James Spillane
Why’s the for-profit world so much better than us at retention?
Let’s face it – people don’t stop buying/investing in the things that they want. So looking at the 94% retention rate in the commercial world compared with just 39% in ours we’re really only left with two conclusions:
- People want commercial products and services more than they want a cure for (insert your cause here)
- Our sector is woefully slow in coming to understand what causes loyalty, i.e. what makes people want to stick around
I think we can all agree it’s the latter right? But do we really believe loyalty is something we can cause? After all the Recency, Frequency, Value model we all work from inherently precludes causation.
Why? Well to say transactional variables add up to loyalty is to say our best donors are our best donors because they’re our best donors! We may as well state that good donors are born, not made, and that our job is to go out into the world and find these loyal people.
Sounds farcical, but isn’t that all we really do? Conventional nonprofit practice attempts to measure and understand loyalty primarily through transactional analysis. Naturally fundraisers working from this perspective equate loyalty with a particular pattern of purchases, contributions, advocacy actions, etc. From there they seek to build loyalty by pushing out enough of the stuff that seems to generate these behaviors (appeals, catalogs, e-mails, videos, petitions, etc.)
The idea is sufficient increases in the frequency of contact will increase the likelihood of ‘good’ donors raising their hands, responding and thus keeping themselves in the ‘good’ as opposed to the ‘lapsed’ file.
While it may sound silly and overly simplified to state it this way, nevertheless this is precisely how much of the nonprofit sector operates. The organization that pushes out the most stuff through the most channels wins. This is what’s led to our race to the middle and will precipitate our plummet to the bottom.
The retention ‘plan’ carried out by most organizations is nothing more than tweaking the timing and frequency of contacts. Charities who test this ‘plan’ – adding or subtracting ‘touches’ – discover it fails to have any impact on retention.
Precision and targeting, i.e. who to spend money on for the next campaign, or reducing the size of paper in your mailing, can yield greater efficiency, to a point. And that is important, to a point. But as a retention strategy it’s an outright admission that we can’t hold on to our donors so the best we can do is lose them more cost effectively!
Here is the main difference between the commercial world and ours: they work from a model that’s cause and effect; ours is all effect.
If we want to stop the enormous churn of donors we must begin to separate cause and effect. We must develop a more accurate representation of what actually is occurring in the marketplace. Aside from a radical change in circumstance, like loss of job or death, the causal ‘levers’ that create loyalty are entirely under our control.
The commercial sector is light years ahead in understanding this. They understand that retention isn’t just something they do; it’s everything.
A customer/donor doesn’t sit neatly in a silo; they’re exposed to the totality of ‘experiences’ an organization creates. These experiences shape how a customer/donor thinks and feels about an organization and subsequently how they’ll act. This is nothing short of obvious. So commercials use models that measure and manage all their ‘experiences.’ They use the information to ensure they’re consistently delivering the right experiences; the ones that cause people to stick around.
Our world by comparison doesn’t seek to understand donors. Rather it uses models with one goal; precision and targeting of campaigns a.k.a. ‘How to lose donors more efficiently.’
We’ll never change the churn, until we change our mind-set and subsequent processes. Like the commercial world we need to understand and then deliver the “what:”
“What do we do or provide to a given segment that will positively impact how they feel and think about us to, in turn, derive more revenue?”
All we can do with our current mind-set, method and metrics is guess. Educated as we may tell ourselves our guess is, it’s still only a guess. Commercials stopped guessing a long time ago. And they reaped the reward.
The financial upside is enormous. As Roger Craver’s ground-breaking study in donor loyalty, ‘Retention Fundraising,’ proved there is, on average, a 131% increase in lifetime value sitting on every house file just waiting to be communicated with in the right way.
The cost to achieve this? No more than your current spend, often less. Unless you intend to suspend fundraising for a while you’ll always have enormous amounts of time, resource and money allocated towards trying to get people to give and do more. All that’s required is a reallocation of what you’re already doing based on knowing for sure what actually matters.
The precedent for success is clear in the commercial world. The precedent for failure is all around us in ours. How much longer will it take us to catch up and start to make a real difference to the causes we serve?
This article was written for Business 2 Community by James Spillane.
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A third possibility comes to mind:
3. There are many more plausible options in the not-for-profit sector for a given consumer spending impulse to land than in the for-profit sector.
There are no more than three good options in the marketplace for a consumer to choose from when what she wants to do is buy a smartphone and national calling plan. (Or only _one_ real option if we listen to our Apple-zealot friends…) For someone who needs to replace the family car the choice will quickly narrow down to maybe two to four companies out of the dozen or so that is the starting point of the search. For someone who loves the particular taste of Greek yogurt there will be at most a handful of brands to make that choice from.
Compare that to when the same consumer wants to, say, support the protection/restoration of natural areas. There are at least a dozen national/international nonprofits working in that space just offhand, and her state or region will also have a bunch of local land trusts to consider, and then there’s a whole layer of environmental education organizations who will tug at the same heartstring, and a new one gets launched seemingly every day too, and let’s not forget all the “supporting organizations” which exist to raise funds to help the relevant state agencies and conservation districts and whatnot, and on and on. Where I live the Chicago Wilderness coalition now has more than _200_ non member organizations. That’s just for one metro region, and doesn’t even count the coalition itself!
So when we say that an individual nonprofit retains only 39% of its donors from year to year that is not necessarily comparable to Netflx’s retention rate, because there aren’t dozens or hundreds of other places for the consumer to place the specific interest which led him to subscribe to Netflix. Comparing them is apples to watermelons. We need a more realistic way to assess how we are actually doing on the retention issue.
“more than _200_ non member organizations” — typed too fast, that should read “more than 200 nongovernmental member organizations”.