The Fundamental Paradox of Nonprofit Fundraising – Building Donor Loyalty

Donor Retention Project ImageThe Donor Retention Project – Week 2:
Building Donor Loyalty

As some of you may have seen last month, I am starting a new series based on The Donor Retention Project (also known as 90 Days to Larger Gifts and Lifetime Donors). Listening to the second week, an interview with Simone P. Joyaux, I realized a fundamental paradox of fundraising.  It starts with examining two commonly held theories about fundraising:

1 – People don’t give unless they are asked; and

2-  Most nonprofits accept annual fund donor retention rates that are incredibly low (Adrian Sargeant of Indiana University’ Center on Philanthropy estimates a loss of 50% of cash donors between the first and second year and 30% each year after that).  And there are some—Roger Craver of The Agitator, for example—who say that attrition is as high as 70% after the first gift.

I think it is safe to assume that these lost donors are being asked for renewed support – often by direct mail or a similar passive appeal. Which can only lead to one conclusion – when considering donor retention, being asked is simply not enough to trigger a response.

Which makes building donor loyalty essential to each and every nonprofit.

In fact, Simone Joyaux states that, “loyalty is the ‘Holy Grail’ of fundraising.” She gives great examples, including a quick quiz she often gives during speaking engagements.

She asks – who is more valuable to your nonprofit – a person who has donated $1,000 this year or someone who has donated $50 for the past 10 years.  The people usually agree that the loyal donor is much more valuable, but when these same individuals get back to their offices – who is getting the personal thank you call?  Who is getting a meeting with the board member or invited to a special event?  Who is getting highlighted in a newsletter?

At first glance, this seems logical.  While the loyal donor is greatly appreciated, any development professional would try to create that kind of loyalty from the $1000 donor.  But the reality is, very often that new $1,000 donor is giving because they have a strong connection with the Executive Director or a board member. As soon as their connection leaves, so does the funding.  Unless you establish loyalty to the organization and not just the friend.

I am in no way indicating that you should ignore the $1,000 donor.  But, perhaps the strategy sessions spent on further engaging this individual should be spent on creating more loyalty among current donors, determining which of these people may be able to grow their low-level gifts and celebrating donor impact at all levels.

It is time to stop accepting low donor-retention rates – rates that would have a for-profit business closing it’s doors – and establish long-term funding for your nonprofit.

There were, of course, many more tips from Ms. Joyaux on building donor loyalty but you will have to own your own copy to hear them. To purchase The Donor Retention Project Click Here.

Read the rest of my highlights on 90 Days to Larger Gifts and Lifetime Donors by clicking here