A dog’s life: Part 4 of 5

This is my fourth of five posts focusing on Frederick Reichheld’s book “The Loyalty Effect” and how the concept of “loyalty” effects for-profit and non-profit corporations equally. If you don’t own a copy of this book, I suggest you buy it, read it, and change your approach to doing business.

I once worked for a smart boss who said, “What get’s measured, gets done! ” Of course, she said it in a very crisp British accent. And she was right.

Reichheld spends all of chapter eight talking about measuring loyalty and creating a more balanced dashboard tool that includes loyalty measurements. I especially liked his point that “… measurement lies at the very heart of both vision and strategy.”  Here is a little more from Reichheld (page 217) on how important measurement is:

“Measurement is the business idiom. Just as language shapes thought and communication, measures shape the attitudes and behavior of a business organization. The choice of what a business measures communicates values, channels employee thinking, and sets management priorities … Deciding what to measure and how to link measures to incentives are among the most important decisions a senior manager can make.”

Yesterday, I ended my blog with a link to an article from studyfundraising.info. In that article, they provided some suggestions on things to measure with regards to loyalty. I urge you to re-read that article and consider developing a scorecard or dashboard with some of those measures.

After a robust walk with the dogs this morning, I came up with some additional suggestions (some of which align with Reichheld and some don’t). So, here are some additional measures you may want to consider:

  • Donor renewal rate for your overall resource development program as well as for individual fundraising campaigns (this year versus last year)
  • Year-end evaluation of donor database with measurements focusing on:
                  * what percentage of donor records contributed in the last 12 months
                  * what percentage of donor records contributed 13 to 24 months ago
                  * what percentage of donor records contributed 25 to 36 months ago
                  * what percentage of donor records contributed 37 to 48 months ago
                  * what percentage of donor records contributed more than 49 months ago
  • What percentage of last year’s “first time donors” renewed their financial support (regardless of the fundraising campaign). In other words, how many second time gifts did you get from last year’s first time donors?
  • Comparison of this year’s pool of donors versus last year’s pool of donors on the average number of years a donor has supported your organization with a financial contribution
  • The number of “total number of private sector dollars raised divided by the total number of “stewardship touches” (e.g. all touches with donors and prospects who didn’t contribute) … compare this year’s number versus last year
  • For certain fundraising campaigns (e.g. annual campaign pledge drive), a comparison of how many renewing donors increased their contributions versus decreased versus stayed the same
  • For your organization’s “Top 50 Lifetime Donors,” the percentage increase of the total value of their contributions this year over last year (and perhaps even year-to-year over a five-year trending period)
  • Using an annual donor survey to measure “donor satisfaction” with your organization’s ability to impact change through programming

Tomorrow is the last day of this blog series on donor loyalty, and we’ll focus on strategies and activities to help build loyalty. However, I strongly urge you to invest time and resources in measurement systems and providing transparency in reporting these facts because it is this data that will drive strategy and performance.

Does your organization used specific “loyalty measures”? If so, please share your ideas with us in the comment section of this blog. If you think I’ve missed something, please weigh-in. There are no right or wrong answers.

Here is to your health!

Erik Anderson
Owner, The Healthy Non-Profit LLC

A dog’s life: Part 3 of 5

This is my third of five posts focusing on Frederick Reichheld’s book “The Loyalty Effect” and how the concept of “loyalty” effects for-profit and non-profit corporations equally. If you don’t own a copy of this book, I suggest you buy it, read it, and change your approach to doing business.

Reichheld spends more than half of his book making the case for business leaders to understand the true costs of not understanding and incentivizing loyalty. Throughout the book he mathematically proves that:

  • Increasing customer, employee & investor loyalty results in a company spending less on customer acquisition in the long-term
  • Increasing customer, employee & investor loyalty results in increased profits
  • Increasing customer, employee & investor loyalty results in decreasing costs for the company
  • Increasing customer, employee & investor  loyalty results in more referrals and a self-perpetuating cycle of loyalty

After looking at these conclusions through a non-profit lens, I’ve come to the conclusion they are equally true for non-profit organizations. After all, how many times has one of your most loyal donors brought their friends to a special event fundraiser or hosted a cultivation or stewardship event for you?

I also found it interesting that Reichheld spends three chapters discussing the importance of finding and acquiring the “RIGHT” customers, employees & investors. While I understand how this applies to hiring non-profit employees, I had a problem wrapping my head around how it might apply to donors … until I remembered the Rubber Duck Race raffle/fundraiser I used to run every year.

In my six years of running that fundraiser, we built a donor database from a small handful of loyal donors to more than 12,000 donor records. While many of those donors enjoyed purchasing their $5.00 duck adoption for a chance to win a new car, I had a terribly difficult time getting many duck donors to cross over into my annual campaign or other resource development activities.

I also wonder what National Public Radio (NPR) fundraising professionals experience when they incentivize donors with premium giveaways. I suspect Reichheld would say that those who donate in spite of the giveaways would be the “RIGHT” kind of donors and those who contribute in order to get their names entered into a drawing for a new iPad cost you more money to retain in the long-term.

In the end, it becomes very clear to me that building a resource development program with “donor loyalty” at its heart requires a plan that invests (both time and money) heavily in:

  • donor identification & prospecting
  • prospect cultivation
  • donor stewardship

As I did in yesterday’s blog, I will end today with one more link to additional donor loyalty resources from the nice people at studyfundraising.info who posted “Donor Retention and Loyalty“. There is a great bibliography for those of you looking for good reading!

Here is to your health!

Erik Anderson
Owner, The Healthy Non-Profit LLC

A dog’s life: Part 2 of 5

This is my second of five posts focusing on Frederick Reichheld’s book “The Loyalty Effect” and how the concept of “loyalty” effects for-profit and non-profit corporations equally. If you don’t own a copy of this book, I suggest you buy it, read it, and change your approach to doing business.

Yesterday’s post attempted to set the stage for deeper conversations around the importance of tracking, measuring and implementing loyalty strategies. Before we move forward, I am sharing this short passage from page 37 of the book:

“Imagine two companies, one with a customer retention rate of 95%, the other with a rate of 90%. The leak in the first firm’s customer bucket is 5% per year, and the second firm’s leak is twice as large, 10% per year. If both companies acquire new customers at the rate of 10% per year, the first will have a 5% net growth in customer inventory per year, while the other will have none. Over fourteen years, the first firm will double in size, but the second will have no real growth at all. Other things being equal, a 5-percentage-point advantage in customer retention translates into a growth advantage equal to a doubling of customer inventory every 14 years. An advantage of 10 percentage points accelerates the doubling to seven years.”

I share this passage from the book with you because oftentimes I find myself in a group of people nodding as we talk about LYBUNT rates (aka lapsed donor rates); however, seldom am I engaged in discussions about what does this REALLY mean. I read this small passage and suddenly I found myself involved in a deeper understanding of the entire problem of donor turnover. I hope you also had the same ah-ha moment.

Ask yourself this question: “Every time I talk or think about my organization’s resource development program, am I overcome by a feeling of exhaustion? Do I see volunteers having the same reaction?” If you answered ‘YES,” then you might be suffering from a donor loyalty issue that has squarely put your organization on the proverbial hamster wheel, which means you’re exerting lots of energy and only running in place (just like Reichheld described in the above passage).

What struck me hardest when reading this passage was that most non-profit organization’s experience turnover rates much higher than 5% or 10%.

As I did in yesterday’s blog, I will end today with a few links to additional donor loyalty resources: 1) “Building Donor Loyalty to Meet Your Your Long Term Fundraising Goals” Fund Raiser cyberzine and 2) “Top 9 Donor Loyalty Tweets” by Reinier Spruit who has blogging about Adrean Sargeant’s book “Essentials of Donor Loyalty“.

Here is to your health!

Erik Anderson
Owner, The Healthy Non-Profit LLC

A dog’s world: Part 1 of 5

As promised on Friday, I unearthed my copy of The Loyalty Effect written by Frederick Reichheld and re-read it over the last few days. Today’s blog post is the first of many this week where I will share a sliver of the book with you and try to translate it into non-profit speak. In the end, it is my hope that we can all get a little closer to this idea of “being donor-centered”. I encourage you to buy a copy of this book and use it as your own “non-profit business bible”.

Essentially, the thesis of this book boils down to this simple idea: business leaders are too focused on the bottom line and profits and not focused enough on retention of customers, employees and investors. Ironically, focusing on numbers rather than people creates turnover (disloyalty) and ultimately causes profits and companies to fall apart. Reichheld advocates for a new business paradigm where CEOs start measuring and focusing on efforts to build loyalty throughout their company.

I echo his sentiment for non-profit leaders!

One of the more interesting things I learned in the first few chapters of this book was:

  • U.S. corporations lose between 10% to 30% of their customer base every year
  • U.S. corporations lose between 15% to 25% of their employee base every year
  • U.S. corporations lose more than 50% of their investors every year

For non-profit organizations, there are a number of different studies that illustrate “donor loyalty” floats somewhere between 50% and 75% per year, which essentially means resource development staff and volunteers are working hard to replace anywhere from 25% to 50% of their donor base just to break even EVERY YEAR.

To compare non-profit loyalty numbers to for-profit numbers, a decision needs to be made around this one issue — “Are non-profit “donors” the equivalent to for-profit “customers” when it comes to Reichheld’s book?”

While I’ve been telling my non-profit friends for years that donors are “investors” (and they really are), for the purpose of translating this book’s message I think we need to think “donor” every time Reichheld says “customer”.  Yes, I understand that donors are not our clients, but I just think the “economic dynamic” is closer for comparative purposes. If you disagree, please weigh-in using the comment section and let’s talk about it.

If you buy into this analysis, then non-profit leaders are equally bad if not worse off than their for-profit cousins when it comes to creating loyalty. So, it stands to reason that Reichheld would conclude that non-profit organizations are at substantial risk of bankruptcy unless they address this issue. I guess we shouldn’t be surprised that only 33% of non-profits survive beyond five years. (Compared to approximately 50% of for-profit biusnesses that are still alive after five years).

OK — this first installment sets the stage for a fun week of investigating the power of loyalty. I strongly encourage everyone to weigh-in with comments and questions as we embark on this journey. In the meantime, here are a few online resources and white papers if you want to deepen your knowledge of donor loyalty for this discussion:  1) Donor Loyalty: The Holy Grail of Fundraising by Craver, Mathews, Smith & Company, 2) The Number One Driver of Donor Loyalty is Satisfaction by Grizzard, 3) Building Donor Loyalty: Chapter 1 by Tony Poderis, and 4) Burk’s Blog by the queen of the donor-centered universe Penelope Burk.

Here is to your health!

Erik Anderson
Owner, The Healthy Non-Profit LLC

A dog’s world: An Introduction

Earlier this week, one of my favorite bloggers, Jeff Brooks of Future Fundraising Now, posted a piece titled “Create good experiences for your donors” and my mind has been wrapped around it all week long.

In a nutshell, he draws a link between customer loyalty and profits and then goes on to suggust that a similar dynamic exists between a non-profit organization and its donors. It is really good and I suggest you click through and read it for yourself.

I think the reason I’ve been spinning on this all week is because a decade ago one of my favorite board members took me under his wing and played the role of Oprah. I was a new Executive Director and he was a wise bank President. One day after a board development committee meeting, he pulled me aside and handed me a book titled “The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value“. He urged me to read the book and encouraged me to return in a month so we can talk about how it applied to our non-profit situation.

Jeff Brooks mentions in his blog that he thinks a “good donor experience” includes:

  • getting the data right
  • being thankful
  • reporting back
  • offering choices around communication mediums

I think creating donor loyalty starts here and involves so much more, which is why I’ve dug out my old copy of “The Loyalty Effect”.  Here is my plan … I am dedicating all five blog posts next week to this book. I’ll read a few chapters, report back to you, and try to draw comparisions to the non-profit – donor experience. I am titling next week’s blog posts “A dog’s world” because nothing is more loyal in this world than “man’s best friend”. Right?

In the meantime, I encourage you to take a minute to weigh-in with your comments on “what do good donor experiences look and feel like? And how do you see non-profits building donor loyalty?”

Here is to your health!

Erik Anderson
Owner, The Healthy Non-Profit LLC

Understanding donors

As if you couldn’t tell, I am a very big fan of Penelope Burk — the unquestionable queen of the “Donor-Centered Universe”. So, when I get the opportunity to talk directly to a donor about their philanthropy — like I did last week — I get really excited.

Last week, I was engaged in a two-day annual fund evaluation and part of the methodology for this process included talking directly to donors and lapsed donors.

In one of my interviews, a donor started talking about the different charities that he and his wife support. In that discussion, he drew a distinction between supporting non-profit organizations who provide comfort and mercy and those whose mission represents an investment in the future for the community. For this particular donor, he said he more deeply values his contributions that are “investments in the future” even though his faith also calls him to donate to those who provide comfort and mercy.

I know this shouldn’t have been a revelation for someone (aka me) who prides himself on being a resource development geek. But I walked away from the interview feeling a little wiser. And after thinking about it for a moment, I started wondering if the organization I was working for knew this about their donor? And if they did, then how many other donors do they know that well?

It strikes me that being “donor-centered” isn’t just about the mechanics of Moves Management and making the donor feel like there is a relationship. Being donor-centered is about developing relationships that are as REAL as the ones you have with friends and family.

Donor surveys, interviews, focus groups and face-to-face stewardship visits are all tools in our resource development toolkit that can help deepen donor relationships and become donor-centered.  One of the resources I used to develop my interview questions was found online at Tony Poderis’ website.  I suggest you check it out too and consider using it to engage your donors (at the very least do something to deepen the relationship with your organization’s Top 50 lifetime donors).

What other relationship building activities do you use that makes you a “friend to many”??? Please share.

Here is to your health!

Erik Anderson
Owner, The Healthy Non-Profit LLC

Donor perspective on targeted mail appeal

As originally promised when I first started this blog, I wanted to engage others in resource development discussions; however, I really wanted to be “donor-centered” about it.


So, yesterday I posted a question that a good friend of mine asked me about targeted mail and my opinion about including a copy of the written case statement in the mail package. Since emailing some advice to this friend, I decided it would probably be wise to ask real donors about their targeted mail and direct mail experiences and motivations.


Here is one donor’s perspective on what appealed to them when they have responded to mail appeals:


Yes, I have given to a non-profit charity through a targeted or direct mail solicitation.  It started when I was 9-years-old to an organization named “World Vision”.  I was excited to be able to make a $9.00 donation per month and get a photo to show me a kid that I was helping. I even had a kid write back to me to say thank you. In this case, I’m sure I read the letter and maybe that is what prompted me to give, but I was young and do not recall what it said.


I have also given to Easter Seals, American Heart & Lung Association as well as a few other organizations because they sent me mailing labels. Now, the only reason I gave to these entities was because I wanted to use the mailing labels and felt guilty using them if I didn’t give. I did not have any direct connection to them nor do I recall receiving a thank you letter or note from them. I know these entities are doing good things, but I was just not connected to the mission so I have no desire to give again.  Also, in these cases, I didn’t even read the letter enclosed.


Finally, I have given to several Boys & Girls Clubs across the Pacific Region….most simply because they asked. Yes, I read the letters and many are very good, some just okay, and others unfortunately were very lame…but I still give because I am familiar with and believe in the mission.


I find it interesting that this donor didn’t do a lot of reading of stuff in the envelope before deciding to contribute.


What about you? Have you ever personally contributed to a charity, political candidate or cause just based on a mailing? Please share your story and what got you hooked?

Keeping the case statement internal

I received an email from a very dear friend last week. She is a development professional and asked this question:

“Would you ever put a case statement inside your appeal letter?”

She qualified her question with the following information:

“I’m just wondering because I think I put together a pretty good case statement and our board loves it. They never had one, and they’re wanting to put it in the letters they send to their donors.”

In my response, I told her that I would NOT put the written case statement document for their annual campaign inside of the targeted mail envelope and I provided her with the following reasons:

  • From a philosophical stand, the case statement is an “internal document” and not an external one. We use it to develop solicitation materials, letter copy, and talking points for a face-to-face visit. Sending it out in a letter sends a bad message to board volunteers … that message is “it is OK to just hand donors this document”.
  • Reader surveys tell us that people don’t read any more. So, why send them “more to read” in the envelope? In fact, the case statement is typically all text and is not easy reading.
  • Typically, many case statements can be very dry with lots of facts, figures and program descriptions. Direct mail experts tell us that letter copy needs to be “emotional” and “engaging” and “story-oriented”. These are not adjectives I think of when I think of a case statement.
  • If you want to supplement the letter by including more material, I suggest taking key information from the case statement and massage it into a tri-fold – easy to read brochure with pictures and bullets – and include that in the envelope with the letter

I’ve taken the last few days to reflect upon this advice, and I still think it right on target.  However, I know there are many different schools of thought on the subject of case statements.

So, I’ve started asking donors for their input. I will share some of this donor input over the course of this week. However, I’m curious what advice you would’ve given my friend. Please weigh-in with your best “world class coaching” for my friend.

Campaign in the ditch

So, I just got off the phone with an organization whose annual campaign isn’t going very well. While on that conference call, I found my mind wandering back to a meeting held last December.

At that meeting, the Executive Director and I were trying to convince the chair of their board solicitation phase to meet individually with board prospects and treat them like every other donor should be treated. As you might guess, we lost that argument and he opted for a big group solicitation with a handwritten follow-up.

Long story short … this organization is still chasing down approximately half of its board members begging them to contribute and not surprisingly their community phase is bogged down. Shockingly, the volunteers are still resistant to going back to their fellow board members with a more personalize face-to-face solicitation.

As I assess their situation, I find myself thinking the problem is rooted in any one of the following issues:

  1. They have the wrong volunteers with the wrong skill sets and experiences on the bus
  2. They have some of the right people on the bus but they might be in the wrong seats
  3. They have done a poor job with cultivating new donor prospects and stewarding existing donors and volunteer solicitors know that and don’t feel right about making the ask 
  4. They are afraid of engaging donors (even those sitting around their board table) because they don’t possess the right relationships and the prospect assignment process went wrong somewhere, and/or 
  5. There is a staff leadership problem and they are relying too heavily on volunteers to do everything and not providing the right amount of support.

I firmly believe that board members are donors. In fact, in many cases they are are most important donors, which is why I get so confounded when we treat them differently that other donors. In the case of this organization, they claim that they don’t have enough time to meet with fellow board members one-on-one. I wonder how that makes the average board member feel? I suspect some feel like an ATM and not like an investor, which then creates a feedback loop and gives them permission to solicit non-board donors the same way.

Hmmmm … I wonder what you think. Are there other possible reasons that might explain this behavior? Please weigh-in with your thoughts on this situation.

Hello world!

My name is Erik Anderson and I am an internal fundraising consultant for Boys & Girls Clubs of America. This is really nothing more than a fancy way of saying I work with local affiliates by helping them improve their resource development / fundraising / organizational development practices.
Over the last few years, I’ve obsessed about what does it truly mean to be a “donor centered” resource development profession. While I’ve been able to educate myself through reading books and websites and other blogs, I often find that I learn more about being donor centered simply through my interactions with donors. For this reason, I’ve decided to start this blog that I’ve titled “Donor Dreams.”  It is my hope that by sharing stories (anonymously of course) that I’ve heard from donors (with their permission of course) , I can help inspire others to change their paradigm and become more “donor centered.”
I also hope to share random thoughts inspired from my readings and stories from readers of this blog.
To get us started, here is a link to a great story from Gift Hub about the general idea of being donor centered: http://www.gifthub.org/2010/01/donor-centered-philanthropy-state-of-the-game.html. Enjoy the reading!
So, I am at the beginning and find myself very excited because every exciting journey starts with this same first step.