’re getting larger one-time gifts, and maybe that gift
retention piece is a little bit more difficult. What would
you have to say to Jennifer about that issue during a
capital campaign?

Erik: Great question. And I think the question mostly pertains to looking
at gift retention after a capital campaign. Once you’ve
raised those big gifts from those specific donors, how do
you look at gift retention? And I would say you would look
at that specifically in view of the environment you’re in.
Understanding that these, let’s say 200 donors or 500
donors or 75 donors or whatever your capital campaign
included – it might be a million donors if you’re a huge
university or something – but ultimately, understanding
which part of your donor population that applies to, and
then using that in your analysis of your gift retention
results.

Now, one thing you could do is you could actually, using
the FEP reports – which, again, are available at
www.afpnet.org/fep — you could actually look at, say a
year prior to the capital campaign and compare it with the
year after the capital campaign. So, there’s lots of ways
to look at the data. And I would say personal and
appropriate analysis would be appropriate in terms of a
capital campaign, where you know you’ve gotten special
gifts, and you know that you’re not expecting to retain
those over the one-year period, but maybe you would retain
them over a five or seven-year period, let’s say. It would
be interesting to look at your capital campaign donors from
eight years ago from your last capital campaign, and now
compare it with the capital campaign you just finished last
year, to see how many of those capital campaign donors you
retained from Year 8 back to Year 1, if that makes sense.

Steven: That makes a lot of sense. What do you think about that, Jay?
You’ve been involved with a lot of capital campaigns. How
do you think folks should approach gift retention in terms
of a capital campaign?

Jay: Erik answered it very accurately, obviously. It’s not going to equate
to the same. And obviously, there’s both donor retention
rates and gift retention dollar amounts that come into play
there. And I think you’ve got to make that a factor to do
that. One of the ways that you can take a look at that –
most organizations still run their annual campaign in
addition to the capital campaign, and one of the ways of
doing that is to run a simple filter or a query and filter
out the capital campaign transactions and just continue to
compare annual campaign to annual campaign to annual
campaign over multiple years and not let the factor of the
inflation that can come from the capital campaign gifts
enter into that. So, if you’ve got the ability to segment
it, that’s the easiest way to do it. And just compare all
the other gifts except the capital campaign – gifts from
one year to the next.

Steven: Great. And Jay, you talked about average gift amounts a little
bit in your slides. And Joann had a question here. She was
wondering if you recommend not including the larger gifts –
maybe something over a million dollars, for example – that
could potentially throw off that average amount or skew it.
Would you recommend maybe not including those high-end
gifts if there’s a small number of them in that average
gift amount?

Jay: It depends on what the gifts are. If the gifts are – and it sort of
ties into our last question – if it’s a foundation grant
that’s a one-time item, I wouldn’t include that. If it’s a
capital campaign transaction that’s also more of a one-time
type of affair. But honestly, if it’s just a large gift
that someone made as part of their annual campaign gift to
you, or what they provide to you if it’s been a regular
donor, and this was not a one-time special thing for it, I
would go ahead and include that. People often ask, “Should
we include planned giving transactions or bequests that
have come to light?” I recommend that you keep those out of
that average so that you don’t have it really skewed
upward. The other way you can do that – and we certainly
have got some of the mathematical minds here at Bloomerang
or at the Urban Institute – is use not just the average,
but maybe the mean or one of the other statistical figures
there to figure out how you do your segmentation. You might
want to use the mean versus the average, and make that come
to life in a different manner.

Steven: That makes sense.

Erik: Just to jump in on that, I think Jay makes a good point, which is,
remember that these are totals to help you raise more
money. I mean, that’s our ultimate goal, is for your
organization to have more resources than you had in
previous years. And these are great tools to help you
understand how to gain and garner more resources. But
remember that these aren’t the end. If your donor retention
number falls and you understand the reasons why, and
they’re good reasons, whether you included the estate gift
or the capital campaign gift isn’t as important as
understanding that and knowing how to change it in positive
ways.

Jay: I’ve seen some smaller organizations, when we talk about that four-
way segmentation for acknowledgement. They mapped out four
different strategies, and they found out after a year or
more that one of the strategies really, really hit a home
run. And they quickly said, “Why don’t we just use that for
all four segments going forward?” And they were the size
and scope that they could make something like that happen.
They did not have thousands of transactions going through
their system.

Steven: Great. There was something that you said in your slides that
kind of stood out to me. You talked about donors that you
can’t afford to lose, and maybe unlocking their power in
terms of increasing their retention or holding it steady.
And I’m wondering how you decide who those donors are. Who
are donors that you can’t afford to lose? Is it just based
on gift amount? Is it based on frequency or maybe some
other factors? How would you go about deciding on those
folks?

Erik: Well, that’s an interesting question, Steve. One of the things that I
think about when I think about donors is I really think
about them in two different ways in light of this question,
I’ll say. One is love and the other is money. I think when
people bring tremendous resources to your organization, if
you lose that gift, it can have profound effects on your
ability to provide mission to your community, whatever that
community is. So, if you lose that really large monetary
gift, it can fundamentally change the way you provide
service to your community. So, that’s an example of a gift
that I would say you couldn’t afford to lose.

The other piece of that is what I’ll call the “love
factor,” which is there are people who are so close to our
organization, so meaningful to our organization because of
the parts that they’ve played, the roles that they’ve had
in our organization’s history, things like this. They, in
essence, are the heart of the organization, whatever that
means to you and your organization. I would say that those
oftentimes are people that we would not want to lose.
There’s certainly Founder’s syndrome, and there’s lots of
reasons original, and I’ll say heart-centered people do
leave organizations. But ideally, there are people that we
keep close to our organizations, because they just add
value in profound ways outside of money. And sometimes
those people also give very heartfelt and generous gifts,
so I don’t want to take that off the table. But I tend to
think of my donors in terms of what donors can I not afford
to lose monetarily, and then what donors can I not afford
to lose for the heart part, if that makes.

Steven: Definitely. There’s a question here from Christine in the chat
room. Interesting getting both of your takes on it. She’s
asking about upgrades. How do you determine what percentage
increase is an appropriate ask from someone that maybe you
want an upgrade from? How would you go about asking for
that? What’s your strategies for Christine there on
upgrades?

Jay: Well, I’ll jump in there first. Most people base the percentage of on
past giving. And I think you’ve got to add two other
factors to that, and hopefully have the tools that can make
those factors come to life. The first one is their capacity
to give. Some sort of a prospect research tool that lets
you know what is the real capacity. And there’s a couple of
the prospect research tools that really do a good job of
showing you the donor’s gifts to other organizations, to
other charitable causes. It’s always fascinating for
someone that you find that’s maybe making a $1,000 gift to
your organization you consider to be very worthy, and find
out in the same year they made three $1,000 gifts to other
organizations. That, all of a sudden, is a real eye-opener
to do that. And then the final and perhaps the most
important piece of the puzzle is the amount of engagement
that somebody has with your organization. Are they just a
one-time a year annual appeal donor, or do they attend
events? Are they volunteering? Are they active in doing
that? Are they performing some stewardship, where they’re
bringing other people in? And some manner of tracking that
engagement allows you to really complete that three-legged
stool of past giving, capacity to give, and engagement to
your organization. And if those two other factors of the
engagement level and the capacity to give are far different
from what they’ve been giving, then I think you’ve got to
adjust that upgrade ask.

In fact, I’ll share this story. I had dinner with three
very large major donors in Boston to various organizations.
And one of the things that one of these individuals did…
This individual worked in a statistical manner for the
company that he was with, and he would, as those different
ask amounts came in, usually from the direct mail engines,
he would really try to throw it off. All of a sudden, if
he’d made a $1,000 gift the year before, the next year he’d
make a $25,000 gift. And the next year, he’d drop down to a
$100 gift and see what the organization did – whether a
real person got involved, or whether they just kept trying
to let the software automatically do it. And it was quite
comical. He showed me three or four examples of how the
organization’s next direct mail appeal tried to accommodate
for that.

Steven: I hope that was a little experiment.

Erik: It’s a great example. And the only thing I would add to that is Jay
and I both have the pleasure of being associated with
Indiana University in the Lilly Family School of
Philanthropy. They look at it with linkage, ability,
interest. So, for me, if a donor has become more linked to
your organization than they were in a previous year, that’s
an opportunity. If they have more ability than their gift
was the previous year, that’s an opportunity. And if they
have more interest in your organization, interest in your
project, interest in the thing you’re doing, that’s an
opportunity. So, that’s an easy way to summarize a lot of
what Jay said earlier.

Steven: Great. We’ve probably got time for about one more question
before we wrap things up. I know we want to be respectful
of everyone’s time. And if we didn’t get to your question,
or if we don’t get to your question, I’m sure Erik and Jay
will be happy to answer anything via email. And we’ll share
their contact info here real shortly. Jay, there’s an issue
that was brought up in one of the questions from Cory. And
it’s something that you talk a lot about. It’s something I
talk a lot about. We’ve both written about it. He’s
wondering how you should decide when to remove someone from
your database. He said he was a little surprised by that
two-year benchmark that you mentioned and that we at
Bloomerang talk a little bit about. So, maybe you could
explain that a little bit more, why you think you should
just go ahead and get rid of folks in your database if they
haven’t done anything in two years. And I’m interested in
getting Erik’s take on that as well.

Jay: I have a very good consulting friend of mine. His modus operandi on
working with any organization that he consults with is he
immediately goes into their database and breaks it into
three sections; those who have not supported your
organization in any way in the last two years – that’s 0%,
those whose giving falls into the 10% level of your
funding, and those that provide 90% of your funding. And in
his case, he totally gets rid of those that were zero in
the last two years. He puts the one that have provided 10%
of your funding on some sort of an automated maintenance
program. And all of the staff’s time and resources are
spent on the 90%. And this consultant has a 100% track
record of significantly increasing the amount raised in the
next few years by following this strategy. It’s really made
a believer out of me, because a lot of people are wasting
money mailing, or they’re sending out a lot of emails that
never get opened or whatever the case may be. Truthfully,
if you’re doing multiple appeals, two years should be a
good enough time period. Now, if you’re only doing a single
appeal a year, I would take it to three years. Now, caveats
to that; past board members, past major sponsors – groups
like that that maybe only come back in certain time
periods. Obviously, those are sacred cows that we should
not take off the list there. But aside for a few of those
sacred cows, I think if you follow those metrics, you’ll
come out ahead. As we convert data for people, we make
those recommendations in a very strong manner to do that
and to see. For instance, if you’ve got email addresses
that you’ve been sending to, and five times in a row
they’ve never been opened, you might want to consider
whether or not that’s a valid email that you don’t want to
continue to send out to. Because if five, six, seven times
no one’s even opened the email, I don’t think they’re
probably going to the next five.

Steven: Right; Erik, any thoughts on that two year benchmark of
segmenting out your database like that?

Erik: Well, I think to speak to Jay’s points, which are how can you get the
best return on investment from your time and energy and
your database, I think Jay makes a lot of good points in
pointing out the fact that 10%, 90%, these types of
benchmark annotated strategies bring a lot of return on
your investment. Again, I think to echo some of Jay’s
points, the more you can put your focus on the highest
likely best results, investing staff time in your donors
that are likely to bear the best fruit, and investing your
email and direct mail resources in the best ways that
generate positive open rates and positive return rates –
those are the types of things you want to do. Jay’s
strategy certainly speaks to that. I have not been quite
that mercenary. I’ve kept a little bit more data in my
work, but I think his points are well-taken.

Steven: Great. We’ve got about two minutes left, and we’d better leave
some time for some final points. Erik, again, thanks for
joining us. This was a really great discussion, and
hopefully all the listeners got a lot out of it. I know I
did, personally. Just in the brief time you’ve got
remaining, do you want to tell folks how they can get in
touch with you and learn more about all the projects you’re
working on?

Erik: Of course. It’s been my pleasure to have the opportunity to chair the
Growth in Giving Initiative and to work closely with the
Urban Institute, AFP, and organizations like Bloomerang.
Getting to know and work with people like Jay Love and
Cathy Williams and Bill Levis and Randy Fox, and there’s
too many people to mention. Know that if you send me an
email with any question to the email address on the screen,
which is daubert.erik@gmail.com, even if I don’t know the
answer to your question, I will do my best to connect you
with an FEP resource or one of the people in our Growth in
Giving community to help get you the best answer to your
question that we can. Again, Steven thanks for having us.
Thanks for hosting this webinar. And thanks for letting us
be with you today.

Steven: It was a lot of fun. And do check out that fitness test. It’s
pretty cool, actually. Jay and I had a chance to sit on a
live demonstration of it. If you’re into data and all those
great things, I’m sure you’ll enjoy it.

Erik: And again, Steven, it’s www.afpnet.org/fep. So, again, check it out.

Steven: Is that test free? I think there was a question about that.

Erik: It is. This information is made free through the hard work of people
like Jay Love and others. So, again, Jay, thanks for your
hard work on this.

Jay: Most welcome.

Steven: Unless there’s any final thoughts, I’m sure, Jay, you would
echo those sentiments. Anyone who wants to ask any
additional questions can email you. They can even send you
an [crosstalk] if you check out our website.

Jay: Come right to the Bloomerang website and find Steven or my address to
do that. And I just want to make a note, too. You’re going
to be mentioning the next webinar, but for those of you out
there, Steven has over the next two months, an unbelievably
power-packed lineup of some of the best minds in the
nonprofit world that’ll be available to you on a weekly
basis for the next two months. Steven, I won’t steal from
your thunder talking about the next one here, but it is
quite a phenomenal lineup. I am so proud of what we’re
going to be able to provide for people.

Steven: Yeah, check out our “Webinar” page. And Jay’s right. We’ve got
a webinar every week for the next – it looks like maybe
eight or nine weeks through March. Really great guests. Our
next guest is going to be Claire Axelrad. She’s just an
awesome fundraising consultant. She’s a good friend of
ours. She’s going to talk about social media and how
nonprofits can use social media to raise funds and to do
some other interesting things online. So check that out.
Register if you think that would be appealing to you. All
of our webinars are totally free, totally education. So, if
you liked this one, which I hope you did, definitely check
out some other ones in the future.

It’s about two o’clock. I think we’ll end it there so that some folks can
get back to work or get to lunch or wherever they need to
be. So, thanks again for joining us. Look for an email with
all the materials from me a little later this afternoon.
Have a great rest of your afternoon.

Jay: Thanks, Steven. Thanks, Erik.

Erik: Thank you, Steven. Thanks, Jay.

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.
Kristen Hay