Why Are For-Profits So Much Better at Retention?

On this episode of Bloomerang TV, Charlie Hulme, Managing Director at DonorVoice, joins us to talk about why for-profits are so much better at retention than nonprofits.

Full Transcript:

Steven: Hey there, thanks for tuning in to this week’s episode of Bloomerang TV. My name is Steven Shattuck, as always, I’m your host today. For this week’s episode, we’re really excited for our guest joining us from all the way across the pond, Charlie Hulme. He is the Managing Director over at at DonorVoice. How’s it going, Charlie?

Charlie: Very well. Thanks for having me, Steven.

Steven: Yeah, thanks for being here. You’ve been writing on our blog, you speak all the time, you’re actually one of the highest rated speakers, I believe, at the Institute of Fundraising conferences, isn’t that right?

Charlie: Yeah, yeah. Glad someone likes it.

Steven: You’re so modest, you don’t have to be modest. Charlie, could you tell us a little bit about DonorVoice, for those who aren’t familiar with that organization? What are you guys up to over there?

Charlie: I’ve been with DonorVoice a year now, and it fascinated me from a distance, because my background was as a creative director, for many very well-known agencies, so I’d be quickest to say the charities I haven’t worked with. But, I got frustrated, and I think a lot of fundraisers will relate to this, in terms of charities always saying, “We want you to be donor-centric, we want you to be donor-focused, we want you to talk about relationships,” and all this kind of stuff. But, when you actually try and drill down, there’s nothing they can give you to help you do that.

Steven: Right.

Charlie: Their phrases become very, they become sort of stuff that sounds great at conferences, great in blogs, looks good on a CV, but when it comes to actually how do you do that, suddenly there’s like this dead silence.

Steven: Right.

Charlie: No one knows what to do. DonorVoice came along and was established by a guy called Kevin Schulman, who is is far and away the world’s leading authority when it comes to relationship and understanding donors. It’s based on a modeling system around being able to measure and manage donor attitude, donor commitment, okay?

It starts to actually flesh out these previously empty phrases, so you can start to understand why a donor has a relationship with you. You can get under the skin of what it is . . . effectively, what’s the job they’re paying you to do? What’s the job they’re employing you to do? And you can start to really get under their skin and get an understanding of what donor-centric actually means, not what would we like it to mean.

Steven: Right.

Charlie: Not what is it we wish they wanted us to do, but actually what do they want to do, and how do we deliver that? Because if we were to deliver that, and give them more of what they want, they’d end up giving us more of what we wanted . . .

Steven: Right.

Charlie: . . . which is kind of the problem fundraising has at the moment.

Steven: So, we both talk about donor retention all the time. You’ve been writing about it on our blog. Everyone knows it’s not a good situation, that the average donor retention rates are super low. But it think it’s really even more frightening when you compare them to the customer retention rates in the for-profit sector, which are usually 80 to 90, super high. Why, in your opinion, are they so much better at this retention thing than the non-profit sector? What’s going on here?

Charlie: I think there are a number of things going on. First and foremost, we as a sector have to get better at understanding that there isn’t a huge difference between the mindset that comes to making a purchasing decision, and comes to making a charitable donation decision. I think too much that we have on our side thinking of ourselves as being like this shiny thing over there that’s totally different.

And the reality, people aren’t making that much of a distinction. If you boil it right down, people don’t stop buying the things they want. So why should it be that commercial people are keeping 80-90% of their customers, when we’re probably losing something like 8 out of 10 of our donors? It just doesn’t make sense.

I think one of the biggest problems is, we’ve got into a mindset where, horrendous attrition is the status quo. It’s almost factored into the costs of doing business or ignored, that we’ve come to not expect any better, you know? Whereas if a commercial operation were losing customers the way we were losing donors, they would go out of business.

Steven: Yeah!

Charlie: Friend of mine, fundraising director, a very good guy, at an incredibly well-known around the world charity, was saying that in the last eight years, they have only had seven months where they’ve had more donors coming in the front door than they’ve had going out the back door.

Steven: Wow.

Charlie: Now you think about any commercial company where that would be okay.

Steven: Right.

Charlie: Or any commercial company that would allow that to happen for two months before there would be an issue, never mind eight years of this stuff, but no one is ultimately in charge of looking at retention over on this side or it becomes a very soft and a very wooly concept. As long as we’ve hit last year’s number, we’re doing okay.

Steven: Right.

Charlie: The answer seems to be let’s ramp up the acquisition, which is getting more and more expensive, so we’re spending a fortune on that, pumping more and more people through the front door, and they’re leaving just as fast out the back, and nothing changes.

Steven: So what do we need to do? Do we need to start acting like for-profits, which I know for all the reasons you just said kind of freaks people out, people don’t like to think of fundraising as sales. What can we do to start acting like it beyond putting someone in charge of retention and making that a top priority?

Charlie: What we have to do, we have to start getting under the skin of why people do what they do. Why do people donate? We spend so much of a focus on looking at what donors did. you know, we look at the transactional date, we look at the recency, see the frequency, see the monetary value, I think we could say RSC over here, RFM over there.

Steven: Right.

Charlie: But we spend so much time looking at what they did we never understand why they did it, you know? And we get very complex, with our . . . we’ll slice the world about a million different ways, you know, with the transactional data, and we’ll append all kinds of socioeconomic demographic information on it, and we’ll see incredibly detailed and complex patterns. But ultimately, none of these things ever tell us why something happened.

Steven: Mm-hmm.

Charlie: So until we start getting into the why of business, what is it that’s driving people to do something with us? What’s driving the attitude and the opinion and the thoughts and the feelings that these people have about us? Until we can uncover that, we’ll forever be guessing, okay?

And that’s the big difference between us and the commercial world. They spent time money and effort and have been doing this for 10, sometimes 20 years, understanding the why question. All we’ve ever done is look at the what.

Steven: Right.

Charlie: And that’s outrageous.

Steven: So let’s say that a non-profit goes beyond transactional data, they get the why, all the things you talked about. What do they need to do with that information to really start moving the needle in the upwards direction?

Charlie: Right, that’s what everybody . . . it’s pretty simple, they need to act on it. This is the business that we are in. It’s about, once you’ve uncovered that information, this is what I was saying at the start in terms of what DonorVoice is about, once you’ve uncovered what matters, it becomes about putting together a strategy that delivers that, you know?

The average organization will have, will create, spend a huge amount of time and money and effort creating many many many different experiences and these cut across departments. So the idea that retention just sits within the fundraising department is not true. I think you had Roger Craver on here a little while ago talking about this as well.

Steven: Yeah.

Charlie: The study showed that at best, the fundraising department accounts for about 25% of a donor’s decision to stay or go, okay, so we need to start looking at the donor experience, the complete totality of it, all the things that are created across fundraising, brands, services, comms, etc etc. Every single thing that an organization creates, look at those things, and start to say well, look, let’s say there’s for argument’s sake 60, 70 of these experiences or touch points that a donor will be experiencing. It’s not rocket science to say that probably some of those matter more than others. And it’s not rocket science to say that not all of them matter equally. But the trouble is, without being able to measure donor attitude, we don’t know which is which.

Steven: Right.

Charlie: So we all need to look at, say, something that’s got financial metrics attached to it, like a campaign, you could say, look, this online email campaign, campaign A outperformed campaign B, we could say that comfortably. What you’d never be able to answer is the bigger question, especially when you think about our response rate or the non-response rate, is, how did campaign A affect they way people felt about campaign B.

Steven: Right.

Charlie: That non-responder is hopefully is tomorrow’s responder. We can’t answer that question, and that’s sitting in the microcosm of a single campaign run by a single team. You can throw in everything else that that organization does, you know, everything else that that donor is going to experience, and you’ve got this enormous jumbled mess.

Steven: Right.

Charlie: So to be able to go in and to be able to say well look actually, of all these experiences, here are the ones that are really important. These are the things, if you were to boil it right down, actually its not these 60 things, it probably sits within these 20. And if we looked at these 20 we could start to say, going a little bit deeper, and say well, actually, of those 20 that matter, some of these are great experiences, they’re driving the relationship, but currently they’re broken experiences. We need to start fixing those. If we could fix those broken experiences, we could get a better value.

Other things we could say, those are good experiences and actually donors love them, these are great. So why don’t we scale those, you know, let’s give them more of what they want. And then, you would have a whole heap of other things that all that time, and money, and effort spent against them, that actually, you’d be better off spending the money elsewhere.

Steven: Right.

Charlie: We’re not necessarily . . . that list of things are bad or wrong in any way, but it turns out that actually none of them are causing a donor’s decision to stay or go.

Steven: They’re not doing anything.

Charlie: So what’s the virtue of focusing on those, when we have over here, that this is the essence, that is the relationship right there.

Steven: Do you think it’s ever going to get any better? Take out your crystal ball, are we ever going to fix this?

Charlie: Yeah, yeah, I mean, and it’s starting to get better. But like any change, it’s incremental. There are some charities who are starting to do this, who are starting to put together campaigns that are led by the donor. Like I said at the start, everyone uses the phrase donor-led. But what they really mean by that at best is, you know, technique, which is important, for example using the word “you” rather than the organization’s name, and so on. But at least, common stuff that should be common sense but still isn’t common in practice.

Steven: Yeah.

Charlie: But, even if everyone was to get all of that 100% right, even if every fundraiser was to suddenly become the most incredibly donor-centric fundraiser in the world, they’d still need to understand that it’s the totality of experiences that an organization delivers, that needs to be got under control and understood to find out what matters and what doesn’t, so that the organization could start to put a strategy together based on what matters to the donor, because if we deliver greater value, they’re going to derive greater value.

It ultimately comes down to, I think too many people look at retention as an add on, you know? You have the fundraising team, you have your online team, you have your events team, you have your acquisition team, you have your cross-sell team, upset team and all that, and then some pauses and someone is, and here’s the retention thing, over there.

Steven: Right.

Charlie: It becomes just another silo. But the reality is retention isn’t something you do, it’s everything you do. If you uncover what matters and start to deliver it, retention becomes a natural byproduct of doing a good job. If you do a good job this month, you know, and you start to give them what they want this month, you’re going to get more of what you want from them. And if they’re getting more of what they want from you, they’re going to give you more of what you want from them. So it means that January becomes better.

Steven: Right.

Charlie: They’re more likely to be there in February, they’re likely to be there in March, and so it goes on. Retention just becomes a logical extension of doing a good job in the first place.

Steven: Makes sense. Charlie, you’re a wise man. You tell it like it is.

Charlie: I hang out with some wise people.

Steven: You do, you do. But you’re also wise. Before I let you go, where can people learn more about you and DonorVoice? They’ve got to follow you on Twitter, read your blog. Where can people do that?

Charlie: Oh, well come to www.thedonorvoice.com. You’ll find me on LinkedIn, Charlie Hulme, the twitter handle is @charlieartful, all one word. But go to the DonorVoice website. There’s loads of great content on there, loads of really great blogs.

Steven: They really are, you’ve got to check them out. Charlie, thanks for joining us, thanks for taking the time out to share all your knowledge, this was fun.

Charlie: Well happy Christmas, my friend, and happy Christmas to all of you guys.

Steven: Yeah, thanks man, you too, and thanks to all of you for watching, taking time out of your day. We will catch you next week with another great conversation here on Bloomerang TV. We’ll see you then. Bye now.