For nonprofit organizations, it’s major (or planned) donors that contribute significant revenues. Securing a major donor, however, often requires stewardship through the donor pyramid, which in turn, requires loyalty. Loyalty is important because it is a major contributing factor to the cost-effectiveness of stewarding a donor. One study, by Sargeant and Jay, found that a “typical nonprofit will lose 50% of its cash (i.e. annual) donors between the first and second donation and up to 30% year on year thereafter.” Using resources to secure a small or annual donor that will ultimately move on to other organizations is not a cost-effective way to fundraise.We also know that improving attrition of donors by as little as 10% can improve donor projected value by 200%. In addition, we know from a study by Barry Berman that loyalty has a profound effect on profits in the business world. A “5% increase in customer loyalty can produce profit increases from 25% to 85%.”

Since loyalty is so important for the sustainability of different types of organizations, studies into consumer behaviour and its effects on loyalty are an ongoing hot topic. Let’s explore how delighting customers (or donors) leads to increased loyalty and thus sustainableincome for organizations.

The difference between satisfying and delighting donors

In the business world, there is a concept in consumer behaviour studies where the outcomes from a customer’s interaction with an organization can range anywhere from outrage to dissatisfaction to satisfaction to delight. What is considered satisfactory? These are product or service attributes that are “…basic criteria of a good or service that result in extreme customer dissatisfaction if not fulfilled.” Examples of basic criteria include delivery and wait times. Then, what is considered delight? According to Dr. Berman, “delight requires that customers receive a positive surprise that is beyond their expectations.” Why is delight so powerful? Berman states that “delight is viewed as an emotional response that commits a customer to the product.” Since the experience elicits an emotional response, it also becomes memorable. Therefore, delighting a customer creates an emotional and memorable connection to a service (and organization) that is difficult to sever or duplicate,thereby facilitating loyalty.

On the opposite end of the spectrum is outrage. Outrage is similar to delight but a negative surprise has been received. For example, a customer might become outraged after learning that a drycleaner lost her wedding dress. Client outrage can be a problem for organizations as 90% of angry customers reported they shared the story with a friend. And although not as severe a reaction to outrage, there is still a high degree of emotionality involved with dissatisfaction. In fact, customers who are dissatisfied as a result of service failures often feel annoyed or victimized, according to Dr. Berman.

It is important to note that customers look at the totality of the experience and not just any one characteristic of a product or service. For example, a satisfied supermarket buyer has basic expectations that the produce and meats are of good quality, the store is clean, and the checkout lines are reasonably long. A delighted customer will encounter assistance in loading groceries into his or her car, free delivery of out of stock goods, and an in-store nutritionist that helps with meal planning.

The influence of external factors on an organization’s ability to delight

Whether or not a customer has the ability to become delighted is not entirely in the hands of the organization. The customer’s expectations of the good or service (related to his or her familiarity of the category), expectations of the brand, and expectations relative to the competition are all influencing factors on an organization’s ability to delight. For example, a well-trained salesperson helping a customer choose a new digital camera may result in merely satisfaction for a hobbyist but may result in delight for an amateur. With respect to brand expectations, although Lexus is manufactured by Toyota, there is a much greater expectation of high quality service from a luxury brand such as Lexus. In terms of competition expectations, brands may continue to “out do” each other in delighting their customers. For example, Air Canada doesn’t charge for extra luggage in an attempt to delight its customers, so WestJet decides to do the same. In response, Air Canada might consider offering free taxi between the airport and the traveler’s home, but WestJet could do the same. It can keep going on like this until a brand learns to create a service that is more difficult to emulate by others.

Specific cases on how the business world delights customers

Toronto Pearson International Airport: While it may not be that surprising that an airport would have Christmas carolers around during the holiday season, the airport took the concept one step further. It organized a campaign where those traveling through the airport could receive a personalized carol from a loved one who tweeted the request to the carolers. To add to the unique holiday experience, the airport partnered with Microsoft to build booths where passengers could take pictures with Mrs. Santa Klaus and the elves.

Zappos.com: Zappos.com is an online shoe retailer whose mission is to provide the best customer service possible – period. It aims higher than simply being the best shoe retailer or best website. It wants to be the best customer service organization in the world regardless of what it’s selling. What has Zappos.com been doing to wow customers? Service is offered 365 days a year. Customers have up to one year to return their purchases. Many customers are “surprised” with upgraded overnight shipping. Lastly, a customer is directed to a competitor’s website whenever a particular item is not in stock.

How much of an impact do delighted customers have on an organization?

Delighted customers have a profoundly positive effect on loyalty to an organization. For example, in a study done in cooperation with Mercedes-Benz USA, 86% of all delighted customers would purchase (or lease) again in contrast to 29% satisfied customers and 10% dissatisfied customers. Further, delighted customers can become apostles, reporting their experiences on the internet and facilitating word-of-mouth advertising. In doing so, this generates the same lifetime value of as many as 11 customers who are merely loyal. Therefore, delighted customers lower advertising, selling, and customer acquisition costs for an organization. Similarly, delighted customers result in higher revenues through higher initial and repeat sales. Lastly, in terms of a longer-term strategic outlook, delighted customers help increase an organization’s brand equity and also help it to withstand competitors.

How can an organization implement donor stewardship that delights?

1. Leadership needs to communicate the advantages (as brought up in this article) of delight to staff and volunteers.

2. Determine who will be involved in developing the delight “program” and who will manage the changes.

3. Understand your donors. Before you can delight your donors, you’ll need to understand what makes them happy, so talk to them! Discover the motivations behind why they are philanthropic.

4. Refuse to be content with merely satisfying customers. Go above and beyond the call of duty in serving them. For example, when a donor is having trouble accessing your organization’s website, there’s an opportunity for a volunteer to drop by the donor’s house or office with a brochure (or tablet-based presentation) and “pitch” the organization to the potential donor.

5. Focus on multiple points of contact. Delight your donors through as many channels as necessary: in person, direct mail, web, social media, phone, etc.

6. Determine how to roll out the initiatives and whatorganizational changes are necessary to support project objectives. For example, how can you empower staff and volunteers to go the extra mile? What resources will they need?

7. Monitor key success factors (e.g. donor retention rates, conversion rates from annual giving, average gift, etc.) before and after implementation.

8. Re-visit your delight program and re-tool or scale up as necessary.

The risks of implementing a delight program and how to manage these risks

1. One risk is that delight is delivered so consistently that customers come to expect the delightful experience all the time and therefore it is no longer technically considered delight. To manage this, give options. For example, offer the choice of a free ticket or a free bottle of wine or free transportation to your annual gala with every ticket purchase.

2. Another risk is that delivering delight has potentially high costs associated with delivering delight. To address this, calculate the profitability of your delight program and reserve delight service for the most profitable donors.

Delighting donors creates a powerfully emotional connection and a memorable experience with an organization. In turn, the organization stewards donor loyalty increasing the lifetime value of that donor, and in many cases, overall revenues due to word of mouth advertising.

Do any of you have tips or advice on how you have or would steward and delight donors? Share them in the comments below!

John Paul de Silva holds an MBA from the Queen’s School of Business. He is also managing director of Social Focus Consulting which provides affordable solutions to Toronto and Kingston-area nonprofits. He can be reached at JohnPaul@SocialFocusConsulting.ca or on Twitter @goSocialFocus.

Photos (from top) via iStock.com. All photos used with permission.