By npEXPERT Marc Koening. Marc Koenig is a Senior Editor at Nonprofit Hub. Marc believes smart, ethical marketing can make the world a better place, and strives to create content that helps nonprofits tell better stories, push their organizations to excel and do work that matters. You’ll find him writing Nonprofit Hub featured posts, brainstorming infographics and tweeting at @npmarc.
Would a business ever try to lose money acquiring a customer?
The answer might surprise you.
Many smart businesses have taken the time to examine their business models and take counter-intuitive paths to grow their profits and impact.
Consider razors: you can get a Gillette Fusion razor, with five separate blades to scrape your face clean, for a relatively cheap $10. Gillette hardly profits from the arrangement.
So how can they afford it? Because they get you to come back and purchase new blade refills for $30 bucks… indefinitely.
“Give ‘em the razor, sell them the blades.”
This strategy works in many forms: marketing legend Jay Abraham often advises businesses to give their sales force 100% commission on the sale of a new client.
The results? Companies routinely triple their initial sales—which is great, considering the vast majority of those companies’ profits happen thanks to repeat sales, not the first acquisition.
The Beauty of Sustained Giving
This strategy only works for one reason: Gillette gets their customer to come back.
If most people bought the razor, enjoyed it, but never purchased a refill, the business model wouldn’t work like it does.
Top performers in the business world understand the huge value of acquiring a client for the first time.
It’s worth breaking even or possibly losing money to get that first purchase if they know that this customer will potentially bring in three times (or more) value over their lifetime with the company. Getting people in the door is highly incentivized.
In the nonprofit world, we also spend considerable amounts on donor acquisition.
We throw big events, encourage birthday pledges, and send out plenty of direct mail.
But the problem is, many of us fail in the most important last mile, when it’s time to recoup our initial losses by getting our donors to come back.
In other words, we spend to get them in the door.
But never see the reward because they bolt (or simply forget about us) before we’ve secured their long term loyalty.
Two Models of Sustainable Fundraising
We’ve got two options:
Model #1: Spend as little as possible to acquire the greatest number of one-time donors.
If you have an incredibly efficient, high ROI way to reach and ask a large number of new donors for money, this approach works great.
However, most of us find this is only viable if our cause addresses big, global emergencies or frequent short term stretch goals—things that tug the heartstrings of the masses.
Otherwise, you’ll be constantly focusing on keeping costs down and lowering overhead as you just break even. Not a great way to grow.
Model #2: Spend extravagantly to acquire donors, and then build a culture that revolves around the expectation that you’re going to keep those donors around for a while.
And when I say “spend extravagantly,” I’m not simply referring to money.
Extravagant spending probably means hours of writing thank-you letters, meeting with people in person and talking on the phone with donors—all more expensive in terms of time spent and emotional labor than in literal dollars.
But here’s the point: we can’t have it both ways and be successful.
There is no Model #3: Spend extravagantly on a one-time donation that barely covers your costs… then expect to grow and thrive and make a significant impact?
The Three Attitudes of Sustainable Fundraising
I propose that the great nonprofits of the 21st century aren’t just going to try to do what used to work a little bit better.
They aren’t about optimizing the mass fundraising mentality of just reaching as many people as you can for a single donation.
Instead, it takes a total perspective shift, to a model where everything revolves around relationship-building. Becoming trusted advisors to your donors. Getting them hooked on the meaning your cause gives them.
Here are three attitudes that these new fundraisers will adopt to thrive:
It’s been said people have to hear a message seven times before taking action. In other words, we want to hear from you. And we need to hear from you often. People don’t keep going to church because they forgot the message—they need to hear it again and get refreshed. While you might change how your message is delivered if you’d like, it’s important to tell a consistent story across all channels if you want develop a loyal bond with your donors.
This is one of the top mistakes nonprofits make with sustainers. Once a donor commits to monthly giving, they often enter into a kind of donor communications wasteland, rarely hearing from the very organization they’ve just pledged to support.
You can and should keep sending appeals and advocacy messages to sustainers — just be sure to modify your communications to acknowledge their regular giving status. You won’t turn your loyal donors off by keeping them in the loop, and not hearing from you can be a reason for them to suspend their monthly giving.
If your donors are willing to commit to regular giving, then on the flip-side, it’s only fair that you commit to regular appreciation. This could take the form of consistent thank-yous, small gifts throughout the year or special opportunities for regular givers—events, guided tours, president’s breakfasts, mentoring opportunities, or anything else that could be considered an “exclusive” event.
Build in a plan to stay in close contact with your most loyal supporters and continue to let them know they’re superstars.
Finally, be sure to plan for routine communications like renewals, cancellations, tax summaries, etc. Good donor stewardship means following up with a donor if his credit card expires or if he requests to suspend payment for some reason. If you have a good follow-up plan in place, you may be able to turn a cancellation of support into a one or two-month break.
The Bottom Line
You can’t expect your sustained giving program to work if you don’t commit to keeping your donors around beyond the first gift.
It’s not enough to get them in the door and have them sign on the dotted line—if it stops there, you’re losing out. That’s step one.
The real work lies in continually keeping them involved, encouraging them and showing them how their money is making the world little less broken, and a little more hopeful.
Choose Model #2. Build a culture around the expectation that your donors are your most precious resource and will be sticking around for a while.
Treat donors like future lifelong friends—and you’ll find that more of them actually WILL be.
Want to hear about what Marc’s got to say on donor retention? Check out his chapter in the new npEXPERTS eBook at www.blackbaud.com/npexperts!