Why Chuck Longfield Is Worried
When Chuck Longfield is worried, it’s time for fundraisers to wake up, pay attention, and begin making some serious changes.
Chuck is the Founder of Target Analytics and Chief Scientist at Blackbaud. For purposes of this post, he’s a first-rate innovator who is more intimately familiar with direct response fundraising trends than anyone I know.
So, when Chuck sounds the alert it’s time to take note. And he did just that at the Direct Marketing Association’s Washington Conference last week in a fact-packed session on Acquisition and Retention Trends.
You can download Chuck’s presentation here.
In a nutshell here are the disturbing trends Chuck highlighted:
- For the past 10 years — before and after the Great Recession — donor acquisition has grown increasingly expensive.
- During the same period, first-year retention rates have significantly declined to the point where, on average, nearly 3 out of 4 newly-acquired donors leave by the end of the first year.
- As a result, for many organizations the return on new donor acquisition is so poor that it has become too costly to acquire new donors to replace the flood of lapsing donors.
With his gentle wit and insight Chuck drew an apt analogy to what the sector is facing. “It’s like the CFO coming to the board and reporting, ‘I lost 70% on our portfolio investment this year, so please give me the same amount to invest next year and I’ll get the same result.’ You can imagine how long that CFO would last.”
Yet year after year that’s exactly what’s happening in donor acquisition and retention. The reasons:
- “Over fishing” – highly sophisticated and efficient techniques scooping up a limited pool of donors.
- Changing demographics — Gen X and the Millennials less loyal than the World War II and Boomer generations.
- Failure to recognize and treat new donors as the valuable asset they represent.
Reminding the session participants of Prof. Adrian Sargeant’s dictum — “even a 10% increase in donor retention can increase the lifetime value of the donor database by 200%” — here are some of Chuck’s recommendations for dealing with the problem.
EMPHASIZE DONOR RETENTION OVER ACQUISITION
- View new donors as valuable assets
- When acquiring new donors, factor in whether you will retain the donor and at what dollar level
FOCUS ON LIFE-TIME VALUE, NOT RESPONSE RATES
- Plug the leaky bucket of attrition
- Be willing to invest in your new donors (a simple, inexpensive ‘thank you’ call will produce a 30% ROI according to Chuck)
FOCUS ON RESULTS NOT EFFORTS
- Focus early in the relationship on those donors with greatest potential and allocate resources accordingly
- Adopt a donor-centric, not campaign-centric focus
INVEST IN YOUR MOST PASSIONATE SUPPORTERS
- Organize yourself to recognize a donor’s passion for your mission (willingness to take surveys, attend events, etc.)
- In fact, put some hurdles (survey, invitations, etc) in front of donors early on to determine the most passionate.
Although The Agitator has ridden the Retention Horse long and hard, Chuck reminds us all that this subject deserves even more attention. So, we’ll have more to say on the many facets of retention — from mindset, to methods, to metrics. Just as we’ve done on Acquisition, we’ll launch a more formal series on Retention.
What’s your experience with retention? What aspects concern you the most? We’d sure like to hear from you.
Meanwhile, Chuck, thanks for once again sounding the alarm. You deserve an Agitator raise.
P.S. Download Chuck’s presentation here. There are some great charts on acquisition and retention rates by sector.