3 Ways to Personalize the Donor Experience
Donor engagement can be complicated. Direct mail, email, telemarketing and online solicitation channels are often managed by separate internal organizations and entirely different fundraising agencies. As a result, donors are engaged in multiple ways, frequently with different appeals and solicitation amounts. This fragmented donor communications experience is a pernicious problem in the nonprofit industry.
“Recipients of charitable solicitations often use defensive mechanisms to protect themselves from frequent solicitations,” according to a study published in the Journal of Interactive Marketing. “… Multiple solicitations to prospective donors may increase charitable contributions. However, excessive solicitations typically lead the donor to developing a greater repertoire of defenses against solicitations, decreasing the pool of available donors and lowering contributions over the long term.”
Sending solicitations through direct response channels without an effort to personalize communications damages the donor experience and consequently decreases donations. When donors feel like the nonprofit does not understand them or their motivations and financial circumstances, they feel less connected and are less likely to remain a contributor.
An ask that is too small fails to recognize the donor’s true potential, and it could also be seen as trivial or insulting. An ask that is too high could be intimidating or even offensive, and potentially damaging to the donor experience.
“You can’t treat loyal and responsive donors like statistics,” Mal Warwick wrote in a Stanford Social Innovation Review article. “... Your donor list will shrink through attrition and your income will slack off to a dribble.”
A Depersonalized Donor Experience Damages Donor Retention
Nonprofit organizations can only rely on discovering new donor prospects for so long. The costs associated with acquiring new donors are unsustainable for a successful long-term fundraising strategy. Nurturing the donors who already care about your mission is a more economic, effective, and sustainable way to raise money.
Some organizations turn to the recency, frequency and monetary value (RFM) methodology to make an effort at personalizing solicitations. This technique typically creates segments that are aligned with ask amounts starting with the most recent amount donated and increasing by a standard amount (e.g., 1.25 times) for each of the subsequent slots in the gift array. It does not dynamically estimate sentiment in real time, nor does it optimize the giving potential of each donor.
Behavioral Economics Modeling Creates Donor Personalization at Scale
A cohesive effort to utilize behavioral economics modeling (BEM) across internal teams and agencies increases giving, donor retention and donor advancement.
“Behavioral economics combines elements of economics and psychology to understand how and why people behave the way they do in the real world,” according to the University of Chicago.
Nonprofits can use BEM to deconstruct fundraising silos and provide a unified experience for each donor interacting with their direct response campaigns.
BEM uses a donor’s previous behavior to model how they will engage with an organization in the future. Using AI allows nonprofits to implement BEM at scale to personalize solicitations with real-time accuracy.
“The biggest benefit [of customizing your donor interactions] is that you get to humanize your work, build unique relationships based on reciprocity and turn your allies into ambassadors,” Howard Schiffer, founder and president of Vitamin Angels and member of Forbes Nonprofit Council, said. “... In turn, your supporters form a bond with your organization that leads to ongoing support that can weather many challenges.”
BEM can individually optimize every donor interaction in three distinct ways.
1. Personalized Ask Amounts
Historic methods of creating gift arrays are standardized across donor segments, rather than personalized to the individual precisely at the moment of solicitation. Even RFM modeling fails to create an optimal ask.
This undermines the donor experience and reduces donations by both number and amount. Asking a donor for too little fails to optimize their giving potential. Asking a donor for too much can create resentment or worse yet, disengagement.
Personalized gift arrays, on the other hand, sustain donor retention, improve giving levels and optimize the donor experience.
2. Solicitation Cadences
Asking the donor for the right amount is crucial, but it is also important to ask with the right frequency. Engaging the right donor at the right time is critical to effective relationship management and cost efficiency. Asking too often, just like asking for too much, is detrimental to the donor experience while asking too rarely misses valuable opportunities.
Applying BEM to the solicitation cadence, on the other hand, improves the donor experience by personalizing who nonprofits solicit and how often they communicate with contributors. When applied at scale, it also allows nonprofits to significantly reduce operating costs by as much as 10% to 30%, while sustaining giving levels.
3. Channels of Solicitation
An organization should not solicit donors through channels it doesn't actively use. Instead, it is crucial to understand where donors engage and meet them there. This shows that the organization understands what is important to the donor, and, correspondingly, it helps reinforce a positive donor experience.
Optimal Giving Improves Donor Experience, Retention and Lifetime Giving
BEM, activated by AI, offers the unique ability for nonprofits to personalize direct response fundraising at scale in an economically viable manner.
The goal of an optimized experience is to maximize a donor’s lifetime value, not the value of a single gift. This can be accomplished by determining the optimal level of giving, not the highest. Increasing lifetime giving is only effective if you have strong insight on donor sentiment, and personalization leads to more engaged donors who remain active for a longer period of time.
Donor personalization is a powerful force, one that is common in consumer marketing, and nonprofits must harness this capability to improve their donor relationships as well as their fundraising efficacy.
Michael Gorriarán the president of Arjuna Solutions, a provider of behavioral economic modeling artificial intelligence services. He is a globally experienced technology sector executive with an extensive 30-plus-year career at Microsoft, Xerox, and early-stage, high-growth business ventures. He has held executive leadership roles in advanced cloud services, enterprise software, business process outsourcing and professional services businesses.
Prior to his current role, Gorriarán was most recently general manager of worldwide commercial markets strategy group at Microsoft. He has either led, been chief operating officer, general manager or a key executive in businesses ranging from less than $10 million to more than $77 billion in annual revenues. His responsibilities have included developing and implementing new business strategies and financial models, executing turnarounds, and launching new lines of business and go-to-market plans to gain a sustainable competitive advantage around the world.
Gorriarán holds an MBA from the Kellogg School of Management at Northwestern University, and a bachelor of science in marketing, with concentrated studies in economics and Spanish, from The University of Rhode Island. He is an avid distance runner, outdoor enthusiast and active parent with his wife Kris of their two children.