Why’s the for profit world so much better than us at retention? (part 3)
Part three: change our mind, change our organisation, change the world.
Take a look at this infographic citing the reasons people leave commercial organisations compared to ours:
All of the commercial reasons are applicable to our sector but the same isn’t always true the other way round (i.e. I’m pretty clear on how Tesco will use my money).
Looking at the ‘Donors’ column what’s striking and damning is that, aside from ‘death’, every single one of these reasons is 100% under our control!
Who’s to blame if someone thinks we don’t need them? Is it the donor’s fault they’re not being shown how their money’s being used? Are they really forgetful or are we easily forgettable (how often do they forget where they do their shopping)? Are they unreasonable to expect a ‘thank you’ for their money?
Poor service and communication is listed as the reason almost one fifth leave us which is bad. But when you tally up the other ‘reasons’ that broadly fall under this heading it reaches more than half which is appalling. Especially when, as we saw last time, this is immediately fixable.
Then there’s ‘others more deserving’. This literally means over one third of people who stop donating don’t actually stop donating to the cause; they just switch to someone who, in their eyes, does exactly the same thing.
And then we come to a chunk accounting for just over half the stated reasons people leave; ‘could no longer afford to give’. What’s important to note is that it’s not as if ‘can’t afford’ is simply worse in our sector than it is in the commercial one. It’s that it simply doesn’t exist there. This series opened with the premise “people don’t stop buying/investing in the things that they want”. So either we take this ‘reason’ literally and right off massive swathes of the public as downright mean spirited, or we take it as a proxy for their telling us we’re not very clear about why we need their money. Given that the other half flat out told us we were lousy at communicating with them we can safely assume it’s the latter.
If I truly believe you are the one who’s going to meet my dream of finding the cure/righting the wrong/ending the injustice then there are plenty of other economies I’ll make before I cut you off. If, on the other hand, you’re communicating poorly then no wonder I stop as I don’t really know what I started.
These figures are terrible news for our sectors prospects of ever achieving growth and having any impact on the causes we fight for. The good news is this is an entirely fixable problem. We’ve already looked in part at how our methods and metrics are so off the mark (for a more detailed study download this free report on the barriers to growth). To change them all we need do is change our mindset.
Contrary to conventional wisdom the fact that the commercial sector has more money and resources is of little importance.
Adrian Sargeant's recent ‘Great Fundraising’ report concluded the most important change that occurred prior to the record level income growth was change in mindset. Money or ‘resources’ was never cited; not once. In each case the new leader brought in had to deal with a mindset that deemed low or no growth as acceptable. Can you imagine any commercial company being ok with that?!
The most marked differences between the commercial world and ours are in the mindset, methods and metrics used to assure optimal retention. The following is a list of organisational factors preventing us from stopping the relentless churn of donors. None of these exist in successful commercial organisations. The list is in no particular order as it is ultimately inter-related. It’s drawn from our experience in both the commercial and charity sector, plus plenty of secondary and primary data we’ve reviewed over the years.
- Mindset/focus/culture. The charity sector focus is almost entirely on the topline, on quantity (e.g. number of donors) vs. quality (e.g. type of donor). Acquisition has its own budget and spend on it is considered an “investment”. None of this applies for retention.
- Silos. One department in charge of acquisition, another in charge of retention. These are two sides of the same coin and many charities have at least begun the process of trying to break down the silos. Typically, this includes putting someone in charge of greater coordination and collaboration across functional areas. More common in the commercial world is complete realignment of functional areas to teams that are tied to customer segments and responsible for the entire “lifecycle”.
- Myopic metrics. Very few charities know their multiyear retention rate, even fewer their Lifetime Value. All can pull up a report citing response rate and average gift and net money raised from the most recent campaign. This is akin to potentially winning the battle and losing the war.
- Failure to think about the competitive nature of market. The number of charities has grown far more rapidly (+42%) over the last dozen years than commercial sector. This growth puts a premium on differentiation, but the reality is that more and more groups tend to copy or emulate each other in their marketing efforts.
Where direct mail and other mass communication is concerned the nonprofit sector tends to send the same stuff to the same people. This is further exacerbated by the over-used practice of exchanging or renting the donor list to competitors. This leads to massive brand commoditisation. The commercial sector by comparison spends billions on brand development and preservation.
- We give our donors away. We bring in new donors and rent or exchange their names so other similar charities can also ask them for money. This is not the principal focus of this article but make no mistake, this is an impediment to retention and lifetime value. In fact, there is data suggesting a 5% drop in LTV every time a donor name is rented. At the very least this loss should be factored in the list rental economics but it never is.
The sad truth as to why the commercial world is so much better at retention that us is that they care more about it. They face facts in a way we don’t seem to. Any outsider would be forgiven for assuming that fundraising was 100% synonymous with acquisition; it’s pretty much all we do. But consider this; you have less than a 2% chance of securing a donation from someone new compared with a 60-70% of getting one from someone who already gives. Do our budgets and our actions reflect this reality? The charities that work to change these issues are the ones who’ll go on to change the world.
Charlie Hulme, Managing Director, The Donor Voice