Attrition – ignored for a decade?

This graph illustrates Adrian Sargeant’s analysis of donor retention in the cash-giving files of the UK’s top ten fundraising charities in 1998.

Over the past decade it has become the most important graph in Bluefrog.

Published widely in 1999 and 2000, we must have quoted it 2,000 times.

It drives our approach to fundraising. We have invested hundreds of thousands over the years in seeking to understand it.

Stark
Why do half of all new donors never give again after year one?

And why, after five years, are we left with only 8% continuing to give?

When, in 2002, Ken Burnett published a new edition of Relationship Fundraising, it must in part have been because of his dismay at seeing these statistics, and what they reflected – that his 1992 edition of Relationship Fundraising was being ignored.

We even had a mini recession in 2001-2002, when the dot-com popped, to jolt us into action.

But it took Adrian himself to underscore the significance of these findings in 2004, in Building Donor Loyalty, co-authored by Elaine Jay. The graph above is Figure 1.1 in the book.

He comments on the shift among charities towards recruiting committed givers as a reaction to the challenges with cash donors, with committed givers yielding lower attrition rates – typically 20% at the time.

“Although that is a dramatic improvement,” he said, “it is still far from ideal. Imagine losing 20% of your friends each year!”

Worst case scenario realised
However, five more years have slipped by and we find ourselves in more difficult times.

I wonder whether Ken or Adrian envisaged this first decade of the 21st century ending with attrition levels among committed givers reaching 70% in year one.

But this is precisely the picture our analysis has uncovered. The following year-one attrition levels are for face-to-face recruitment:

• Medical Research 64%
• Overseas Development 65%
• Mental Health 62%
• Homelessness 64%
• Elderly 70%
• International Medical Research 64%
• Children’s Health 64%

And this is not isolated to street recruitment. Average attrition levels for all types of regular givers were revealed by Rapidata in its analysis of Direct Debit cancellations in January:



However, Rapidata’s analysis, revealing soaring cancellation rates, can in some ways be misleading, implying that attrition has been problematic only in the last year. But take a closer look: before the credit crunch and recession, cancellation rates fluctuated around the 3.5% per month mark. In other words, we appear to have been content to be recruiting donors knowing that four out of ten of these supposedly ‘committed givers’ would turn their back on us within a year.

It is almost too late to wake up to what is happening. But it is imperative for the sector that we do.

We have ignored the fundraising prophets of doom (namely, Adrian and Ken).

As Adrian himself puts it, in his foreword to our lapsing research paper (PDF), “we continue to waste large sums of money on unnecessary acquisition and neglect the fact that were we to achieve even minute increases in donor retention the impact on performance would be profound.”

“Picking an easy number to illustrate,” he continues, “I estimated back in 2004 that a 10% increase in retention could lead to a whopping 200% increase in the lifetime value of the fundraising donorbase.”

Turning research into action
Bluefrog’s research into lapsers is one of the largest studies into the psychology of lapsing ever conducted. Based on its findings we have created a multi-step programme for donor retention from the point of recruitment. Called Protect the Donor, it is reproduced here in summary:

• Start a relationship in the first place
• Manage your donors’ expectations
• Communicate in a way that pulls, not pushes
• Think about the four donor needs
• Provide choice
• Know your donors. Look, listen and remember
• Part as friends

For me, this boils down to one overarching recommendation: ensure that donors are engaged in the relationship.

Treat me like a real person
At the risk of this becoming a Sargeant eulogy, I think it is worth quoting him again – albeit alongside his co-author, Elaine Jay – in their 2005 research, Redefining Commitment.

They identified two different types of commitment. Passive commitment exists where a donor feels no strong desire for the relationship with an organisation to continue and has no sense of ‘bond’ to the organisation. Intertia is all that maintains the relationship. And the weakness of this paper-thin connection is now being revealed, as fundraising megaliths such as the NSPCC, report spiralling cancellations by their £2-a-month Direct Debit cohorts.

Adrian and Elaine define active commitment, by contrast, as ‘the genuine desire on the part of a donor to maintain a favoured relationship’. Child sponsorship is just one example of where this commitment can be seen – and our own work with ActionAid over the past decade reflects what others who run these schemes report, i.e. single figure attrition rates.

The challenge, then, is to nurture that desire and it is here that I turn to Gary Larson for inspiration, and his satirical cartoon series, The Far Side.



The point being that we need to go back to basics and put the donor first in our thinking, for that is what is important to her:

• Engage her by using her name, often, e.g. on the cover of a report you’re enclosing with a request for money
• Engage her by showing her you remember things about her, e.g. the month and year she started supporting you
• Engage her by giving her something to do alongside donating, e.g. writing a card to someone who benefits from your work
• Engage her by showing her you respect her, e.g. by asking her what she’d like to hear about
• Engage her by connecting her to your work, e.g. individual stories of the difference you are making – think of the success of Charity:Water and KIVA
  
• Engage her by “delivering on your promise” to her, as Karen Osborne puts it, and telling her how you used her money

Before the recession, this sort of thinking was called ‘stewardship’. That phrase is outdated. This is now called ‘a formula for survival’.

Romance them

"So Posh, happy David is in Milan?"

"They died as heroes"

"Cheryl flies in, Ashley jets out"

As fundraisers, how can we interrupt our audiences, when we compete with such sugar-rush media?

(The three lines above are on the same front page of just one of today’s free evening papers in London.)

Well in fact, Bluefrog seems to be interrupting rather well – despite the economic gloom. Recent recruitment of cash donors runs at 6% and £11 average gift for one client. And two-stage recruitment of committed givers runs at 12% initial gift and 9% conversion for another. And it is hard to keep up with our adwords and Facebook campaigns.

But our isolated success acts as counterpoint to the fact that Direct Debit cancellations are soaring, as Third Sector reports today.

Why is it that even stewardship-toting NSPCC is watching donors herd onto their online banks and cancel at such intensity?

Simple.

There’s no romance left. One fundraiser recently said that signing up to a direct debit with his charity was like inviting a pack of vampires (if ‘pack’ is the right word) into your home.

But why have charities like the NSPCC allowed themselves to give in to the temptation to put their donors under such pressure? Like bankers peddling sub-prime debt, it seems that the quick wins of cash asks and upgrades has blinded many fundraisers into near oblivion.

The machine-gun staccato of appeal > upgrade > appeal > faux-feedback > appeal > upgrade > appeal has eroded any goodwill that may have been there at the start.

What appears to have been lost is the focus on the donor.

What do donors need?


Our research has revealed that a typical donor has various needs – sometimes as simple as an impulse to help, sometimes as complex as needing to grow or to define themselves. If, through the course of a communication cycle, you can show that by giving to your organisation, their varying needs can be met, you are far more likely to develop a lasting relationship.

Sounds a lot like romance doesn’t it?

I will never forget the moment, many years ago, when I was sat in a launderette, waiting for my washing to dry. Mercedes, the chain-smoking manager, in the middle of doing a service wash for a customer, screeched in delight, “Elaine, ooh, Elaine! Look at this! ‘Ere, can you imagine picking a bloke up in a pub ‘cos you fancied him ‘cos of the bulge in his jeans, only to get him home and find he’s got a pair of these on?!” (Holding up a ‘loin king’ padded thong.)

Looking back, I can see there is a salutary – if a little obscure – lesson for fundraisers in that.

As stewardship guru Karen Osborne puts it, standard donor communications are just, ‘this is what we promise to do with your money’. “Stewardship,” she asserts, is, “‘this is in fact what we did with your money.’ It’s the delivery on the promise.”

Just as employing loin kings is generally an unromantic tactic, so too is the harassment of donors for short-term gain.

If you want to foster long-term relationships with donors, build a mutual exchange with them: one that is fulfilling and stimulating for them.

ActionAid – and other development agencies that offer child-sponsorship – boast industry-beating retention levels. They understand that for their richly rewarded donors, cancelling a direct debit would be like cancelling a part of themselves.

Take a moment today to look at what they do well, and think how to apply it.

Two weeks in. 2009: the challenge you can overcome?

This post from The Agitator got me thinking.

Reflecting on the knee-jerk reaction of some fundraisers to cut back in the face of recession, Roger comments: "The most practical course of education for most fundraisers would be experience on a well-run farm.

"They would learn the cost of not investing in seed corn (donor acquisition) … they would understand that an investment in weeding (donor cultivation) and good fertilizer (information and accountability for donors) is essential for sustainability.

"And, if they were fortunate enough to work on a farm with an orchard, they would come to understand that it takes three, sometimes four, or even five years to bring in a profitable harvest of fruit from newly planted and continually pruned trees."

Bluefrog’s experience in the past four months has shown us that despite the naysayers it is possible to fundraise successfully in the gloom.

Three conclusions stand out to me:

1. Keep recruiting. We saw Christmas mail acquisition for a cancer charity perform as well as ever before.
2. Keep asking. A Christmas appeal for a homelessness charity beat target by 30%.
3. Push legacies. I’m not talking about a ‘give now, pay later’ message; just a straight forward promotion of gifts in Wills. Every legacies campaign we’ve run with clients in the past six months has beaten expectations – most recently for a development charity.

However, don’t use recession as a lever. One test we ran with a medical research charity showed that when the recession was mentioned it lowered average gifts.

Another post from The Agitator. Tom asks what makes a ten-year donor. As he suggests, January 2009 perhaps more than any other new year before is the moment to find out.

What clues are there among loyal donors as to how to improve retention? And in particular, are long-term supporters lapsing now – or giving at lower amounts than usual?

We know that legacy propensity leaps when someone’s been around for a decade – by seven times for one children’s charity client. And that seems to confirm that there is something special about this group – their continued giving is more than simple inertia.

So go on! Talk to them, seek feedback from them and run analysis on their giving histories.

After all, some of them will have been giving since the last recession – or even longer.

Why fundraising is like making cappuccino

“Grande skinny caramel macchiato, extra hot, with three shots, extra cream, marshmallows, double vanilla and a dash of cinnamon” is heard rather too often for my liking.

This is sacrilege against the art of coffee making.

And I use the word ‘art’ advisedly. The perfect espresso is created only when the following six elements meet in harmony:

• A perfectly maintained and spotlessly clean espresso machine
• A quality blend of perfectly roasted, fresh coffee beans
• A grind that is neither too course nor too fine
• A carefully judged dose of the ground coffee
• A tamping technique that is neither too firm nor too light
• A portafilter tightened just enough to keep the coffee compressed and the steam pressure in

And then to craft a cappuccino, the densely foamed, steamed but not-too-hot milk is added, so that the following rough proportions are achieved:

• A third espresso
• A third milk
• A third foamed milk

The best coffee in Shoreditch, if you find yourself in Bluefrog’s neck of the woods, is to be found at Food Hall, on Old Street.

Each cup is given the attention that a sculptor would give a masterpiece carving. And take-away is as good as drink-in … although a purist would argue that cappuccino cannot properly be drunk from a paper cup.

Am I sounding pretentious yet?

Time to infuse [sorry] fundraising into this.

Raising money
Why compare coffee and fundraising? Well, truth be told, simply because I love coffee. But bear with me and you’ll see that there are some really helpful parallels.

First, the espresso machine. This is your fundraising department and as you know, if that’s not working well, everything else is doomed. The metaphor can be taken further, however.

Espresso machines work under incredible pressure, and in a similar way, fundraising departments work with an ongoing challenge to find budget, high demands from Trustees, and a constant strain to develop the next target-beating campaign.

But the best Gaggia won’t make good coffee if it is neglected. And NCVO’s Third Sector Skills Research published last July was just one report to lament a skills shortage in fundraising. Unless we invest in developing skills, our fundraising will get more and more watered down.

“Credit crunch”, I hear you shout. Indeed, and several major players are certainly feeling more crunch than credit at the start of 2009, but scheme’s like the IoF’s Fundraising Learning Online are to be applauded, in making basic training affordable.

One thing remains unavoidable in a recession: those who continue to invest through the hard times will emerge ahead of the pack.

And so onto the next element: coffee beans. The basic ingredient. In fundraising that’s your strategy. It doesn’t matter what you do with a poor strategy; it is still a poor strategy, and it will only get you so far.

Adrian Sargeant’s regular sessions at IoF and IFC conferences on building a fundraising strategy give the basics. I’d hazard a guess, however, that fewer than half of the top-500 fundraising departments have developed a strategy with even that much thoroughness.

Cranfield School of Management run great courses on strategy development, and they can sometimes work with charities on a consultancy basis.

The grind, number three on the list, is your target audience. Not that I’m suggesting that donors are a grind.

In coffee making, it is important that the ground coffee is neither too course nor too fine. So, too, in defining your various audiences, it is important neither to view them as too homogenous a group, nor to break them into thousands of small segments.

The key, of course, is to understand your audience. To really understand what each set of donors – or prospective donors – is like: what motivates them, how do they give and how can you build relationships with them? There are myriad resources out there to help get into donors’ minds – CharityBloggers, for example.

But the best technique of all – and I aim this comment mainly at direct marketers, who, I’m sorry to say, are generally useless at this – is to speak to donors or read their correspondence.

In a brief spell in commercial brand marketing, before coming to Bluefrog, one of the brands I oversaw was Listen2. Primary audience: 65+. Not only does my iPod now contain some Mantovani and Vera Lynn, I made sure I spent time opening post and in the call centre.

The dose comes next and in my mind this equates to the offer or proposition. Clearly, this comes after understanding your audience, but it is nearly as important.

I’ve seen ads bomb for lack of attention to what the audience will be likely to do (e.g. direct debit ask when a cash ask would have been better).

Successful trust fundraisers will tell you that unless you really understand what the Trust is looking to support – and precisely which aspect of your work will push their buttons – no amount of hard work on the application will get a result.

Corporate partners, similarly, are usually looking for the right type of charity partnership.

And what you tell donors their money can achieve is equally critical.

The Prostate Cancer Charity’s Research Action Fund that Bluefrog created, works very well as a high value donor recruitment tool. And this is mainly because it maps precisely onto the sort of work the prospective donors want to support.

It is perhaps a stretch to see how tamping – the next element – equates to creative. But that’s possibly because not many people have used an espresso machine.

The skilled use of a tamper, to compress the ground coffee into the filter, needs something of a creative flair to get just right. I hope the next time you buy a coffee you get to see this in action.

In fundraising, whether it is community fundraisers sending invitations to a carol concert, major donor key workers chatting to someone at an event or the acquisition team in direct marketing developing a new DRTV ad, the message must be put across effectively.

Marie Curie’s Great Daffodil Appeal is an interesting example. For such a well-loved brand, warmly embodied in yellows and blues, opting for black as the primary colour for this annual appeal was a brave move. Blacks and greys evoke death, which for a cancer care charity is upfront but also seems a little risky.

It looked very nice on big cross-track posters in the Tube. But one can’t help wondering what the community fundraising volunteers, like those in the pictures, prefer wearing – black or blue. And what do individual donors think?

Finally, timing – when to tighten and stop tightening the filter holder. Often fixed, e.g. around Christmas, timing is rarely given enough thought. There is a tendency – if one thinks about timing at all – to try to out-do the competition and move an appeal a bit earlier.

Christmas card catalogues in August? Of course. And if you don’t get yours out in August too, you’ll lose sales. How long before someone tries July or even June?

Admittedly, you only have limited scope on testing timing, as your hand will often be forced by what other departments or competitors are doing.

Email is one area where testing is both possible and worthwhile – assuming you have sufficient volumes of responsive data. A few years ago, I heard a consensus emerging that Tuesday morning or Thursday lunchtime were the best times to send an email. But that has now changed, and the clear advice from digital experts is to do your own testing.

As I said elsewhere, from a stewardship point of view, the timing of feedback and thank you messages will be very important as the recession deepens. Specifically, I recommend now!

Frothy coffee
Cappuccino is anathema to true espresso lovers. Some argue that once milk – or even hot water – enters the dark nectar, it is ruined.

Others, however, enjoy delving into the velvety softness, allowing the warmth and strength to be drawn through.

In a similar – but less suggestive – way, a contrast can be drawn between fundraisers who see themselves as solitary espresso and those who strive to achieve a cappuccino-like mix. The former keep their head down and concentrate on the task in hand. Sometimes brilliant, often a little weak or bitter.

I would argue that the latter group, however, are more consistent.

They turn espresso into something greater, by mixing one third themselves, one third creative agencies and consultancies, and one third peer networks and industry bodies like the Institute. Not that I would suggest that the IoF is frothy and full of hot air.

Although they risk becoming a little bland, fundraisers who seek input from others and build upon the experience of peers and the industry stand a much better chance of being successful.

Donor needs
But going back to the “grande skinny caramel macchiato, extra hot, etc…”, maybe Starbucks and their 20,000 variations on a cup of coffee are right on the money. What they do is to recognise that customers have needs, and the most important of all is to be treated as an individual – to be given what you want in return for your money.

And anyone who’s read Mark Phillips’ post on donor needs will immediately see the parallel.

As Mark says, donors want to know what a charity has done with their money, rather than read about what the charity does (or what a corporate partner has given, or what policy statement they’re issuing); it's a very subtle difference, but a very important one.

But how do you implement that in practice?

At the risk of being clichéd, I shall draw this post to a close with a reference to Barack Obama’s astounding fundraising success.

As Nick Burne comments in PF, Obama succeeded because he, ‘made the campaign about me’.

Nick observes: ‘A statement on the front and top of Obama's website read: “I'm asking you to believe. Not just about my ability to bring about real change in Washington … I'm asking you to believe in yours." And it wasn't just a statement. He backed it up by giving me ways to get involved online. I could be a hero – part of the change. It was about me, my friends and family, and who I could influence.’

And in September 2008 alone he raised a record-breaking $150m, largely from ordinary Americans, primarily because he understood their needs.

My crunch hunch

Optimism is dead. Regarding the wider economy, at least.

You no longer hear the occasional optimist saying things will pick up in the spring. Everyone agrees that things are going to get worse.

As winter suddenly bites in January and February, the only thing getting brighter will be the sky as the days gradually lengthen. The economic outlook will get darker.

The post-New Year lull can often feel a bleak time of year but in 2009 it could be dreadful.

Over 80 percent of marketers are investing in CRM because of the economic downturn but this sudden focus on relationship marketing comes too late.

With brand and product homogeny, and the relentless growth of online retailers fueling the Long Tail, differentiation by customer service is increasingly important. A concept widely promoted in the 80s, it is sad that so few brands really embrace it.

Charity brands from the NSPCC down are losing direct debit donors at an increasing rate, and commercial brands such as Dixons are reporting rapidly dropping sales. The sorry demise of Woolworths, it has been said, is only the beginning.

Improved customer service seems to be one of the few ways left to avoid catastrophe as the recession bites.

(Interesting, then, that just at this critical moment BT axes 10,000 posts ... and if you have ever had the misfortune of calling BT Customer Services, you will agree that this move does not inspire confidence in future levels of service.)

Marketers must start to engage with customers – really engage, by taking time out to sit on the phones and take Customer Services calls for example! Similarly, fundraisers must start to engage with donors, for example by regularly spending time with Supporter Services, opening post and seeing what they're saying about their appeals.

In September, CAF and ACEVO reported that 88% of charity CEOs expect income to drop over the coming year. And recent press reports appear to be confirming this outlook.

While 62% of charities expect to increase fundraising investment to mitigate the effects of the recession, according to IoF/PwC/CFDG's Managing in a Downturn research, some charities are already on a slippery downward slope. They are the ones whose copies of Relationship Fundraising have been gathering dust for the past decade, while they’ve persisted with the charity equivalent of the assault on Falluja.

So what can you do to stem the attrition of donors, and protect your income in 2009?

If I were back in that position, I would seek to communicate – at least twice between January and March – the following key messages…

“THANK YOU”

“THIS IS WHAT WE’VE DONE WITH YOUR MONEY”

‘Your money’ is the vital phrase. And it is one that I think deserves a moment’s reflection.

This slightly old fashioned notion of it being ‘my money’ is very relevant in times of recession. It’s my money. Why should I continue to give donations on the vague promise that, ‘this is what you will do with it’?

I want to see what you did do with it.

Otherwise, I’m not so sure about giving you any more.

As Karen Osborne puts it, this ‘delivery on the promise’ is what donors want – and it is the best way to unlock their next gift.

The good news is that Bluefrog has developed several solutions to this challenge that are already reaping rewards for clients.

My hunch is that unless charities lead on this message in 2009 they will end the year with fewer than half the active donors they have now.