Why the FEP Donor Retention Data is So Vital to Every Fundraiser

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 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 theline 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 [email protected], 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.