4 Ways Technology Can Address the Deepening Donor Retention Crisis
In 2006, the Association of Fundraising Professionals and the Center on Nonprofits and Philanthropy at the Urban Institute established the Fundraising Effectiveness Project to conduct research on fundraising effectiveness and help nonprofit organizations increase their fundraising results at a faster pace.
Monthly updates of anonymized data are provided by Neon One, Bloomerang and DonorPerfect, and constitute the largest dataset of individual data in the world. It is the most accurate benchmark of where we are as an industry and if early 2019 trends continued throughout the year, things are not going to be positive.
Early 2019 data from Fundraising Effectiveness Project (FEP) reports that in the first nine months of 2019 compared to the same period in 2018, the number of participating donors was down -3.6% while revenue declined -4.6%. If this trend continued in the final 2019 quarter, 2019 giving could equate to a loss of $20 billion from the $427.71 billion given in 2018.
Fewer donors means less revenue, and less revenue means less investment into our organizations and the causes they represent. The reasons for why this is happening are complicated and varied, but a few key items are cropping up that point to what is causing this downturn in giving:
- The Tax Cuts and Jobs Act of 2017 is correlated to when giving began slowing down in 2018 and appears to have had an amplification effect into 2019.
- Numerous studies have shown that confidence by high-net-worth individuals in charity is waning, with 25% citing a lack of faith in nonprofits as the reason they do not give anymore.
- Nonprofits juggle multiple data sources and struggle with stewardship and data hygiene to maintain positive communications with their donors and program participants.
While an organization cannot control larger economic forces, they can control how they interact with donors, and technology is a major way that we can regain the confidence of those that support us. There are four key areas that we as an industry must address as it relates to technology in the nonprofit sector if we want to address the donor retention crisis.
1. Focus on the Basics
Our staff should be investing in solid data policies, procedures and entry management. Poor data management is extremely costly in a variety of ways for nonprofits, so a concerted effort should be made to cover the following basics before moving into more sophisticated technology:
- Invest in creating a usable policies and procedures manual for data management.
- Run a quarterly NCOA update on your mailing addresses.
- Perform donor surveys to collect up-to-date information and communication preferences.
- Strategically plan out how you will address data integration across platforms.
With these basics covered, our organizations will be able to chart out a growth strategy with the assurance that the foundations will be covered with confidence.
Resource: Learn tips from industry expert Roger Craver about implementing data stewardship at your organization.
2. Make Giving Easy
In a recent blog article, Moceanic outlined the impact that a nonprofit will see if they do not offer American Express (AMEX) as an option on their online donation form. For instance, AMEX donors give 50% more than other credit card users. Yet many organizations cite the higher fees and other existing options as reasons not to enable this for their donors.
Taking things a step further, why would a nonprofit have to negotiate this in the first place? Technology vendors who offer online solutions should be taking the necessary steps to not only build in a variety of payment options into their platforms, but to also negotiate the best rates for the nonprofit as well.
By being intentional with making sure that integration points interact in a meaningful way (e.g. making sure my payment processing interfaces with my donor management system), we will see a streamlining of both data and processes.
Resource: Learn how Homes For Our Troops utilizes a wide variety of donor friendly ways to drive new revenue toward their cause.
3. Modernize Metrics That Matter
With the rise of technological systems comes a mass of data that an organization now has at their fingertips. Yet two key issues have cropped up that organizations need to ensure that they address in order to focus their efforts:
- With more data comes the possibility that we are focusing on “vanity metrics” that do not actually help our organizations grow.
- With new processes and opportunities that technology brings, we may be focusing on “impact metrics” that do not make sense anymore.
A concrete example of this comes with major donor cultivation. As Dr. Kathryn Gamble outlines, “Data is completely revolutionizing the way we identify and focus on prospective donors. We are impressed by the new data tools that offer new opportunities to find committed, high-net-worth donors who love you.”
In the past, a major gift officer would focus their reporting to superiors around the number of phone calls or meetings that may have occurred within their portfolio. Yet technology has made communication much easier to not only initiate but to also ignore. Instead of focusing our efforts on how many planned giving packets were mailed out (vanity metric) or how many phone calls were made (outdated impact metric), perhaps we should focus instead on the number of legacy gift commitments we have received (modern impact metric).
By changing the core ways we think about the data collected, we can shift our attention to what actually will help us acquire, retain and grow our donor revenue.
Resource: Check out this essential guide on moves management.
4. Reflect on How We Communicate
One of the key pieces of data that directly relates to the donor retention crisis is the satisfaction that donors have with actually giving money. In his landmark research on donor loyalty, Dr. Adrian Sargeant found that only 10% of donors were very satisfied with the donation experience.
Many organizations struggle with being able to quickly and meaningfully thank donors for their gifts. As outlined by Roger Craver, the reality is that technology can only take us so far when it comes to automating certain elements of the donor stewardship process. Stewardship is where art and science converge, and every organization should be taking a hard look at how they thank their donors, in what ways they thank their donors and the language employed to thank their donors.
Shifting the focus toward celebrating both the successes of our organizations, as well as the donor’s role in creating that success, will be a key way that nonprofits can change the tenor of our communications around impact of gifts that do come in.
Resource: Check out this guide on donor communications at every lifecycle stage
Through these four ways of revising how we leverage the technology we have at our disposal, we should be able to put in place the foundation that will be necessary to turn the tide and grow our giving again.
Tim Sarrantonio oversees Neon One’s ecosystem of software, consultant, and institutional partners that can address any nonprofit need. Neon One provides best in class products with NeonCRM, Rallybound, CiviCore, Arts People, and an ecosystem ensures that over 27 product integrations and over 90 consultants are working to solve problems specific to nonprofits.