Jay Love on Tony Martignetti Nonprofit Radio

On February 22nd, Jay Love was a guest on Tony Martignetti Nonprofit Radio. Jay and Tony discussed donor retention and how technology can help.

Video Transcript:

Tony:  This week, donor retention. Jay Love is CEO of Bloomerang. We’ll talk about holding on to donors you’ve got because it’s much cheaper and easier to keep a donor than to replace one. Jay has strategies for you.

Also more Maria sites. Maria Semple, our prospect research contributor and the prospect finder keeps up her reputation as doyenne of Dirt Cheap and Free. This month she will review donor search and list select.

Between the guests on Tony’s Take Two, the IRS publishes a list of charities that have lost tax exempt status each month. In March, that list will be longer than it has been in other months and I’ll explain.

Now, I’m very pleased to welcome Jay Love. He’s the CEO and co-founder of Bloomerang and Senior Vice President of . Both companies serve the nonprofit sector only with tools for fundraising and communications. He was Senior Vice President of the Art and Culture Division at Blackbaud. Before that he was CEO and founder of eTapestry. Jay is the member of the National Board of the Association of Fundraising Professionals and I’m very glad his work brings him to the show. Jay Love, welcome.

Jay:  Hey, thank you very much Tony. It’s good to be here this morning.

Tony:  It’s a pleasure to have you. Donor retention, Jay, why is this important?

Jay:  Well, it’s continued to fall. The main source of the data that I’ve been referring to so often in the last year has been from the fund raising effectiveness project otherwise known as SEP that was a combined effort of the Urban Institute and the Association of Fund Raising Professionals. They have been doing this for the last five or six years and it’s a first time that data of this nature has come directly from the donor data basis.

The charities that have the software that is in use by the various vendors, they are now sharing the summary data and being able to tell from that summary data exactly what is happening in retention of donors from one year to the next. It’s quite scary in that retention rate has dropped from the low 50s now to 41% in the most recent survey.

Tony:  Has it been dropping consistently through the five or six years that you have had this survey?

Jay:  There was a year or two that it held pretty steady but overall it’s dropped about 10% or 11% since the time the study has been enacted.

Tony:  Let’s reassure any charities that might be using software. You certainly would know if your data was going to be included, right? And, it would have been anonymized and aggregated.

Jay:  Absolutely, all it is, is summary data and it’s part of the licensing with the vendors. The very nice part of that is not only does it provide information people can use but many of the software vendors are allowing you to compare your results to the aggregate results so you have a very good idea of how you are comparing against the national average.

Like I said, let’s hope that your individual charity is doing better than losing 6 out of 10 donors from one year to the next, because losing nearly 60% is a scary proposition. It means you have to be on a constant treadmill bringing in brand new first year donors and the retention rate for the first year donors is even worse in most cases it’s down in the 20s and 30s retention for those individuals.

Tony:  The next thing I was going to ask, you just started to answer it. So, the retention rates are falling which means attrition rates are rising and we are now at 59%.

Jay:  We are now at 59% in the most recent study there. Like I said, its’ a trend and something we have got to turn around because as we all know just like the commercial world existing customers or existing donors in this case are much easier to keep than bringing in brand new ones because the retention rate is at least a little bit higher for those folks that have already been with you.

Tony:  Do we know about how much it cost to acquire a new donor versus retaining one?

Jay:  Most organizations do know that. Most people know the cost to acquire a new donor is usually more than the  received from that donor in the first year. You don’t get to a break even status until the second year in most cases.

Tony:  And, of course, there is considerable time in acquiring new donors versus thanking and keeping retaining existing donors.

Jay:  And, there is some basic things, Tony, that people can do. One of the things that we try to allow software packages to help people to do is realize is that if a brand new donor comes in and it happens to be above the average donor level that you have, that might be a situation, instead of sending out that tired old thank you letter, you might want to pick up the phone and call that person and thank them directly and get to know them a little bit or try to set up a face to face meeting or get them to come take a tour of your facility. If there is a telephone contact, the retention rate doubles or triples in most cases.

Tony:  We are going to get to a bunch of those factors that we know influence retention. Jay, your background is technology, eTapestry, Blackbaud, now Bloomerang and Avectra. Is this a strictly a technology problem or there’s a big personal factor to these relationships as well?

Jay:  Very much so. A donor relationship is no different than any sort of a personal relationship or friendship. I know in some larger organizations there are those donors are people that you only meet via electronic communications or written communications in some way shape or form, but even that as we all know, if you had a pen pal back when you were in high school, there were ways of building that relationship and taking it to the next level, even if it was only through written communications. So you can have that person on the other end of the receiving end feel like they are more than just a statistic. They are actually a person that’s connected to your organization and to your mission and their moneys are going to achieve something different than what they could at someplace else with those dollars.

Tony:  But as well technology has a role too.

Jay:  Very much so. It’s like so many things in life; just being able to know what your retention rate is tends to improve it. I think of the old Andrew Carnegie story of going into one of his steel mill plants and asking the worker on the line how many of that particular widget or whatever they made for the day, and he took a piece of chalk and wrote it down on the floor and said, 21. That was how many this guy did on his particular shift.

Then the afternoon shift came in and they said, “What’s that number on the floor?” They said, “Well the big guy was here and he wrote down what he did.” That shift they crossed it off and instead of 21 there was 25. This went on for weeks until it was up over 50. It was all because someone was noticing and actually saying this is the number we are shooting for or we are trying to surpass.

Tony:  Not long after that Carnegie locked down the steel mill and kept all the workers out, but that’s a different story.

Jay:  Isn’t it, though.

Tony:  I went to Carnegie Mellon.

Jay:  He at least started a foundation, right?

Tony:  Yes, he did. He gave a lot of libraries and pools and lots of public spaces in the Pittsburgh area. But it was a bit of a battle.

Jay:  I wouldn’t want that to be any sort of a witness or praise for his business practices. I heard quite a cruel thing came out of that.

Tony:  I went to Carnegie Mellon University so I’ve heard those stories.

Jay:  Oh. Very much so, then haven’t you.

Tony:  Yes. This is quite startling. We are only retaining, let’s use round numbers 60 and 40. We are only retaining 40% of our donors. I’m sure you are comfortable of the representativeness of the sample this data is from?

Jay:  Yes, to give you a little bit of an idea based upon data coming from about 3200 charities that in the most recent time period raised just over $2 billion in fundraising dollars. It’s a small percentage of the total of fundraising world but it is a very statistically relevant sample that it’s being taken from that group. I think what gives this so many legs too it’s primarily focused on the small and medium sized nonprofit. There are a few larger ones in there, but the vast majority of the nonprofits that are in this representative sample are raising less than $10 million a year and most are below $5 million.

Tony:  Well, that’s the audience to this show, small and mid-sized charities. Jay, we are going to take a break and when we come back you and I will talk about some of these factors we know influence retention and what charities can do to increase their retention rate. I know you will stay with us, Jay, and I hope everybody else does too.

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Tony:  Welcome back to big nonprofit ideas for the other 95%. Jay Love is CEO and co-founder of Bloomerang. We are talking about donor retention this segment. Jay, we know that there are a bunch of factors that either positively or negatively impact retention and there’s a lot of lessons that I think charities can take away from these factors. Why don’t we get started, actually some of them know that charities don’t have a direct influence over like the persons giving.

Jay:  I tend to break these factors in to three categories, Tony. One based upon financial. One based upon activities and then a third one based upon communications.

Tony:  Okay.

Jay:  If we take a look at the first one as you were alluding to, is the financial aspect of it, there are certain things that you can tell that are moving that engagement level or that engagement needle up or down. Such things as have they made a donation in the last 12 months? Was that donation higher or lower than their previous one? Did they upgrade or did they down grade? Did they make multiple donations? Did they support multiple causes or multiple funds within your organization so they are involved in different ways?

Are they doing something in the way of pledging or on a recurring gift mode? We know someone that has signed a pledge card or is giving in a pledging or recurring basis is much more likely to being retained from year to year than someone who is not. Did they come in knowing they were giving to an organization rather than supporting a runner in a race or something of that nature? Those are all factors, I think, from the financial standpoint can move that needle up or down accordingly.

Tony:  Charities can have an influence on some of these. For instance, you mentioned earlier, if an office sees that a new donors gift is above the average, your suggesting reply with an above average acknowledgement and thank you.

Jay:  Exactly. Do something outside of the ordinary, whether it’s picking up the phone and calling them trying to get a meeting or maybe a handwritten note or handwritten [ps]. Several of the boards that I serve on, the first part of the board meeting that we do, each one of us writes out 10 handwritten notes during the board meeting to a donor who is to let them know how much we appreciate that and inviting them in to take a tour of the facility.

Tony:  You are doing that at every board meeting? You are taking time at every board meeting to do that?

Jay:  Every single board meeting there is I’m on the board of the local food bank here in Indiana, one of the larger food banks. We have six to eight board meetings every year and that is part of the board meeting.

Tony:  I don’t suppose you are in Bloomington, Indiana with the company name Bloomerang, are you?

Jay:  Well, we are actually in Indianapolis, Indiana with a company called Bloomerang actually, yeah to do that.

Tony:  Okay. We should meet sometime because I’m in Indiana very often.

Jay:  Wow, I didn’t realize that.

Tony:  North of Indianapolis in Carmel, I’m there quite often.

Jay:  Okay, good.

Tony:  Are there other things? You mentioned recurring donations. That’s a very positive factor and you are more likely to retain that donor than someone who doesn’t do a recurring donation.

Jay:  Yes.

Tony:  So, how can a charity go out of its way to thank that recurring versus nonrecurring donor?

Jay:  I don’t think it’s as much thanking them in that situation, Tony, as it is trying to see if you can talk somebody or have them be interested in doing a recurring gift or a pledge letting them know at the time of making their transaction would it be nice to be able to support that particular part of our mission in ongoing time periods. If you set that up to do that, it’s much more widely used around the rest of the world than the United States of being able to automatically deduct form a checking account or from a savings account or even a credit card on a recurring basis. Instead of making a one-time gift of $240 maybe having $20 a month taken out with no stop date there. That becomes a way of really having long-term retention for that individual.

Tony:  So, that may be worth looking into for charities that are not offering that and if you want a little more information on that my other podcast which is for the Chronicle of Philanthropy Fundraising Fundamentals look back in the archive of that. You will find it on iTunes and the Chronicle of Philanthropy website. I had a guest there named Marc Halpert, and he was an expert in eCommerce and talked about online giving and recurring giving and how to set that up. So, you might look back at that Fundraising Fundamentals podcast if you want more detail on how to inaugurate a recurring fundraising program the way Jay Love is explaining.

Jay:  Would you like to look at a couple of the other factors here, the activities and communications ones, Tony?

Tony:  Well, give me a chance here Jay. Don’t take over the show. We’re going to get there. No, just for that the answer is a quick no. You are off. I am going to have 11 minutes of dead air time now. I had planned to be with you, but I’m booting you off. Of course, yes. Of course, we are going to talk about activities and communications.

Jay:  Great.

Tony:  What do you have under activities?

Jay:  Let’s think about all the different activities that you can track that would be involved with it, Especially, you mentioned in some of your previous broadcasts, some of the social media, but whether or not someone attends an event or whether they attend multiple events have they taken a tour of the facility? Those are kinds of things that happen.

The one I think that is really growing in popularity is all the activities that surround the social media. Have they posted on your Facebook wall? Have they become a friend? Do they say something about your nonprofit with a particular hash tag or a Tweet on a Facebook or on a LinkedIn profile? Are they active in some way in promoting your nonprofit to do that?

I often think about in the days before and the nonprofits knew to have like Facebook pages and stuff like that, were a very active volunteer. I think it was the American Cancer Society or somebody like that turned around and found out there was already 20,000 people following them or liking them in Facebook and they were able to help them bring that Facebook page over to their usage.

All those factors, if you can follow those and there’s ways of very easily electronically doing that. Technology has taken us to whole new levels of you can be aware of those factors and they can actually become part of your CRM or database knowing someone has said something about you and given that a particular value in their engagement level.

Tony:  CRM, of course, we have to talk about this on the show, but I want to caution you about [jargon jail], which I have on the show. CRM, just explain CRM in case listeners may not know.

Jay:  That’s Constituent Relationship Management. CRM is a fancy name for a donor database.

Tony:  We have had guests on talking about CRM. But, I like to keep listeners on the same foundation.

Jay:  No problem at all. The key difference, instead of it just being a database of pure donors and maybe perspective donors, it’s everybody that the nonprofit touches in some way shape or form. So, it maybe people that are effective by its mission. It may be suppliers. It may be vendors. It’s every single communication interaction that’s taking place.

Tony:  Indeed. We have talked about that and some of the platforms that support it on the show. Let’s focus on some of the thing charities can have a direct impact on. You mentioned earlier tour of the facility ad encouraging donors to do that especially if they happen to be an above average donor, first time. But that’s something it’s also a positive when you get a person to do a tour but that’s a positive retention factor that’s something a charity can directly have impact on by extending invitations.

Jay:  Extending an invitation, but just thinking about what their communications are. Some donors have never heard from their charity expect in the form of another request for a donation. It’s always someone reaching out with a hand versus sharing information. Think about it. Perhaps you could set up a communication schedule and actually go back to the person and say this is how we are doing. We are tracking ourselves and this is how well we are achieving our mission.

One that’s absolutely magical that I wish everybody would do is just telling every donor what their moneys are doing. If you can say those dollars went to this particular activity or fund and this is what it’s doing. Even if it’s just a general fund you can just say these are what your moneys are achieving for us and just hear that information without asking for another donation. People tend to feel much appreciated for that being the case.

A lot of my experience over the years, Tony, becoming much more of a donor myself. I used to run an interesting experiment at eTapestry and Bloomerang, where I would ask the new employees to take $50, we would provide them $50 and say go out and make 5 or 10 donations to 5 or 10 different charities and come back to me in 3 months and let me know who built a relationship with you and who did not.

Tony:  Excellent. At those low levels and what did you find?

Jay:  There were some absolutely marque organizations that my employees would stumble upon that even for a $5 gift they would build a relationship. What was ironic some of my employees are still life long donors to those organizations after making that small gift that was given to them to make on behalf of the company.

Tony:  That’s terrific. That’s a great lesson.

Jay:  Yeah. It was remarkable. I told them to try to mix. I told them to pick between a few national organizations and a few local organizations just to see what is going on there because I honestly believe any small nonprofit, I know a lot of your listeners are in that category, Tony. All they have to do is try that experiment themselves. Take $100 and go make ten $10 gifts or 20 $5 gifts to some national organizations and just copy what those groups are doing. Find out which ones make them feel the best and start building that into their own processes that they’re doing at the local charity.

Tony:  Excellent. That’s a terrific suggestion and a great use of $100. You can survey 20 charities for $100.

Jay:  Right. You get to do your own mini MBA or research project for $100 or $200, because you get to see every type of communication. I would mail some in and I would do some electronically and see what the difference is.

Tony:  Listeners may want to listen back to some of the four-month series that I had with Amy Sample Ward our regular social media contributor about real engagement using online networks because a lot of what Jay talked about, posting on a Facebook wall, Tweet etc. there are real engagement strategies and Amy and I talked about over four months of her being on once a month how to really engage through the social media sites.

Jay, there are also things people can report to the charity. If they keep their communication preferences current.

Jay:  Exactly, things like that in the communication area. If you are able to, if your email system and your communication system are tied into your database you can check real quickly does someone open my emails I send to them. Are they clicking through a link [sent] to read further on the stories? A very important one, are they forwarding it on to other people. You can get all that reported back to you and it can be part of the database that you can see.

You hit on an important one. If someone has taken the time to let you know that their address has changed even electronic email address or their mailing address has changed, boy that’s a very special person. You want to put a big red or gold star on that person. If they have taken the time to let you know that their address has changed is probably four to five times more likely to become a major donor or a legacy donor to your organization in the long run because they care. They’ve done far out of the ordinary what anyone else would do.

Tony:  That’s so interesting, because it’s purely ministerial. They filled out a reply card with an updated phone number or address or email address. What can a charity do? Would it be, “Thanks for keeping current with us?” Typically, now, I think most charities are doing nothing. It goes to the database administrator, the donor services team. The database gets updated and then that’s it. What could we be doing to keep that person engaged?

Jay:  I think that record needs to be marked that this is someone who that took the time out of the ordinary to do that. That should be made to the attention of either a gift officer or a fund raising person or a plan giving person so that they can reach out and just try to get to know that person. If you combine the two, if that’s someone that’s been a multi-year donor even at a small level and has let you  know that and many of you out there I know have read the book, The Millionaire Next Door that may be a good chance that person falls into that category and could be a very substantial legacy donor down the road for your organization.

Tony:  Jay, we have just a few minutes left. Let’s talk about the communications factors that we are aware of we haven’t talked about yet.

Jay:  We talked a little about them. People that have opened up their emails and things of that nature. Another communication factor is if you can find out who has visited your website and who has downloaded information. I think every nonprofit website should give people reasons to come back. That means there’s got to be new content on there and that can be something as simple as blog posts from the executive director or from other people within the organization or case studies or case histories.

I always love, if you make available documents to download this is a document that tells you about our mission. This tells you about our performance metrics, what we’ve been able to do to achieve our mission. If there are PDFs and different types of documents, background information, annual reports, quarterly reports, things of that nature, people love to download them and look at them. Particularly folks that are in higher level of donor categories.

Being able to track those communication activities and then being wired into your front desk or your receptionist. Anybody that calls your organization, that should always be marked in the database to know that this person has reached out and actually dialed our organization whether it was asking for information or giving us information. or something of that nature. Those are people that are communicating with you and that’s half the battle.

Tony:  Yes. These are excellent and very simple strategies, really, Jay. We have just a minute left. I wanted to ask you what is it you love about the work you are doing?

Jay:  Being able to help all size nonprofits do their job better. I have hanging on my wall something my daughter created for me when she was in elementary school, saying my dad works helping further missions of nonprofits. I still have that hanging on my wall today. It will always be part of my life, I think.

Tony:  Jay, thank you for being my guest.

Jay:  You’re welcome. Thank you, Tony.[/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]