The following article is an excerpt from Penelope Burk’s new book “Thanks! A Guide to Donor-Centred Fundraising”. In the book, Burk reveals the results of her National Study on Donor Communication and Recognition, an expansive look the fundraising practices of 111 charities and the giving habits of 100 individual, corporate and foundation donors across the country. She advocates for a new way of dealing with donors to help them strengthen their ties with your organization and keep giving long into the future.
From Chapter 3: Donors Are People
The Revenue Gap
Why do some donors give more with each successive ask while others hold the line? Why do some donors reduce the size of their gifts while still others stop giving altogether? If all receive similar solicitations and relatively equitable treatment, what then are the reasons behind their significantly different patterns of response? The individual donors in our Study all have two things in common; they have been giving for an average of 30 years and they have been contributing to many different causes. By any measure, they are loyal, dedicated philanthropists. These are the people who occupy “most coveted” status in fundraising programs; they are representative of donors who can be counted on to remain loyal to the cause and to increase their giving over time. It is interesting to note that the donors in our Study also voiced considerable dissatisfaction with slow gift acknowledgement and lack of meaningful information on their gifts at work. These things, however, which cause less experienced donors to stop giving, are not the reasons cited by long time donors for withdrawing their support. And that makes sense. Experienced donors are already well informed about the charities they support. They make it their business to acquire the information they need to shape their giving decisions. They are proactive. These experienced donors, most of whom learned about philanthropy from their parents, have developed a resilience that enables them to maintain their fundamental belief in charitable giving in spite of charities’ varying communications skills. When they stop giving to a charity, it is most often because of mismanagement of funds, failure of the charity to fulfil its mandate, or negative media attention.
If loyal donors keep giving, often in spite of poor communications from the charities they support, then it stands to reason that donors who stop giving or give less than they could, do not have that same “philanthropic resiliency” that more experienced donors display. The CCP Survey on Giving, Volunteering and Participating discovered that 88% of the adult population contributes to charity in a single year4. According to the fundraising industry’s own information on attrition, about 50% of donors do not renew their gifts and, by the fifth year, almost 90% have stopped giving to the charities that once elicited their support. The Canadian Centre for Philanthropy and their Imagine Program have achieved the objective of getting Canadians to give. Today’s even greater challenge is to keep donors giving after they have made that first commitment. Ironically, the problem of donor attrition and under-performance has been created by the very charities that are trying so hard to raise the money. Continuing to drive home the same message of “give, give, give” while operating business as usual back at the fundraising office, will not close the future fundraising gap.
Professional and volunteer fundraisers need to turn their considerable skill to the majority of donors who give and then either stop giving, reduce their giving, or choose not to increase the amount of money they give. Time and resources should not be focussed on acquisition but on reinforcing existing donors’ support. Special attention must be paid, as well, to new donors and donors whose giving is tenuous so that they, too, can become resilient philanthropists.
Meaningful information on their gifts at work is the key to donors’ repeat and increased giving. Communication is the process by which information is delivered. The fundraising gap, therefore, is actually a communications gap.
Why We Lose Our Donors
Saying thank you and providing donors with information on their gifts at work is simply the right thing to do, but just because it’s right that doesn’t mean it is done consistently or well. There are many reasons why charities delay or mass-produce thanks and take shortcuts with the provision of information. They usually have something to do with time and cost.
Our National Research Study found that professional fundraisers spend 15-20% of their time on donor recognition and communication; leadership volunteers spend approximately 5%. However, it actually takes more time to keep donors informed about what their money is achieving than it does to ask them for it. If, as our research found, the key to sustained and increased giving is communication and not fundraising, then should charities rethink their priorities when it comes to the allocation of paid and volunteer time in fundraising? It seems evident that they should.
The need for more time and more meaningful content in donor communications will be recognized first by staff who, day to day, are on the front lines of executing fundraising programs and coping with attrition and fluctuations in donor loyalty. It falls to staff, then, to bring a solid argument to the CEO and the Board of Directors for implementing donor-centred communications and allocating a budget that is appropriate for the task. When presented with compelling financial information and a sensible plan of action, employers and Boards make good decisions, even when they are asked to challenge long held beliefs concerning investment in fundraising.
The Triple benefit of Donor-Centred Fundraising
Donor-centred fundraising is an approach to raising money and interacting with donors that acknowledges what donors really need and puts those needs first. Donor-centred fundraising impacts revenue potential in three ways. First, it retains more donors longer, giving them time to develop their own philanthropic resiliency. Second, it causes more donors to give increasingly generous gifts; third, it raises the performance of even the most active and loyal donors to a new standard. Donor-centred fundraising aims its sites at our two worst enemies in fundraising: attrition and stagnation.
The Compound Catastrophe of Donor Attrition
If a donor gives to do something worthwhile for a cause or because of a compassionate feeling towards people in need, and if it feels good to give, then why would he ever stop? Maybe it is because soon after giving, it doesn’t feel so good anymore. Perhaps he never finds out whether he made a difference to a cause or helped someone in need. Or, maybe he feels that the charity wasn’t all that excited about getting his money. No charity would ever intentionally make a donor feel unimportant; but could there be a communications gap between charities and their donors? And, could that gap be translating into a measurable loss in fundraising revenue?
The CCP survey findings and our own research seem to suggest that there is. The CCP Survey learned that when donors decide to stop giving or give less than they could have, 40-49% of them do so for reasons that are tied to lack of meaningful information or to a feeling that their giving is not appreciated(1). Our own Study looked at the same issue but from a more positive perspective, asking donors what would influence them to give again. 84% of donors said that they would definitely or probably keep on giving to charities that provided them with meaningful information on their gifts at work. We cannot expect to keep every donor who comes our way. Some donors encounter serious situations that force them to stop giving or to reduce their contributions. All donors die eventually. But the research is telling us that somewhere between 40 and 84% of donors who stop giving or choose to give less than they could have, do so because of circumstances that are entirely within the control of charities and fundraisers to change.
Calculating the revenue gap in charities’ fundraising operations requires the courage to first look at donor attrition in the cold light of day.Though there seems to be no published industry standards on attrition rates after first and subsequent gifts in direct marketing programs, colleagues I spoke with supplied consistent information. Attrition rates after the first gift are most commonly around 50%, though this figure can certainly fluctuate depending on the quality of the initial acquisition program and post-gift communications. A 30% attrition rate after the second gift is commonplace, followed by a further 20% loss of donors with each subsequent appeal. This attrition pattern, when extended over five renewal campaigns, is alarming, especially considering that the period of time for five such campaigns can be as little as eighteen months and is seldom more than five years. Consider the calculation in Table 1 for a charity with 1000 newly acquired donors, with gifts averaging $100.00 each, and what happens to both the number of donors and gross revenue in only five renewal campaigns. Average gift increase for renewing donors has been calculated at 15% for each campaign, a target that most organizations can reach with donors in their first few years of giving.
Table 1
| Campaign # | Attrition Rate | # Retained Donors | Average Gift | Campaign Revenue | Accumulated Revenue |
| Acquisition | n/a | 1000 | $100.00 | $100,000 | $100,000 |
| 1 | 50% | 500 | $115.00 | $ 57,500 | $157,500 |
| 2 | 30% | 350 | $132.25 | $ 46,287 | $203,787 |
| 3 | 20% | 280 | $152.09 | $42,585 | $246,372 |
| 4 | 20% | 224 | $174.90 | $39,177 | $285,549 |
| 5 | 20% | 179 | $201.14 | $36,004 | $321,553 |
In only five campaigns, the number of still active donors fell from 1000 to 179, a total of 82%. Even though gift averages of the remaining donors increased by 101% between acquisition and the fifth campaign, total revenue in the final campaign was a mere 36% of the amount raised in the acquisition program.
Now, without altering average gift values, consider what the impact would be if the charity found a way to retain 40-84% more of its donors instead of losing them through attrition. Table 2 illustrates.
Table 2
| Campaign # | Attrition Rate | # Retained Donors | Average Gift | Campaign Revenue | Accumulated Revenue |
| Acquisition | n/a | 1000 | $100.00 | $100,000 | $100,000 |
| 1 | 8-30% | 700-920 | $115.00 | $80,500 – $105,800 | $180,500 – $205,800 |
| 2 | 5-18% | 574-874 | $132.25 | $75,911 – $115,586 | $256,411 – $321,386 |
| 3 | 4-12% | 505-839 | $152.09 | $76,805 – $127,603 | $333,216 – $448,989 |
| 4 | 4-12% | 444-805 | $174.90 | $77,655 – $140,794 | $410,871 – $589,783 |
| 5 | 4-12% | 390-772 | $201.14 | $78,444 – $155,280 | $489,315 – $745,063 |
Table 2 shows that the charity was able to raise between $167,762 and $423,510 more in as little as eighteen months by instituting donor-centred communications practices. The organization also retained between 211 and 593 more people as active donors, the future long term giving potential of whom is simply immeasurable.
Stagnant or Declining Gifts: Sending a Message with Every Contribution
Donors who increase their giving in successive campaigns are sending a message that they approve. If they are not being provided with meaningful information on their gifts at work, yet they continue to give, it is because their positive view of the cause outweighs the poor quality of post-gift communications they receive. These donors’ faith in their chosen charities’ reputations, history or public persona, can support their loyalty for some time. Some donors may be determined contributors to a cause because of first hand experience; others may have access to the information they need from their work as leadership volunteers; still others may simply be hoping and trusting that their money will be well used.
Donors who decide to give the same amount or give less even when fundraising solicitations ask them to give more, are also sending a message. Their message is a warning. They have not yet taken the extreme step of refusing to give, but they are not fully satisfied either. The cause may still be compelling enough to elicit another gift but the charity has failed to reassure these donors that their previous contributions have achieved beneficial results.
Even if a donor increases her previous gift by as little as a dollar, she is demonstrating her growing generosity within her own means. It is important to remember that all donors, whether they give more, the same or less than they gave the last time, supported the cause to begin with. Charities cannot blame the donor, therefore, for becoming disenchanted with the cause or for having other priorities. Responsibility rests with the charity and, specifically, with the Development Office for failing to give her the information that would have facilitated a different decision.
The following tables illustrate the impact that stagnant and declining giving can have on a single fundraising campaign. Table 3 brings forward information from Table 1 that showed the number of donors still active after Campaign #1 and their average gift value.
Table 3
| Campaign # | Attrition Rate | # Retained Donors | Average Gift | Campaign Revenue | Accumulated Revenue | |
| 0 – Acquisition | n/a | 1000 | $100.00 | $100,000 | $100,000 | |
| 1 | 50% | 500 | $115.00 | $ 57,500 | $157,500 |
Table 4 shows how the giving patterns of the 500 retained donors breaks down, expressed as average gift values for all donors who gave more money, for those who gave the same amount and for those whose giving decreased.
Table 4 Breakdown of Gifts Contributed by 500 Retained Donors in Campaign #1 Donors Whose Giving Declined
| Donors Whose Giving Increased | Donors Whose Giving Stayed the Same | |||||||
| # Gifts | Average | Total | # Gifts | Average | Total | # Gifts | Average | Total |
| 200 | $150.00 | $30,000 | 155 | $100.00 | $15,000 | 145 | $82.75 | $12,000 |
The average gift value for all donors who gave in Campaign #1 is $115.00; but the group of donors whose giving increased gave an average of $150.00. These are the most responsive donors, the ones who are particularly dedicated to the cause and who are expressing confidence in the charity’s work. If all donors who gave in Campaign #1 did so at an average gift of $150, the charity would have raised $75,000 instead of $57,500, a 30% improvement.
Industry standards on attrition and renewal are compiled from the collective performance of thousands of charities. These organizations raise money for totally different types of causes, with or without marketing support, under widely varying budgets and under the direction of fundraisers with differing levels of expertise. A standard based on this many variables is of little use to a single organization. A much more valuable indicator of performance for a charity is its own high performance standard, indicated by those donors who remain loyal and increase their giving over time, and as reflected in Table 4. It is this standard that charities should be reaching for with all their donors.
Much More Is Possible
Stemming donor attrition and gift stagnation is only the beginning. The real amount of money that charities are failing to raise is actually much higher than depicted in the above examples. The most dramatic evidence of the potential impact of donor-centred fundraising and communications came from of our test which extended from the National Research Study. The test and its implications is explored in detail in Chapter 6.
Combining significantly reduced attrition with dramatically increased average gift levels through donor-centred fundraising will yield a new standard in fundraising success, one that we have not yet dared to imagine.
Calculating the Current Revenue Gap in Your Organization
The current revenue gap is the amount of money your charity is failing to raise now due to the absence of donor-centred fundraising and communication. Calculating the current revenue gap in your organization is a necessary and valuable first step towards raising more money.
Every organization is different and, therefore, every organization’s fundraising potential is also different. Nature of service, name recognition, longevity, experience in fundraising, types of fundraising programs – all these things and more impact donor retention and overall fundraising success. But, regardless of a charity’s donor profile or fundraising programs portfolio, every organization can estimate its own revenue gap.
Measuring Attrition in Fundraising Programs
Attrition in direct marketing programs – direct mail, telemarketing, canvassing, corporate campaign – can be analyzed by following the examples in Tables 1 and 2.
Due to their nature, major gift programs should already be good examples of the positive impact of better communication with donors. However, if even your more sophisticated giving programs are exhibiting a level of attrition that is unacceptably high, it is an indication that more personalized and/or more meaningful communication with these donors is required. There are no industry standards for attrition in major gift programs. It will be important to rely on your own judgement in deciding whether you are losing donors for reasons that relate to unsatisfactory donor communications.
Fundraising events also experience donor or participant attrition. Even though “gift levels” are often fixed amounts and not donor-determined, (such as the price of admission to the annual ball), analyzing attrition will be revealing. If the annual attrition rate of event attendees and sponsors is high, and/or if attendees are not moving up into higher level giving programs, then event donors are not getting the information they need that directly ties the achievements of the charity to their continuing support. By using your own organization’s standard period of attrition(2), you can determine your current revenue gap. For instance, in a direct mail program with an eighteen-month attrition period, it will only be necessary to go back three years from your most recent campaign, comparing the performance of your donors in the first eighteen-month period with the performance of the same donors in the most recent eighteen months.
Measuring Under-Performance in Fundraising Programs
Tables 3 and 4 demonstrate how to calculate your high performance standard and to use that as your benchmark for gauging your current loss in revenue due to declining or stagnant giving by some donors.
Projecting the Revenue Gap Over the Long Term
When you total the lost revenue of stagnant and declining giving plus attrition, you have a figure that represents your organization’s current revenue gap. This is the amount of money you are losing today due to an absence of donor-centred fundraising and communications, and this is important information for fundraisers, CEOs and Boards. But, by projecting the aggregate loss of donors and money ahead ten years, you get an even more important picture of the serious consequences of long term inaction. In ten years, donors and money dwindle to a negligible amount, which serves as a vivid reminder of both the tragic loss of these once earnest supporters, and the frustrating need to replace them through aggressive and expensive donor acquisition programs. A ten-year projection gives you your future revenue gap, an alarming calculation that tells decision-makers what they can expect to be dealing with in the future if action is not taken now. Combined with a pragmatic plan to solve the problem, you will have a compelling case for the institution of donor-centred fundraising.
The flip side of the current fundraising gap is the enormous fundraising potential just waiting to happen. Donors will be there, still ready to fulfil their philanthropic ambitions, when the charitable sector decides that the time is now.
For more information about Thanks! A Guide to Donor-Centred Fundraising, visit http://www.burkandassociates.com.
Notes:
1. Canadian Centre for Philanthropy, Caring Canadians, Involved Canadians: Highlights from the 1997 National Survey of Giving, Volunteering and Participating (Ottawa, 1998).
2. Many organizations determine that a donor has become lapsed (no longer active) after 18 months without giving, but attrition periods vary with types of fundraising programs and frequency of solicitation.
