Fundraising 101: Donor Retention

I’ve gotten a fair number of inquiries lately from readers of the blog and listeners to the podcast about donor retention and gift acknowledgements. The issue that people are interested in is that they know that donor retention following a first gift is very low, about 30%, and that that’s really a terrible, terrible figure.

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The people who give you a gift are highly motivated to do so. People who make a gift, if it’s legitimately a gift, are not receiving something in return that’s tangible. Ultimately they’re giving it because they they want to do that; this is something that they want to support. And if they want to support your institution, they make a gift and then they only give a second gift 30% of the time. What that tells you is that their experience of giving that first gift was pretty lousy. So the question is: why is it lousy? Luckily, we actually know quite well what is really going on. And so I’d like to talk to you a bit about what best practices are for gift acknowledgement and therefore for promoting donor retention.

So let’s start with the basics. We can use our own experiences and our own attitudes and our own tendencies very well and considering what works and more importantly, what doesn’t work. When we give a gift to an organization and are looking for some reason to give at the college level, particularly the community college level, you’re really going to get two types of first time gifts. The first is of course, an alumnus who has graduated, perhaps recently, perhaps not, but they have received enough contact with the institution and some sort of prompt and they’ve elected to make some sort of modest gift. These first-time gifts of course tend to be small. And what’s important to understand is that the experience that that first time donor has when they make that gift has a tremendous impact on whether they’re willing to give again. So there are really several things where the process can go wrong. And I will, I’ll start with the simplest, which is that there are actually very few institutions which thank donors enough.

So there’s a general rule of thumb in fundraising that a person needs to be thanked in some way, acknowledged in some way, about seven times, before the average person truly internalizes that; that is, that they truly feel acknowledged, that it’s driven home to them somehow that their gift was appreciated seven times. Sounds like a lot, but in fact it’s actually quite routine and, and some of it is simply automated. So when a person makes a gift, say on the college website, they’re going to receive an acknowledgement back, some sort of an automated receipt. Obviously that receipt that they get this whatever the screen displays when they hit the submit button – the screen is going to display something and it had better display a “thank you.” I have literally seen screens receipt screens that do not say thank you!

So then presumably another automated step after that is that you’ve presumably collected some sort of contact information for that person. Hopefully you’ve gotten their email and so there there’s going to be then an automated email, because obviously the receipt on the screen itself is helpful, but they also might need a record that they’ve just made that gift – an automated email thank you. That contains the same information as the receipt that they saw on the screen when they hit Submit, and that’s another opportunity to say thank you. But of course there are many other opportunities as well. Are they going to get a hard copy thank you? Of course, every school is going to have a different policy about what warrants a hard copy thank you. But in most cases, it’s going to be worth it for you to send something that specifically they receive in the mail, obviously a different format than electronic, that says, thank you.

What about the foundation’s website? Does that thank the donor? Does that have some kind of revolving ticker or some kind of accumulating list that shows who’s given that year or that month? To what specific purposes? What about the website of the purpose that the gift was made for? Let’s say that it’s given to the chess club at the college – does that chess club have its own page on the college’s site and does it acknowledge the donor?

We haven’t even gotten started, because then there’s the realm of social media. Obviously I’m not going to bother to list all the different possible social media outlets, but presumably if the person has not asked for that gift to be anonymous, and of course most people do not make that request, most people are fine with having their gift be publicized. You’re now going to thank them where it’s appropriate on social media to targeted audiences. Ideally you’re going to do that in a way that tags that person so that they’re aware that they were thanked. But let me tell you, nothing is more gratifying to a donor than being unaware that many people know about your gift, walking into Walmart, meeting somebody that they know and that person says, “Oh, I saw that you made a gift to the chess club, and that was really nice of you.” Or something like that. Everybody certainly likes that experience, but social media really presents a literally a dozen opportunities to thank a donor. Remember, it’s not just one time on social media; you, you might thank a donor when a gift is made, you might have a weekly wrap-up of acknowledgements. You might have a monthly wrap-up. You might have a monthly report or something that goes out on social media that thanks people –  there’s really no shortage of that kind of thing.

Don’t forget about phone calls. Depending on the size of the gift, it may warrant a phone call. It may warrant more than one phone call. At my previous institution, we had very specific policies about first time gifts at varying sizes. Who was going to call that person and thank them? It sounds burdensome, and it’s not the slightest bit. (Honestly, because most people don’t actually answer their cell phones.) So all you’re simply doing is leaving a very short, very appreciative message that anybody would like to get in their voicemail. Gifts of a certain size – maybe the warrant a phone call, if they’re a first-time gift, from the annual giving director. Maybe gifts of a larger size require somebody at a different level in the organization.

But in every case, what you’re going to do is to thank someone for the gift. And my recommendation is that you explicitly point out that this is their first gift to the institution. Everything you can do in your acknowledgement that personalizes the acknowledgement, that makes it seem as if you clearly understand who this person is, at least in terms of their history with the college, is going to make that person feel as if you’ve made a connection with them. You know who they are, you understand whatever it is about what they’ve done that is special.

You can sit down and easily come up with two dozen different ways to thank people that overlooks some of the less obvious ways. Is there a monthly report that the, either the fundraising office or the president makes to the board, which is in the public domain and that that report can thank all new donors or all donors in general.

Is there a way, for example, to acknowledge that person’s gift back to them by sending them as a separate piece of correspondence information about the program that they’ve supported? Is there a way to invite them based on their gift to specifically acknowledge them as a donor in an invitation to an event that has to do with the part of the college that they’ve supported? There’s literally no end to the number of ways in which a donor can be thanked and acknowledged. Is this a lot of work? No, it is not. It may sound like a lot of work, but in fact there’s a couple of things that a successful organizations do that minimize the work. So the first of course is automation. There should be a two or three points in the process in which the, the acknowledgement is automated and doesn’t represent additional work for anyone.

Second, if it’s built into processes that already exist, it turns out to be a very small part of a process. So for example, if you’re having an event, obviously the planning for the event is exists anyway. So does the invitation process to the event. So at that point, all you’re really doing adding to the process is just a single item on the checklist that just says, check with the fundraising office to ascertain whether there have been any people who’ve contributed say in the past year to the part of the college that’s hosting this event. Ultimately those people just get included in the invitation. Now, why is this so important? It’s because even though the rate for donor retention is so low, the fact is, is that if that problem is corrected, the outcome is very significant. And the reason why is because it is simply easier to keep a donor than it is to gain a new donor after losing one.

Let me give you a, a sort of a very graphic example of that. So back in the early nineties, I believe, Harvard did a study about their major donors and and their goal was really just to find out predictors of why someone would make a major gift to Harvard. They they ran their major donors through the ringer who were alumni. What they found was that their major donors who were alumni ultimately had two things in common: the first was that they had high net worth, which of course isn’t going to surprise anybody. But the second one was truly fascinating, which is that every major donor they had who was an alumni had begun making annual gifts to the institution within three years of graduating. That means that the opportunity is there to develop those major donors. Annual donors with money become major donors if stewarded correctly.

So let me get more specific about the kinds of things that ultimately, truly convey appreciation. Two first time donors and impress them and keep them coming back, make it a truly memorable experience for them. Ultimately, you know, you’ve got to remember that there are really three kinds of donor experiences. One in which the organization was very appreciative, one in which the organization produce some kind of negative experience in some way, and the other in which the organization was indifferent. And that really should, because there’s three of those and two of those lead to non-renewal of donors, it’s probably no accident that the retention rate is about 30% because two of the three outcomes are going to lead to poor donor retention. So let’s talk specifically about some of the things that really differentiate an organization that really retained donors that really make a donor think, “that was pretty amazing. I feel really good right now.”

We’ve already talked about the automated receipts, the personal email, but there are other things that really are very valuable. So the first is something separate that comes, in, in the mail to it, to a donor and you, you can make your decisions based on the size and workforce of your organization as to what gift level triggers this. I would urge you to keep that gift level as low as possible because small annual gifts now become large annual gifts later. If this is really just about investing in a future outcome, but what I would recommend is somebody who is making a gift for the first time should be explicitly welcomed into the donor family. Some kind of welcome packet that basically we know that you’ve made your first gift to here’s the group that you’re joining, here’s the organization you’re supporting and that that packet is going to give them information about the kinds of things they’ve already demonstrated that they’re interested in.

But there are other things that would set that apart that that packet cannot be something that, you know, it looks like it was just sent to anybody. It has to be significantly personalized. There should be some handwriting on it. Ideally, a handwritten note to the donor. There needs to be a way for them to respond to it by the way, that is not very forward, but allows them to be so impressed that they follow up perhaps with some kind of reply. It needs to include, the business contact information of a somebody in the organization so that if the donor wants to follow up in that way, they can as well. And ultimately it’s really got to be carefully made to show that there’s an impact of the gift that the donor is having, the effect that they envisioned, and that if they’re having that effect, that the organization recognizes that and appreciates it.

Any listeners who are interested in examples of what these kinds of communications with donors might look like? I’m certainly happy to send them to you. I did mention earlier some kind of newsletter and I want to stress the need to produce two kinds of newsletters, a one electronic and one print. Obviously electronic are less expensive. It’s certainly less expensive in many ways to produce and to disseminate. And of course it tends to target a younger demographic that from a certain standpoint is obviously very desirable because as, as the Harvard study shows, you want to get people in a pattern of annual giving as early as possible in their lives. But the fact is the print newsletter can often have a much greater impact. There’s clearly something that resonates with people about a physical object that they can hold. And in addition, you have to remember that depending on the age of the recipients, some people simply prefer something in print. If any listeners are interested in how to create good newsletters, I can refer you to some excellent source material about how to create a newsletter that actually produces an impact.

Ultimately, all of these techniques are variations on a theme. And the theme is simply this, that one of the principles I suggest any organization that is an object of philanthropy I think should live by, is, to ask less and to touch more. One of the problems that you’ll see if you talk to anybody who is talking about their Alma Mater, one of the things you’ll hear very, very often, is this sort of criticism: “Well the only time I hear from them is when they want money” or something like that. And ultimately if that’s the way the person thinks about your organization, that is the fault of your organization, because an organization makes very deliberate choices about how often and for what purpose to contact it’s constituents. If you are contacting donors in a way that convinces them that they are just a checkbook to you, they’re going to recognize that – they’re not stupid. You’ve probably drilled that into their heads through years of contact that was designed only to explicitly extract money and you need to recognize that. You need to step back from it and say, wait a second, that’s not the way a supporter should be talking about our institution. And you have to recognize that that’s on you, that you’ve turned that person who presumably wan’t born with that opinion of you. So somehow they’ve formed that opinion, they haven’t formed it in a vacuum, and they’ve probably formed it because of things that you’ve done as an organization. So it’s time to step back from that and think about a different approach.

The statistics clearly show that organizations are very bad at retaining donors. And the studies clearly show that the main reason why they’re bad at retaining donors is because they poorly acknowledge gifts. For the life of me, this is very difficult to understand. You know, there’s this temptation to think that somehow, “well, you know, I’ve gotten their money and I don’t need to do anything. Anything I do after this is just wasted effort because they’ve already given me the money.” Nothing could be further from the truth. Leaving aside the fact that you owe that person a certain amount of gratitude. the fact is that if that person has 30 years of giving ahead of them, or 40 years or 50 years, and they’ve made their first gift, you could say “I’ve already received their money,” but in fact you’ve only received one 40th, one 50th, maybe one 100th, maybe one 1,000,000th of the total lifetime gifts they’re going to make to the institution. Ensuring that they make that second gift, and then that third gift, is the best way to capture all of those funds.

I actually think that there’s something else at work, particularly in smaller organizations, and this is a little difficult to describe. I think that when we express gratitude genuinely and say, with a handwritten note from a specific person or something like that, when we actually express our own emotions about the how we feel, even if it is just gratitude, I think we do leave ourselves somehow emotionally vulnerable by telling somebody how we feel. And a lot of people do not want to do that. They don’t want to make themselves emotionally vulnerable to other people, to their, to perhaps a rejection of that gratitude or something like that, which sounds totally bizarre. It actually applies better in the case of say, an apology or something like that. But I think that we have a habit of not wanting to expose ourselves emotionally to others, even in cases where it’s clearly warranted and it would move something important forward. So I think we have this habit where we think, “Oh God, you know, I don’t want to do that.” Or something like that. The fact is, is that thanking people should be the most natural, the most desirable activity we engage in.

Everybody likes to be thanked. It feels good when you thank somebody, when you thank them profusely. If you’re genuinely grateful for it, you’re really just expressing something that you already feel and everybody feels good. I’ve never really gotten why this is so difficult for organizations to do. I would urge college administrators, not just fundraisers but any college administrator who is in a position to acknowledge a gift, to thank a donor for their support, to think about it in terms of gaining future support, because then it seems like the rationale is far more clear. I have always been puzzled by organizations that will invest in a planned giving program, knowing full well that that program will not yield a net positive return for five to eight years, and do not approach their first-time donor acknowledgements with the same sense of planning of long-range thinking.

The fact is that if you approach those first time gifts with the attitude “I’m going to make this a fantastic experience for that person so that they will come back the next year, they will have another fantastic experience. I am going to be at the top of that donor’s priority list.” If you adopt that view, you will find two things. The first is that of course your donor retention will go up and your money will go up. The second is that the work life of you and the other people in your organization that are part of the acknowledgement process, that the quality of their work life improves. The more gratitude there is around us, the more celebration there is of support, the more we feel worthy of support, the more we believe in what we are doing, because we see others from the outside that want to support it and that we celebrate that publicly and repeatedly.

This is a way of not just improving the donor’s experience, but actually improving the morale of the people who work at your institution. I do want to thank my listeners. We’re wrapping up our first season of the mortar board. It’s been a very successful season. and I really want to thank all of our listeners during the summer. I do plan to release the podcasts slightly less frequently so that I can work on other projects I have planned. But the podcast will not end entirely. I think that instead of an episode being released every two weeks, I think we’ll probably see one approximately every three weeks. At any rate, this podcast is being released as many of us are closing out our academic year, and so I wish to all of you that your graduation ceremonies and your other end of the year events are pleasant and rewarding ones and that your students have been successful this year. That’s what drives all of us and this is a good time to reflect on that.

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