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Donor Churn How to stop it before it starts and why current approaches

prevent this from happening.

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Overview ‘Donor churn’; the on again and off again (and on and off and on…) cycle that typifies the catch and release world of acquisition and lack of retention. To state the obvious, “acquiring” the same donor over and over again is less than ideal.

Why do they leave? What is the nonprofit sector doing to address it?

Few organizations have a good handle on why donors leave. At best, an individual charity may identify the straw that broke the camel’s back; namely the most recent or top of mind pain point felt by the donor. Even then that only happens if the charity asks. The vast majority do not.

Fixing churn requires addressing the root causes (see Fig.1) by determining, at each interaction point, across all channels (web, donor service, email, direct mail, face to face) whether the organization delivered a positive or negative experience. In short, it requires fixing churn before donors have already decided, as a result of the organization’s action, they are leaving.

Figure 1

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There are four unspoken mindsets and, by extension, approaches (or lack of them), that undermine meaningful efforts to address the churn problem. The result, as evidenced by the widely available data, is retention rates getting worse, not better, over time.

This paper reviews each of these issues in detail and identifies the fix for each one. These fixes are not theoretical. They are very real and practical. They are being implemented by charities all across the globe. Unfortunately, these organizations are the exception, not the rule. Fixing churn (and increasing retention) by accepting the deficiencies with the current operational business model and recognizing there is an alternative –an alternative so powerful it amounts to a “silver bullet. In short, it requires a change of mindset, which is probably a lot harder than writing a check But, make no mistake. The effort is well worth it because the financial upside is significant (see Figure 2). (The test results displayed reflect a limited implementation of the “fixes” presented in this paper.)

Four Issues That Get In the Way of Fixing Donor Churn

1. Thinking churn can be addressed when they call to quit or with a reinstatement program.

2. Believing churn can be fixed by sending more communications dubbed “engagement” or “loyalty” touchpoints (i.e. those with no hard ask).

3. Only assigning value to transactional data and being forced to guess at the “why” of

donor behavior.

4. Treating donor service as a cost center and a burden.

Figure 2

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Churn Issue #1 – Thinking churn can be fixed when donors call to quit or after they leave

The Situation: Most charities with monthly donors (the business model norm in many countries outside of the US) have some sort of process and protocol in place to try to “save” monthly donors when they call to quit or more likely, when the payment doesn’t arrive that month.

For single gift, or cash donors, there is no notice or indication they are defecting until they get far enough back in our rearview mirror that we label them “lapsed”. Here they’ll likely sit for many more months (or years) before being called or mailed with an invitation (strikingly similar to the very first one they received in the acquisition process) to come back. So many of the responders never actually know they left and the massive majority, who don’t respond, never intend to return.

The Reality: Retention rates will continue to get worse if the inflection point for thinking about donor churn occurs only after the donor has decided to leave (monthly), or when we have to wait for transactional data reports to tell us donors are fading away. The day late, dollar short adage applies in this situation.

Donors decide to stay or go not based on a single event but instead, over time given their cumulative experiences (or lack of them) with the organization.

The Fix: There are some charities getting into what we call the “cause and effect” business to understand the totality of touchpoints - across channels and over time – and their impact on loyalty and lifetime value. This “cause and effect” or root-cause analysis combines attitudinal and transactional data to determine:

1) The touchpoints that cause loyalty and lifetime value and those that have no impact 2) The financial value of touchpoints that matter (even if they

don’t ask for money) 3) Those that matter but are “broken” from the donor’s

perspective

Insights possible from this root-cause analysis include,

1) Determining whether or not their welcome kit is on the mark and if not, how to fix it. 2) Knowing if the e-news piece and magazine (which have no money attached to them) are in fact

positively impacting future giving decisions or not 3) Identifying whether a given brand message actually increases loyalty or has no impact on the donor 4) Understanding the financial impact on lifetime value of a good or bad donor service experience 5) Identifying the impact of taking an advocacy action or participating in a live event on lifetime value

in the direct marketing stream.

Donors decide to stay or go not based on a single event but instead, over time

given their cumulative experiences (or lack of them) with the organization.

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This information is used to fix churn before it happens. To optimize the donor journey from the donor’s perspective and fix what isn’t working, dropping those activities that are irrelevant and creating extra “noise” and increasing the frequency or channel availability of those touchpoints that are winners already.

This can be mapped and piloted with the goal of moving from what we call “current state” to “desired state” (see figure 3) or a set of donor experiences that are empirically known to build commitment or loyalty in the hearts and minds of donors as the ultimate antidote to churn and lousy retention rates.

Churn Issue #2 – Belief that sending “loyalty communications” will fix churn.

The Situation: Most charities talk internally about two types of interactions – those that ask for money and those that do not. The latter get labeled with all sorts of euphemistic terms such as stewardship, engagement or loyalty interactions/touchpoints. We know of many charities in the US, UK and Europe that have ginned up all manner of in-market tests – 100% conceived internally – in the name of reducing churn that alter the ratio of ask to no-ask interactions. None of these has worked. In fact, in most cases the results have had the exact opposite outcome from the intended goal – churn increased.

The larger problem lies in believing we can solve donor churn with more navel gazing or ‘best-practices’ – as if there are lots of charities showing up at the benchmark meetings with massive retention improvements and corresponding practices worth emulating. The specific issue in this instance is thinking the donor actually has these same mental categories of “ask/no-ask” for thinking about and experiencing the charity. This thinking further assumes the donor must prefer the no-ask variety since that is always the side of the scale that gets tipped in creating these in-market tests.

Figure 3

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The Reality: We have examined the impact of no-ask touchpoints on loyalty and value and with few exceptions, found it not to matter. This means that for most organizations the “solution” of changing the ratio of no-ask to ask is fixing a problem that does not exist while leaving unaddressed the real reasons, which include touchpoints – irrespective of the ask/no ask false dichotomy – that don’t matter and crowd out those that do while leaving unattended the broken experiences that collectively mount up and lead to churn.

The Fix: Start to interrogate ideas for impacting donor churn with a Jeff Bezos (CEO of Amazon) or Steve Wynn (Las Vegas casino developer) style by asking “do we think or do we actually know this will work?” Both are famous for doing this in their internal meetings. If the answer is “we think” then shift immediately to asking for ideas that “we know” will work or identifying the data that is required to move an idea to “think it will” to “know it will”.

Churn Issue #3 – Paying attention only to transactional data The Situation: The charitable sector runs the business as an assembly line, not a human enterprise. How can a sector built on serving others be compared to an assembly line producing widgets? This irony is directed towards how the sector treats the donor, not the beneficiary. When it comes to the donor, the only input we are setup to accept, process and act on is the “data” they provide on our pre-printed, pre-created forms for giving or doing. Any “data” or input from the donor that doesn’t fit in the online sign-up or the paper reply device is treated as extraneous and unimportant; the handwritten note scribbled on top of the pre-printed reply device? It goes in the circular bin.

And since we assign no value to the qualitative data (e.g. the donor’s opinion, feedback, compliments, complaints, recommendations) that results from the donor having made an extraordinary effort to provide it; it only stands to reason that we, as a sector, make no proactive attempt to solicit this type of data. As proof and comparison, roughly 35% of outbound calls in the for profit sector are tied to customer service versus roughly 1% in the non-profit sector. Additionally, the for-profit sector spends meaningful chunks of annual budget collecting feedback from customers after each interaction. There is an entire technology industry built to support just this activity. For all intents and purposes they don’t sell into the non-profit sector because there’s no demand for consumer opinions and feedback data.

What this means for the sector is that we are in the business of analyzing nothing but outcomes and lots of circular logic follows – a loyal donor is one who gives a lot and they give a lot because they are loyal. This “outcome only” view of the world means we engage in no root cause analysis of churn, no cause and effect for lifetime value. Instead we run an assembly line that churns out as much “product” as efficiently as possible through as many channels as possible.

The charitable sector runs the business as an assembly line, not a

human enterprise.

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The Reality: The opinions and reactions and feelings of our donors still exist even if we turn a deaf ear to them. These feelings and experiences, over time, dictate whether donors stay or go and, the trend data are clear: they are going at an increasing and alarming rate. The “transactional data only” view of the world provides no answers on why this is happening.

All the quantitative data from your website, email marketing tools, direct mail response data, opens, clicks, visits, time on site, response rate, conversion rate, social media shares and on and on and on.

Donor behavior data is useful to get more efficient at analyzing the world we elected to “cook up and serve”; to watch and observe our supporters through the rearview mirror and then guess at root cause.

All this transactional data cannot, no matter how much you torture it, tell you why something happened. Nor can it listen to your supporters and answer questions like the following:

• Why do people click on one thing and not another, is it location, lack of interest, lack of understanding?

• Why do those who don’t click on anything behave that way? Did they still get value from it? • Why do visitors spend x amount of time on our site? Are they really engaged or does our navigation

suck? • Why is it that we only have one percent conversion rate? • Why did 99% of people take no action?

So how do these seemingly critical questions get answered now? We overlay our own opinions and experiences and preferences. Unfortunately we are not our supporters.

In fact being as close to our organization and our marketing activity as we are, it is quite likely that we are the worst possible people to understand our supporters.

So why not ask the donors? Yes, a survey. One that is short, purposeful and tied to a specific interaction or experience and served up at the point and time of that interaction (e.g. exiting your website, having a donor service interaction, reading a content page on your website).

This kind of listening and responding is continuous, not discreet. It is also ubiquitous in the commercial sector. Think about the last time you bought something, had a meal, traveled or shopped online… anywhere. Chances are the company was asking you for feedback about that experience. Heck, lots of them even provide incentives for that feedback. They measure and manage and spend against what they assign value to.

Donor behavior data is useful to get more efficient at analyzing the world we elected to “cook up and serve”; to

watch and observe our supporters through the rearview mirror and then

guess at root cause.

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The Fix: There is a way to systematically and efficiently collect and act on feedback data from your supporters. Further, this feedback can be solicited right after a given interaction and it can be done across channels. And the feedback can be acted on at the individual supporter level – not just aggregated for root cause analysis (though this is important to do). With the use of technology, business rules and a bit of process this can be highly automated and therefore, scalable.

While commonplace in the commercial sector there are now charities getting into the feedback game and using the feedback to fix bad experiences when they occur and build on positive ones - for each supporter - who takes the time to engage your organization in a conversation.

Why bother? What does this have to do with raising money? In a word, everything. We have clients collecting feedback after the ultimate transactional, short-term definition of success – a donation is made.

An illustrative sampling of the kind of feedback and reporting after the donation can be seen in Figure 4 and as it shows, our definition of transactional success is often dangerously short-sighted.

Figure 4

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For one client the feedback after the donation identified,

1) Many supporters who expressed interest –in the open end comment box as part of the feedback survey – in making a monthly donation and oblivious to the apparently very “broken” option to do just that in the internally created donation process.

2) Similarly, many supporters left the donation process extremely confused and frustrated with giving in-honor or memory of someone. More specifically, it was unclear if the request got processed and how people would be notified.

This insight is only knowable if we ask supporters – just like donating, hardly anyone volunteers it without being asked - and it is mission critical if our business is raising money and not churning 5 to 7 donors for every 10 we gain (in year one alone).

Churn Issue #4 – Believing donor service is a cost center and a burden

The Situation: Service in the non-profit sector is too often relegated to some distant corner of the organization and/or treated as a cost center. The incentives and business metrics are geared towards minimizing the number of interactions and the length of each one. The phone number for many a charity is far too difficult to find and, shockingly, many of those same charities acknowledge this is done with intent. Interactions are highly scripted versus conversational and the agents (in-house or vendor) have no autonomy, control or sense of purpose. This is a recipe for low motivation, high turnover and below average service.

This is all driven by the assembly line mindset and the goal of reducing cost tied to service.

The Reality: The donor service operations for many a charity are churn machines. They are the places relationships and donor lifetime values go to die. This is not the fault of the agents or the people managing these functional areas. It is the fault of the management.

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The typical, large charity in the US has between 1,500 and 3,000 inbound contacts per month (phone and email) with obvious spikes tied to the outbound direct marketing activity. This volume is experienced without the charity making much, if any, effort to solicit comments and feedback. In short, it grossly under-represents the real need and yes, opportunity.

As Figure 5 shows, there is improvement in retention to be had simply by making it easier to complain. Forget fixing it. Just turn up the volume on the existing sentiment. Take the extra step of problem resolution – the cornerstone of any service operation – and retention skyrockets.

The Fix: Service needs to be lifted out of the basement and moved into the penthouse. It is about actively soliciting feedback and acting on it to prevent churn before it happens; fixing bad experiences and building on positive ones.

Even the service interaction itself warrants collecting feedback. For example, one charity is asking supporters who have a donor service interaction whether or not their issue or concern got resolved at the end of the call (or email exchange). This is referred to as First Call Resolution (FCR) in the commercial sector and the only way to know if the issue was in fact resolved to the donor’s satisfaction is to ask. For those who say ‘no’, a follow up call or email is triggered to remedy the situation to the donor’s satisfaction. For those who had a positive experience the charity will either make a request for a donation or ask that person to introduce someone to the charity – especially if the person is highly committed, which is also measured in the feedback script.

The upside is significant. One client experienced a 3x improvement in cross-sell and up-sell for those who were offered the opportunity to provide feedback after their donor service interaction.

Figure 5

One client experienced a 3x improvement in cross-sell and up-sell for those who were offered the opportunity to provide feedback after their donor service interaction.

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This is the new paradigm for sales and repeat business in the commercial sector and, for the first-mover, innovators in the nonprofit sector. It is bringing to fruition all the previously empty talk of relationship building and 1 to 1 marketing.

In short, service is the new sales and by extension, a new way to fundraise that delivers spectacular ROI. It requires a service culture and mindset, the technology, process and people to support it and the correct financial, donor and operational metrics to steer it.

Summary

The nonprofit sector is in search of growth. The market is shrinking by virtue of more charities competing for the same size pie.

The leading organizations – by virtue of mindset, not size – are re-examining the way they think about donors, non-transactional data, relationships and service. They are systematically tackling the four issues that undermine retention and growth.

This is the silver bullet.

Four Issues That Get In the Way of Fixing Donor Churn

1. Thinking churn can be addressed when they call to quit or with a reinstatement program.

2. Believing churn can be fixed by sending more communications dubbed “engagement” or “loyalty” touchpoints (i.e. those with no hard ask).

3. Only assigning value to transactional data and being forced to guess at the “why” of

donor behavior.

4. Treating donor service as a cost center and a burden.

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DonorVoice The Experience and Relationship Company

US Contacts: Kevin Schulman, Founder and Managing Partner

kschulman@thedonorvoice.com

Josh Whichard, Partner jwhichard@thedonorvoice.com

UK Contact:

CharlieHulme, Managing Director chulme@thedonorvoice.com

Phone: 202-246-9649

www.thedonorvoice.com