relationship fundraising australia

When I began working in fundraising, more than twenty years ago, I was told we should not look at other organisations as competitors, that we should not see ourselves competing for the charity dollar, that one of the aims of what we do should be to increase the size of the cake so that there is more money available for everyone.

Twenty years later what has happened?

The cake is certainly bigger. I am sure that more money is raised today than ever before. Certainly the amount of money raised indicates that fundraisers have become better at raising money. We are more professional and there are more of us than ever before.

But is all well?

Let’s look at another set of realities.

Over the last twenty years I am seeing the number of new donors acquired per acquisition campaign getting fewer and fewer. At the same time the cost to acquire a new donor is getting higher and higher. That is why there is a lot of interest by fundraisers in how to acquire donors cost effectively. The reality is it is getting harder and harder as well as costlier and costlier.

We are also seeing renewal rates falling. A few years ago it was not unusual for donors to support fifteen, twenty or more organisations. Today donors are restricting the number of organisations they are supporting. Now it is more like four or five that they consider to be their favoured charities.

As a result we are seeing fewer and fewer numbers of donors renewing each year but those that renew are giving larger amounts. Fewer and fewer are giving more and more.

With many of the Donor Database Audits we perform at Robejohn we are seeing evidence that the number of new single gift donors who are going on to give a second gift is reducing. Whereas it was not unusual for 55 – 60% of new donors to give a multiple gifts within their first twelve months, today it may be only 40 – 45% who go on to make a repeat gifts in this time frame. Hence we are seeing a frenzy of activity as organisations compete to convert donors into regular giving programs. Many of these programs are not based upon strong donor loyalty principles.

And add to all this is the demographic fact that the traditional donor who is now well over 65 years of age is retired on a fixed income. And those who follow are not as good givers as their parents, grandparents or even great-grandparents.

What’s the problem?

A survey taken in the US in 2002, I believe is a good indicator of what may be happening.
In July of that year, Barna Research Group, a very well known and respected research company involved in the non-profit sector, interviewed 1,012 adults by telephone. The results show a weakening of both donor loyalty and donor confidence in non-profits.

• Over the previous five years, the percentage of people who give to non-profits has dropped from 87% to 69%. That’s the lowest is has been.
• 23% of respondents said they lost confidence in non-profits in the past two years.
• 14% of donors had discontinued support of an organisation in the past two years.

What this seems to be saying is that maybe we are the problem. I have heard, anecdotally, of research that was conducted in Sydney by a very well known non-profit of its lapsed donors. They found the reason why donors stopped giving, is not because they have financial difficulties, it was because, at least in 70% of the cases, donors felt the organisation did not care about them.

If this is true, and I believe this is not far from the truth, we as a profession and a sector have a lot of soul searching to do.

Experience shows that it is not what organisations do, as much as what they are not doing that makes donors attrite. If you want to find out if your organisation is one of these, try this out: send a donation using a false name and use a friend or relative’s address, say that you are getting on in years and cannot see as well as you used to, but you have for a number of years been admiring the work of the organisation and so you felt that you would like to make a small gift to help support their work. Also add that you would like to receive any recent material they have available about their organisation… then wait and see what happens, or more likely what doesn’t happen.

The Barriers to Donor Loyalty

A question I often ask board members and senior staff of non-profit organisations is, “What is the role of fundraising?” One hundred percent of the time the answer given in response is, “To raise the resources we need to provide our services.” And then I ask “So what is the role of the donor?” Logically the answer then given is, “To provide the resources we need.”

And there is the root of the problem.
Those of us involved in fundraising have been raised with some very important principles taught to us by our peers and mentors:

• People give to people
• You don’t raise funds; you raise friends
• Fundraising can be summed up in just three words – relationships, relationships, relationships.

Ken Burnett wrote in his 1992 seminal book, Relationship Fundraising, the now famous words:

“Relationship Fundraising is an approach to the marketing of a cause that centres not around money but on developing to its full potential the unique and special relationship that exists between a charity and its supporters”

“Whatever strategies and techniques are employed to boost funds, the over-riding consideration in fundraising is to care for and develop that special bond and not do anything that may damage or jeopardise it”

“In relationship fundraising every activity of the organisation is therefore geared towards making donors feel important, valued and considered. In this way, relationship fundraising will ensure more funds per donor in the long term”
Ken Burnett – Relationship Fundraising

Despite this fundraisers and their organisations still act as though the aim of fundraising is to raise money. Along with this emphasis on raising money we also see in many organisations:

• Fundraising is kept separate from the rest of the organisation
• The fundraising or development department, whatever term that is given to the department, has sole responsibility for donor relationships
• The push from an organisation’s leadership at both board and executive level towards fundraising has to do with raising more income, often at lower costs.

At its heart, donor development is about an organisation’s staff and leadership developing relationships with those capable of giving support and making them friends of the organisation. Donor development must be embraced by the entire organisation. It is not just the responsibility of the fundraising department. In other words, an organisation must become donor-centric. This takes commitment and involvement of an entire organisation to successfully develop donors.

However, before you think that what I am saying is the only barrier to donor-centric fundraising is organisational, I want to also point out that another major barrier is the way fundraisers approach the raising of money.

In general, most fundraising departments approach the raising of money in “product” terms – through a mix of cost-effective, hopefully, fundraising products. Therefore we see fundraising efforts, departments and even budgets divided into fundraising “products” such as: special events, direct mail, bequests and major gifts.

The result is that we divide our fundraising departments into “silos” based on the fundraising products. And as Penelope Burke, a Canadian fundraiser says, “Silos are for farmers and not fundraising.”

We even see where after-marketing or “customer service” is based on efficient data processing and the development of systems, rather than on donor care which meets and exceeds donor expectations.

Why is Donor-Centred Fundraising So Important?

When we set fundraising goals, we usually cast them in terms of dollars. However, the major fundraising goal of any organisation should be to build a base of loyal donors who give money year after year, campaign after campaign. It is this base of loyal, supportive donors upon which the financial goals of every fundraising campaign are built, making donor loyalty the most critical element of long-term, sustainable fundraising success.

The only bigger sin than allowing the first gift from a donor to become the only gift received from that donor is allowing the most recent gift from a donor, who has made multiple gifts, to become the last gift from that donor – because the longer a donor gives to an organisation the more likely those gifts are to grow in size and frequency. Losing a donor should be so painful to the fundraisers that they would do everything they can to never allow it to happen.

As Tony Pedres, a US fundraiser writes:

“When an organisation loses a repeat donor, it loses in two ways. First a lost donor is lost not only for this year, but for every year to follow. Secondly, the hope for gifts from every lost donor will have to be replaced with money from new donors, and replacing a lost donor is not a one-for-one exchange. That’s because in general, the longer a donor gives to an organisation, the more frequently and larger those gifts become.”

In fact it may take at least five new donors to replace one repeat donor. Another fact is that if you slow the attrition rate of repeat donors by five per cent annually you can double your income over 10 years. Donor loyalty is the key to successful fundraising.

What is involved in Practising Donor-Centred Fundraising?

There are many aspects to doing effective donor-centred fundraising. Here I will present a few of what I believe are the key elements.

1 – A need to change the mindset:

It starts with what is in our head, how we think. We need to develop a new way of thinking, because how we think influences how we act. Below is a paraphrase of the kind of new thinking we need in fundraising from the book The Eleventh Commandment by Sandra Vandermerwe.

Old Thinking

New Thinking

Our function / division department matters most

The good of the whole matters most

We therefore strive to retain our independence

We actively work towards interdependence and reciprocity

We are responsible for doing our own function / division / department activities

We are jointly responsible for activities which create and deliver value to customers

Some people are not connected to customers

Everyone is connected to customers – either external or internal

Our aim is to get as much income as we can

Our aim is to deliver ongoing “high value” to our donors

We need to compete both internally and externally to be competitive

If we don’t collaborate, we can’t sustain our competitiveness

The biggest obstacle to change is the enemy within – the mindset – the programs deeply ingrained within each of us – that determines how we think, talk and behave. Mindsets reflect not just our view of the world, but the shared view within the organisation built up over time.

2 – Say “Thank You” Effectively

Here I am indebted to Canadian fundraiser Penelope Burke. Penelope has done the most comprehensive study I have ever seen on what donors want from the organisations they support. This research was conducted in both Canada and the US and the results were very similar between each country, and I would suggest they would apply here as well. In fact I must confess, what she has said has been the most significant material I have read on fundraising in recent years.

Penelope’s research said there are three things that donors want from the organisation they support. These are to know that:

1. The gift was received … and you were pleased to get it
2. The gift was “set to work” as intended
3. The project or program to which the gift was directed had/is having the desired effect.

Basically donors want meaningful information about how you have used their money before they give it to you again. Penelope then goes on to emphasise the major communication vehicle for doing this the “thank you” letter. She goes on to give the key elements of a good “thank you” letter.

Here at Robe-John we use this list as our guide. Compare your “thank you” letters against this list and evaluate how good your letters are…

• The letter is personally addressed
• Each letter is personally signed by someone in a leadership position
• The donor is warmly and enthusiastically welcomed
• It communicates excitement, gratitude and inner warmth of the writer
• It has an overall “can do”, positive tone as opposed to a hand wringing one
• It does not continue to “sell”
• It makes specific reference to the intended use of funds
• It indicates approximately when the donor will receive an update on the program that she has funded
• It includes the name and phone number of a staff person whom the donor can contact at any time or an invitation to contact the writer directly
• It does not ask for another gift or to do anything else
• It is received by the donor promptly.

I can truly vouch that what Penelope says is right. One of our clients has allowed us to test this approach with new donors. Those who received the new thank you letter and treatment responded three times better to the Christmas appeal than those who were given the traditional treatment.

3 – Have a Balanced Approach to Management

How we are measured by our superiors will determine what we will do. Therefore, if we are measured by income to cost ratios then that is how we will perform, irrespective of how much damage it may be doing to the organisation.

I remember once speaking to a direct mail manager for a very large organisation who confessed that she set the dollar handles on the coupon low so that as few as possible people would give $1,000 or more. She said that the internal protocol was that anyone who gave $1,000 or more was transferred from her database to the major gift department who then took the responsibility and the income from that donor. The reason for this is that she was being measured by how much she was raising.

Whose fault was this hers or the leadership who set poor measurements?
I believe, very strongly, that we need a balanced set of measurements which measure a range of factors besides income. Below is a growing method of measurement which is now being adopted by non-profit organisations as well as for-profit organisations:

There is so much I like about this method of measurement. What I especially like is the “Learning and Growth” chart. If we are not a learning person, department, organisation then we will not grow.

4 – Know Your Donor

I would like a dollar for every time I ask fundraisers to describe their donors, and they reply by saying, their donor is female, over 65 years of age with medium to high income. One conclusion could be that there is one old lady who gives to every organisation.

What they are really saying is, they don’t know. They may know vaguely who their donors are but they don’t know them personally, what motivates them and what they expect from the organisation.

The key to any relationship is communication. And if you want to build relationships with your regular donors how can you communicate with them if they are strangers to you.

It is vital that you ask the donors how they feel about the organisation, and what they expect in return. And you need to ask this regularly.

5 – Be a Contact Leader

It was once fashionable that the style of leadership that people were encouraged to follow was facilitative leadership. What this meant was that you brought out the best in your staff. You empowered them, supported them and managed them.

But today you need more than facilitative leadership. The danger with this kind of leadership is that you never leave your office. You sit behind a computer contacting the world by email or if you are really wanting to go a step further you will call someone.

What is needed today is contact leadership. A fundraiser must get out and talk with donors, staff and volunteers. Meet them face-to face. Talk with donors who call because they have a complaint. Open letters from your donors and see how they fill in the appeal coupon, see what they are saying. Join your staff at the “coal face”.

Get close and personal with your donors – and when you can, bring donors close to the organisation. Site visits are a very important part of this.

Where you can you should look at outsourcing anything that does not involve personal contact with your donors, form a solid partnership with a dedicated direct marketing agency like Robe-John, make sure they understand relationship marketing principals and the giving market.

6 – Work Cross-Functionally

Of all the aspects of donor-centred fundraising this is the hardest area to both communicate and for people to accept, because it goes against what we have learnt over many years. We are taught to be competitive, and to take control. The donor-centric approach says you have to work collaboratively and towards a group vision. This means working across functions or cross-functionally.

When we are hired we are usually given responsibility for a function. We are given K.P.I’s based on this function. We are even rewarded on how well we perform our function.

The problem with this in fundraising is the functions are based on fundraising “products” rather than around the donor. Therefore the old thinking functional approach results in communications that is centred on products. The new thinking results in donor-centred communications.

Here are some key steps to developing a donor-centred communications plan:

• Take a long term view, at least three years
• Define supporter segments eg. Acquisition, New Supporters, Core Supporters, Major donor Supporters, Lapsed Supporters
• Work in cross-functional teams
• Meet regularly
• Analyse every point of contact with the donor to see how effective building relationships between organisation and the donor is
• Set balanced 12 month goals
• Develop 12 months communication strategies
• Review at least every 6 months, even quarterly if possible.

I think the ultimate cross-functional team would include people outside of fundraising; therefore it would include someone from finance, service delivery, even IT. This way people outside of fundraising would understand the issues facing fundraising better and fundraisers may even understand the issues faced by others in the organisation.

Conclusion

Donors are quite smart. They can tell when they are really cared for or when they are being given a token treatment because it is their money that is being sought.

The donor needs to be made to feel that not only are they being cared for but more importantly that the money they give is being used to achieve the mission of the organisation. They entrust you to do as you say.

The organisation must never take the donor for granted. In fact it must put the donor at the heart of the organisation along with the people that it serves.

This means you must earn donor loyalty, not assume it.

Once earned you must re-earn it, don’t take it for granted.

As a result donor loyalty is hard work on the part of people who have earned it, it’s not magic. Therefore don’t wait for the right time to build donor loyalty; you do it all the time.

Finally, I believe to be successful in fundraising you need to learn to love your donors and be passionate about your organisation.

Leo Orland FFIA, Account Director

Bibliography

“Thanks! A Guide to Donor-Centred Fundraising” Penelope Burk,
Burk and Associates, jd.burk.assoc.ltd@sympatico.ca

“The Eleventh Commandment, Transforming to “Own” Customers”,
Sandra Vandermerwe, John Wiley & Sons

“Donor Focused Strategies for Annual Giving”, Karla A. Williams,
Jones and Bartlett Publishers

“Balanced Scorecard Step-by-Step for Government and Non-profit Agencies”,
Paul R. Niven, John Wiley & Sons

“Relationship Fundraising”, Ken Burnett, The White Lion Press Ltd.

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