Ditch the Donor Pyramid for the Loyalty Loop
The donor pyramid and donor funnel have long been the ultimate fundraising strategy. Though the nonprofit sector may desire a better method, these relied upon tactics are still used today.
But St. Elmo Lewis created the donor funnel in 1898 to help sell cash registers door to door, Andrew Davis shared at the NIO Summit last week.
“A lot has changed since 1898, but fundamentally we're using the same exact tool we've always used to build our strategies,” Davis said. I think we need something different. I think maybe it's time for a new model.”
M+R found that just 29% of one-time donors were retained last year, but Davis noted that, in the consumer world, the equivalent measurement is 70%.
“We have some work to do, and it's because consumer-packaged goods and consumer brands are really good at crafting great experiences,” he said. “All we have to do is stop telling people we make a difference and start showing them they make the difference by inspiring them.”
So, in place of pyramids and funnels, he recommends following the Loyalty Loop. Here’s a look at what that entails.
Loyalty Loop Explained
The loyalty loop is not linear, but a series of four interlocking loops. To explain the model, Davis walked through the car-buying process in his session, “Loyalty Loop — How Small Things Add Up to Big Business.” In this scenario, think of the buyer as the donor, and the car brands and dealerships as nonprofits.
1. Moment of Inspiration
The first loop represents the moment of inspiration. It might start when someone sorts through their mail. In Davis’ example, a letter from Nissan’s finance department arrived to remind him that his lease will expire in 30 days.
“30 days, he said. “We have to buy a car in 30 days? What kind of car am I going to buy? I don't know, maybe a Nissan?
The first thing that happened after reading the piece of mail was a moment of inspiration.
“A moment of inspiration is an instant in time that sends you on a journey you never expected,” Davis said. “And these happen to us all the time. Right there, I didn't expect that we'd be going on a journey to buy a car. I was just opening the mail. I forgot our lease is expiring, and now we have to buy a car in 30 days.”
For nonprofits, maybe that moment is an appeal explaining your cause or need; a postcard reminding the donor they haven’t donated in a while; a social media post from your friend participating in a peer-to-peer fundraiser for an upcoming charity race; or an email announcing the launch of a capital campaign.
Now, a moment of inspiration results in two other things — a trigger question and prime brand.
2. Trigger Question
The first thing to happen after a moment of inspiration is a trigger question, or the first question a person asks themself subconsciously as a result of a moment of inspiration
“In this case, we've just been sent on this journey and we're immediately subconsciously asking, ‘Oh my gosh, we have to buy a car in 30 days? What kind of car are we going to buy?’ My brain asks that question without me having to verbalize it. That happens every single time,” Davis said.
Your prospect or donor should be asking questions like,
- “How can I help feed families facing hunger?”
- “What can I do to address climate change?”
- “Where can I support the arts in my area?”
- “How can I assist this nonprofit to meet its campaign goal?”
3. Prime Brand
In the car example, Nissan is the prime brand, which serves as the answer to that question.
“Your brain does not like ambiguity,” Davis said. “Your brain wants an answer to every single question as fast as possible so it can move on to more important things. So what does your brain do? Your brain tries to answer that question.”
For a nonprofit looking to build a loyalty loop with donors, that prime brand is your organization. After you present your impact or ongoing need regarding an issue the recipient is passionate about, you’re now presenting your nonprofit as the organization that can help feed families, address climate change or support the arts.
4. Active Evaluation
In active evaluation, you’re thinking of other potential brands — or nonprofits — that you see throughout the normal course of your day, and then adding and subtracting them from your list of potential purchases based on various factors.
“And in active evaluation, you take lots of inputs, even very quickly, to determine what you're going to do next,” Davis said.
As the donor determines where they want to donate, this is where a multichannel marketing campaign can keep your organization top of mind.
5. Moment of Commitment
A moment of commitment occurs as soon as one trades money, data or time for information to buy a product or service, or support a cause. Davis decided to test drive the Audi Q3 by signing up for a VIP appointment.
“And the moment of commitment happens as soon as I hit that submit button, that donate button, that, yes, volunteer button,” he said. “That is a moment of commitment. And after the moment of commitment, we are now part of their universe. And this is the most important part of the entire journey.”
Reinspire Donors to Create the Next Loyalty Loop
The loyalty loop is not a singular loop. Instead, it’s a series of micro encounters that leave major impressions. Donors should continue to be inspired and committed to the cause.
“It's more like a slinky,” Davis said. “It's like this — at the top, you have a moment of commitment. They just donated or they just signed up for something, they just volunteered, and you need to create another moment of inspiration.”
For Davis in his car-buying purchase, he submitted an appointment request form to Nissan and received an automatically triggered email with a very templated message.
“No, that is not a great loyalty loop experience,” he said. “It has to make me feel something. We need to craft our loyalty loops. Because the truth is, we don't raise money or solicit donors. We deliver an altruistic experience. That's what we are giving for the donation they are giving.”
Based on her opinion of a friend’s car, Davis’ wife recommended they also consider a Mercedes-Benz GLE 350. This resulted in a different experience.
“I get a really nice email in my loyalty loop from a guy named Bruce,” Davis said. “Bruce says, ‘Hey I just washed and vacuumed a beautiful black Mercedes GLE 350. I've got it waiting for you. Can't wait to see you tomorrow.’ That's raising anticipation.”
Davis doesn’t think anyone raises anticipation better than the pizza chain, Domino’s, though he noted it’s not about the pizza. It’s about raising anticipation with the order tracker that shows who is making your order, putting it in the oven and even delivering it to your destination.
What [Domino’s] did was they took a task, like a chore, into an experience,” Davis said. “So we need to do the same thing. We need to raise anticipation for the next step in our donor's experience. We need to ask ourselves, what's our pizza tracker?”
An example in the nonprofit sector could be a recognition wall.
“If I donated, and yes, you sent me an automated thank-you note, but a few hours later, you sent me a little thing that said, ‘Andrew donated,’ and you put it up on your wall in your office — I would share that picture with others.”
Maximize Honeymoon Phase
After his wife decided to not join him for the Mercedes-Benz test drive, Davis was nervous, noting his first rule is to never separate at a car dealership. After he returned from the test drive, Bruce helped him find his wife in the nail salon at the dealership, which offers a free manicure every time someone brings in their car to be serviced. Davis pointed out to his wife that she has never taken the car to be serviced once in the past 17 years.
“And she says, ‘I will now,’” Davis said. “Today, we drive the most well-serviced Mercedes-Benz in the world.”
Another example of a great honeymoon phase is from Rent the Runway, an online dress rental service, Davis said. He compared online reviews for the same dresses for retailer Nordstrom versus Rent the Runway and noticed one big difference — the emotion in the review.
On Nordstrom’s site, reviews tend to happen before the buyer wore it, so they are focused specifically on the dress, whereas Rent the Runway reviews have emotion, which leads to action, in what the brand calls the #AfterPartyGlowMoment.
“Rent the Runway knows one thing that Nordstrom doesn't,” Davis said. “They know exactly when you're gonna wear the gown.”
Therefore, Rent the Runway reviews capture how the customer feels in the dress by emailing customers for the review the day after the special occasion, hoping they received compliments wearing their dress and asking them to upload a photo from their big event. This logic also translates to your donor relationships.
“So maybe it's not just when [they] donate, it's when their donation is actually put to work,” Davis said. “Maybe that's our warm-glow moment. It's this moment where we feel something. Now the average donor online feels good for 20 minutes, but if you can get them to reflect on their charitable acts, it can actually make them feel good for 10 more minutes.”
Related story: R.I.P. Donor Pyramid?