Measuring The Impact Of Your First Impression

Over the next couple of weeks will most likely read in many of the LinkedIn groups thoughts on creative ways to raise money. This is especially for those that have a fiscal year-end on June 30. I read one such post just the other day and it got me thinking.

For many organizations this time of year means a laser beam focus on the finish line and implementing strategy to squeeze as much as possible out of their remaining prospects.

I've been wondering if while we're looking ahead at the finish line our prospects are looking backwards and reflecting on how they've been treated leading up to the last minute ask. Is it another example of our industry being out of sync with the people that were looking to engage.

While it's true that opposites attract I imagine if a restaurant only served what you didn't enjoy you

wouldn't go back let alone try it to begin with.

I do wonder if the time to strategize the last minute gifts is actually at the moment when someone makes their first gift. Is the rate of return on our year end solicitations related to the quality of the first and lasting impression we create when someone first supports our organization. What is the old saying about one chance?  :-)

This summer a few friends and I are going to take a deep dive into the business of designing donor experiences and what metrics are required to stay on top of in order to create lasting impressions. 

The New Science Of Fundraising Metrics & Increasing Retention

Donor retention and measurement is an interesting conversation for any fundraising group to have. So often we gravitate to the linear aspect of measurement because it's easy to grasp. Southwest airlines several years ago decided to measure happiness a unique but highly impactful exercise. As an industry

we may be served extremely well not to throw in the towel so quickly on designing metrics around monetary transactions. Because with a little work we might be able to actually measure the right things and the things that will create the greatest impact to the bottom line that we wish to have. Now this is not to say that the money aspect is not critical to the business of raising money because clearly that is our purpose, however it is important to note that our success with the raising of money is directly related to the length of time our customers or donors choose to remain connected to our organization and our mission.

Another significant achilles' heel for our industry is that our metrics in general are short in nature. We measure items connected to how we are doing compared to last year,   interesting and important pieces of data to understand but they do very little in helping us understand the momentum that we are creating with the people we wish to remain connected to.  Many of the conversations today regarding donor retention revolve around renewing a gift. This consistent focus on the transaction of a gift is continuing to drink from the poisoned well that has actually caused the retention issues we wish to resolve.

I have spent my career studying and redesigning the process of fundraising to address this significant

issue of donor retention. What I've concluded is very similar to the theories that were demonstrated in the movie Money Ball. In a wonderful scene between Brad Pitt and Jonah Hill in the garage Jonah looked at Brad said baseball is archaic in its thinking. They are measuring all the wrong things. You shouldn't be looking to buy players you should be looking to buy wins, and in order to buy wins you need to buy runs.

Take that same logic and drop that over the raising of money. In order to raise money you actually need donors. To raise the most amount of money from those donors you need to keep them longer and have them feel that supporting your organization is adding value and quality to their life.

So what if  you measured major gift officers by looking at the individuals that they manage. What is the average length of time that their donors have remained on the books. Is that length of time increasing or decreasing. That's a linear metric connected to the sustaining of a relationship. Have their gifts for this pool grown over a period of time has it remained stagnant or is it shrinking.  To begin measuring performance around sustaining and deepening relationships with the people that organizations are strategically connected to will pay significantly higher dividends than the shortsighted metric of how many visits that you make this month.

If we focus on the transaction we will accomplish very little with building a motivated donor

Because:

 If you want to raise money you need to have donors.  If you want to have donors supporting you at the capacity with which they could give you need to have emotionally motivated committed donors. If you want to have emotionally motivated and committed donors you need to be measuring whether or not you are adding value to their life. One way to measure that value is the length of time they choose to remain connected in support of  your organization. Since donors typically do not lead with their best gift retention (length of time) matters.

Our traditional belief that measuring transactions will deliver the most resources to our bottom line have

clearly been proven to be inaccurate over time. As it becomes increasingly more challenging to connect with people in an incredibly crowded space we will need to rethink how we've been connecting with our donors over the last 50 years. If am continually surprised that the largest provider of software to our industry does not even have a method of giving you actual retention rates. If you do not know the average length of time your donors stay on the books today and how that relates to the length of time 5 & 10 years ago, then every strategy decision you make is unrelated to your organizations ability to grow strategic relationships.

If you are interested in this proprietary measurement tool or head here. What to dramatically increase retention with proven practices? check out the Donor Retention Boot Camp this summer.

What If Our Measures Undermined Our Mission

This past week I witnessed a thread on Linkedin focused on the roi measurement of money raised by Major gift officers. Measuring for money raised leads directly to mediocrity and our industry statistics seem to prove that point. Now please know I fully understand what the outcomes of an advancement effort need to be, however what I have experienced first hand is that you can push results much much further then imagined by focusing on another set of metrics that will drive the results you seek.

Do a google search for Harvard Business school professor Clay Christensen. After a little research one of the many things you will find is that he very simply describes why successful companies fail. The reason is simple....they are looking to be profitable in the short term. By focusing on the short term profit they loose sight of the really key long term stuff.

Now marry that to our world of philanthropy. We are all about short term metrics. Cost per dollar raised, average size gift, participation and many others. The majority of our measures are focused on the transaction, the money part.

I thought we were about relationships? What relationships are build via measuring transactions? Looking at the AFP Fundraising Effectiveness it is quite clear that our short term focused measures isn't working if we are looking to build and relationship momentum. Another indicator for us to pay attention to is the fact that the nonprofit sector has not gained any market share in 4 decades.  In forty years we have not been able to gain any ground on the for profit sector with giving remaining at 2% of GDP. How many indicators will it take for us to just stop and pivot to something else. But where?

So what should we measure for optimal success? Over the past year the New Science Of Philanthropy team has beta tested a tool to measure the momentum and financial impact of donor connections. If we can agree that a retained donor is better than a lapsed one than please read on :-).  The raising of money requires having a donor, not one that leaves in 2 years.  In addition most people do not lead with their very best gift. Keeping donors significantly longer than our national averages will be required in order to successfully fund our missions. But, as Clay Christensen suggests, if we continue to measure for short term profitability we will keep up our 40 year trend of zero market gain, lose donors at a 58% annual rate, un-fund our important work but most importantly not design the opportunity for so many to lead a life of value and service. Measuring for our ability to sustain and grow relationships is the most important metric to understand and it requires long term questions.

That Is Not Retention

Recently on a LinkedIn discussion in the CASE group there was a fairly typical discussion regarding the retention of donors. It started off as a loyalty thread, which is a topic I look forward to addressing here in the very near future. At one point an individual stepped up to outline the significant success his program had at moving retention from 67% - 70%.

Introducing The New Science Of
Philanthropy in San Francisco last month

First, what is the logic of measuring retention in a percentage? Let’s take the higher number as a quick example. If you kept 70% of your donors that means you are losing 30%.  A next logical step is to stretch that out over time, you would go through 100% of your donors in 3.33 years.  In the business of building and sustaining relationships our questions need to be based on longer-term outcomes.

Measuring a year over year retention rate as a percentage will only hurt your ability to actually do what you want to do. In the above scenario the 70% does not hold level for multiple years, as a result the loss of donors accelerates. The above LinkedIn member’s donor base is most likely barely surviving 3 years on the books.

Founders New Science

I will go much deeper into retention on this blog but let me suggest that retention is measuring by years. Example: ten years ago our donors remained on the books 2.5 years. Today the average length of time a donor remains is 4.28 years.  Now that is a 71% increase in donor retention.

The New Science Of Philanthropy currently has a patent pending on a proprietary dashboard technology that for the first time assists organizations in building strategy for actual retention results. It will impact social media, communications, stewardship and acquisition.