Five Ways to Make Your Donor Relationships Better
Acquiring a new customer (donor) can be five to 25 times more expensive than holding on to an existing one.
- Harvard Business Review
By Wayne Hendry, Client Experience Manager, Lexicon Financial Group
As a small business, we share some of the same challenges in terms of marketing, brand awareness, and business development as small- to medium-sized charities. As a portfolio management firm, we are fortunate to count many charities among our clients, which has made us more aware of their unique challenges: maintaining and growing donations, implementing proper governance, hiring and retaining professional staff, to name just a few.
Our investment clients aren’t much different than donors. They expect us to invest their money according to their investment objectives. Donors expect charities to invest their contributions in activities that support the changes they want to see in the world.
Research shows that good donor and customer relationships can not only help retain donors (or customers), but can actually help attract new supporters.
Here are five ways to build better relationships with your donors:
1. Provide a great first impression
First impressions matter.
A positive first impression is an important start in building a meaningful relationship with today’s donors as it sets the tone for the rest of their experience.[1]
Creating a good impression includes:
Making the donor experience of giving a gift as seamless as possible
Responding to donors within 24-48 hours of their donation or query
Sending a gift receipt and thank you letter or an email within 48 hours
Asking donors what their contact preferences are
Inviting board members to write to new donors or call them to thank them for their donation[2]
2. Convert transactions into relationship
According to Westfall Gold, non-profit organizations (including charities) have unwittingly created a culture of “transactional giving.” This approach to fundraising is formulaic—offer a simple proposition describing what a specific donation will achieve. It is prevalent today because donors consistently respond to appeals that have a well-defined personal or altruistic benefit. There is a cost to this approach. According to the 2019 Fundraising Effectiveness Survey Report of the Association of Fundraising Professionals, every $100 gained in 2018 was offset by $93 in losses through gift attrition. This is the result of fundraising that elevates the giving transaction over the donor relationship.
This transactional approach may not work over the long-term. Sure, it is quick, simple, and easy to market. However, this approach does not increase donor retention and may even result in the charity losing out on larger donations. Transactional appeals usually attract a one-and-done donor and does not allow donors to fully see the charity’s vision or appreciate the long-term impact of the continued donations. This can lead to poor engagement, limited giving, and low donor retention.[3]
Donors today, especially high-net-worth ones, may want to become long-term partners with charities to change the world in dramatic and extraordinary ways. As donors shift from transaction to transformational giving, charities should take the opportunity to ask for transformational gifts instead of transactional ones. A small- or medium-sized charity can kick-start this switch by getting personal with donors. They should try to find out what made donors decide to donate, how they want to be communicated with, and what they want to see happen with their donation. Donor feedback is an important part of building a relationship. An important step in building relationships with donors (current and potential) is to use relationship marketing. The graph below outlines the benefits of relationship marketing. Charities can make this graph relevant to themselves by replacing customers with donors.
3. Use technology to supercharge donor relationships
Prospective and current donors today have instant access to information on multiple devices at their convenience and they expect more meaningful connections with the organizations they decide to support. Charities can leverage technology to meet these needs. Taking advantage of new, easy-to-use technology, charities can refine their donation development strategies and create stronger connections with donors. It easier than ever before to meet donors where they are, speak to their interests, and provide content that drives them toward the action wanted. This more personal and customized way of communicating with donors strengthens relationships with them.
Marketing automation platforms can revolutionize efforts by enacting a 24/7 donor development strategy that affords organizations the capacity—and opportunity —to build deeper, more meaningful relationships with donors by connecting with them on each stage of their life and digital journey.[4]
Gathering data about donors, their donations, etc. makes this possible. Excel spreadsheets may work but managing growing data becomes a challenge over time. Creating comprehensive reporting is difficult unless you are using a Donor Management System built to resolve this issue. There are more than a few free donor management systems available to small- and medium-sized charities. And they can be used to good effect, no matter the size of staff or marketing budget of the charity.
4. Pursue donors, not just big donors
We know that fundraising to meet budget demands is a constant major issue for charities. This is why landing one or several big donors is important. But is doing this the most effective way of generating donations that help fund and even increase the budget of a charity?
In January 2023, a full-page newspaper ad titled “Canada’s Charities Desperately Need Additional Funding” was published, urging the Canadian parliament to introduce a new measure that would provide more tax relief to Canadians donating to charities. Will this create the conditions for more families to give more when Canada already has one of the world’s most generous charitable tax breaks for charitable giving?[5]
Maybe, but maybe not.
Going after the big donor(s) may look like a great route for small- and medium-sized charities given the potential reward. Smaller donations, however, provide a greater diversity of donors, have a greater potential for generating awareness of a charity, and lessens the impact of any one or several donors halting their donations.
Also, smaller donors are easier to retain so their donor lifetime value may be greater than a one-time donor who gives a little more. Smaller donors may not have the resources to make a sizeable donation, but they have the potential to be regular donors who can make a larger donation over time. [6]
More importantly, tomorrow’s large donor might emerge from a relationship you develop with a small donor today.
5. Get buy-in from your people
A 2021 Harvard Business Review report showed that a whopping 78 per cent of companies failed at their efforts to shift the way they do business. However, the report also revealed that 22 per cent of businesses that successfully elevated growth through transformation had one thing in common: they focused their efforts on their people. And they did this by following an employee-centric approach that focuses on buy-in for your business’ goals.
Employee buy-in is your staff members’ understanding and acceptance of a change needed for your charity to succeed, and then working to help meet the goals of that change. Employee buy-in has positive impacts for a charity in terms of its efforts to attract more donors. [7]
Further reading:
Why Small Donations Are Worth More Than You Think, Classy.org, August 21, 2019
7 Ways to Show Your Donors Some Love, Network for Good
5 Fundraising Trends to Watch in 2023, Soraya Alexander, Classy.org, January 5, 2023
First Impressions Count: The Importance of Customer Contact Points in Retail, Aaron Copestake, Vocovo, April 24, 2021
7 Ways to Show Your Donors Some Love, Network for Good, December 29, 2021
Transactional vs. Transformational Giving, Jordon Johnson, Westfall Gold, April 23, 2018
How to Supercharge Your Donor Development Efforts With Marketing Automation, MagnifyGood, January 22, 2020
Private foundations sit on billions of dollars while charities struggle, Linda McQuaig, Contributing Columnist, Toronto Star, February 9, 2023
The Power of Small Donations: Why They Should Matter To Your Nonprofit, Allison Smith, Content Marketing Coordinator, Neon One, April 20, 2022
Why Employee Buy-In Is Important, And How It Sets Your Company Apart, Gerardo Gonzalez, Growth Institute,
Wayne Hendry is Client Experience Manager with Lexicon Financial Group (www.lexiconfinancialgroup.com) at Raymond James Investment Counsel.
The opinions expressed are those of Wayne Hendry and not necessarily those of Raymond James Investment Counsel which is a subsidiary of Raymond James Ltd. Statistics and factual data and other information presented are from sources believed to be reliable but their accuracy cannot be guaranteed. It is furnished on the basis and understanding that Raymond James is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Raymond James advisors are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters.