Donors: Cash Cows or Valued Friends
Nonprofits run off the kindness of donations. Except for the largest charities, there are no large endowments, glitzy fundraisers or celebrity appeals. Instead, there are many people who work hard for a cause they care about, with no pile of cash or long-term plan. And relationship marketing is hardly considered.
The cash flow needs of a nonprofit tend to drive the direct response fundraising machine. I often say that the donors are the cash cow to the charity, and we, as their DM agency, are the milkmaids. It isn't because they don't care; nonprofit staffs care greatly. However, nonprofits are out there fighting for each dollar. The monthly overhead always looms. Naturally, this short-term focus on cash flow produces a short-term view of direct response fundraising.
This mindset does not lend itself to relationship marketing. There is no effort to build communication channels; many appeals don't mention the previous gift or inform the donor how their previous gift was used.
There are more than 700,000 registered charities in the United States. Usually donors aren't corporate giants, but the people next door who give $15 or $20. In the past, people gave to local charities and based on affinity. They were veterans so they gave to the VFW or donated to the local YMCA since they were members. The past decade has seen a seismic shift away from relationship building toward what I call "cash and carry" fundraising, aided by premiums.
I bet that seven out of 10 charity appeals are premium-driven - greeting cards, address labels, calendars. Premiums attract attention and raise the response rate. However, premiums have weakened the link between donor and charity. Many people give a few dollars out of guilt to a charity when receiving a premium. That helps in the short term, but hinders long-term growth.
Premium-generated donors are less loyal and less giving than other donors, but they get a lower average gift, they get a greater response rate, usually enough to offset the lower gift. So what is the right balance?
The answer lies in relationship marketing. Nonprofits need to realize that with relationship marketing they can build long-term relationships, which will reduce the churn of donor acquisition, stabilize and grow their existing donor relationships and offer more financial strength in the future.
How does a charity do this? After all, few are at the forefront of technology, frequently the left hand doesn't know what the right hand is doing, and consensus among departments can be difficult to obtain.
Let's use a sample charity based on several I have worked with. Our charity is a national, Save the Emus (SE), with an active donor file of 150,000 people. SE mails on average 10 times a year to its donor file, plus gift acknowledgment letters each time a donation is received, and a quarterly newsletter. SE also mails donor acquisition appeals every six to eight weeks, about 100,000 pieces each mailing. All mailings involve premiums. Direct response fundraising bring 90 percent of its operating income.
There is no rule as to what to do, but suggestions abound. Save the Emus can collect e-mail addresses of its donors. Gift acknowledgments sent via e-mail cost a few cents apiece, as opposed to 25 cents apiece for a paper acknowledgment. It can offer to e-mail the newsletter, further saving the cost of a paper newsletter. It can get permission from donors to send items of interest or urgent action requests regarding emus, starting a new communication channel with the donor. By getting permission, SE can start a new two-way dialogue with its donors and strengthen the relationship.
In every letter, donors should be thanked for their gift and told how it made a difference: "Dear Mrs. Smith, thank you so much for your recent gift of $20. Thanks to dedicated supporters like you, we can save more emus than ever before ..."
A recent study of U.S. donors by professor Adrian Sargeant of Henley Management College (UK) conducted while he was visiting associate professor of nonprofit marketing at Indiana University's Center on Philanthropy showed that of donors who had stopped giving to a charity, 13.2 percent said it was because the charity "did not acknowledge my support" and 8.1 percent said it was because the charity "did not inform me how my money was used."
Donors should be surveyed to discern what they like about the nonprofit, what they don't, and what is of interest to them. The idea is to craft communications that are meaningful to the donor.
Staff should treat all communication from donors professionally. All nonprofits to varying degrees have canned responses for common inquiries. Tailor these responses to acknowledge the relationship, and use them to move the relationship forward.
Relationship marketing is not simply using a database to personalize letters. It is a process of building trust and understanding, of turning a donor into an advocate as well. As charities strive to adopt standards from the for-profit world, they have become too inner-focused. Charities must focus on the donors, see what they want and listen to what they say.