Redefining loyalty - how to improve Lifetime Value by over 105% without increasing spend

Charlie Hulme | 22 November 2013

Insanity’s defined as doing the same thing over and over expecting a different result. So why, when faced with the most horrendous retention figures the sector has ever faced, do we focus all our efforts on finding new donors (who don’t stay!) instead of building relationships with existing ones?

It’s just not sustainable. Traditional channels are in decline, and new channels are saturated. Costs of acquisition are rising, whilst the number of donors and value of donations fall. We’re literally paying far more for far less! Retention has been snowballing for years. We can’t just keep our eyes tight shut hoping it’ll go away. My fear though is none of us will take loyalty seriously until a major charity folds.

What’s baffling is there is empirical evidence that a small investment in loyalty yields large and long term returns. More than a decade ago Adrian Sargeant showed that just a 10% increase in loyalty could return over a 200% increase in lifetime value. Couple this with the fact it costs ten times more to recruit a new donor than it does to retain an existing one we really need to question our sanity!

So why are we so reluctant to look at loyalty? Because no one really knows what it means, so no one knows what to do. Ask the average fundraiser what a loyal donor is and you’ll hear some version of purely transactional variables like the recency, frequency and value of their gift.

Ok, but then what? Think about it, these variables tell you what they did; they don’t tell you why they did it. Fundraising is by definition an emotional process, but it’s impossible to build empathy when our audience is commoditised. We don’t have relationships with donors; we have segments of data. We know nigh on nothing about their motivations; their fears, hopes and dreams. Nor do we have a clue about their attitude towards us and the interactions we offer. Trouble is these are the true causal factors driving loyalty.

Is it any wonder people don’t stick around? How long would you stay friends with someone who kept asking you for money, ignored what you told them and (only if you were very lucky) once in a great while said a clumsy ‘thank you’?!

So how can you change this? That’s what I’ll be exploring alongside world leading loyalty authority Kevin Schulman at this year’s IoF London and South East conference. There, and in the follow up post, we’ll look at how you can entirely redefine loyalty. To move it away from being a fluffy, nice to have, concept to being central to a strategy providing long term, sustainable growth. Which is what it’s all about. After all unless you believe you’ll find the cure/end the injustice/feed every child with your next appeal it’s unethical not to focus on loyalty.

Charlie Hulme is Managing Director at Donor Voice

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