'Turn It Around, or You’re Fired'
Maybe you are a chief development officer who must report to your board that fundraising for the previous year was flat. Or worse, that it was down. Or maybe you’re new to your organization and were brought in to turn around declining revenue.
In these situations, the natural response is to look for ways to bring more donors or fundraisers into the fold. At the same time, there are now less resources available to devote to marketing. What’s your smartest move?
If you were selling goods or services instead of commitment to a cause, the answer would be obvious. You would take your precious marketing dollars and invest them in your current customers. In for-profit language, you would upsell them.
Upselling is a strategy to sell a more expensive version of a product that the customer already has (or is buying) or to add extra features or add-ons to that product. For many of us, the term brings to mind sleazy car salesmen trying to get us to buy an undercoating or paint sealant that is absolutely worthless. But when done properly, upselling brings for-profit companies closer to their customers, brings in more revenue, and results in better retention. The relationship gets “stickier” and more resilient with appropriate upselling.
Why is it smart to sell to your current customer base? In the end, it’s all about the return on investment. In their book, Marketing Metrics, the authors describe their research on the probability of selling this way:
- The probability of selling to a new prospect is 5 percent.
- The probability of selling to an existing customer is 60 percent.
That’s a pretty big difference. While many companies focus the majority of their efforts on getting new customers, there is a much bigger immediate opportunity in making existing customers happy and selling more to them.
As we all know, selling commitment to a nonprofit organization is different than selling cars, insurance policies or computer software. The numbers for soliciting support from new prospects versus existing constituents are bound to be different, right? Absolutely—the differences are even more extreme.
In a recent interview, Roger Craver, the author of “Retention Fundraising: The New Art and Science of Keeping Your Donors for Life,” says, “The average nonprofit has a 60 to 70 percent chance of obtaining additional contributions from existing donors; a 20 to 40 percent probability of securing a gift from a recently lapsed donor; but less than a two percent chance of receiving a gift from a prospect.”
Craver points to three reasons why our knee-jerk reaction to declining revenue is to throw more resources into acquisition:
- Because that’s what we’ve always done (and most everyone else does it too).
- Because acquisition is easier; we outsource it to our list broker and marketing consultant.
- Because if we don’t replace those we lose through attrition, we will wind up with nobody in the contact database.
The easy access of prospects via social media makes acquisition all the more enticing. Do you have a bunch of followers on Facebook? You can create “lookalike audiences” that are based on the characteristics of your existing Facebook contacts. Then cast a digital net to your supporters’ clones and wait to see how many new fish you get.
Spoiler alert: You won’t get many. Interestingly, however, research indicates that this type of digital outreach is effective with one type of person—those who are already highly connected to the cause. That’s how effective upselling is, sometimes it happens by accident.
Upselling is one piece of a bigger strategy. The for-profit world focuses on doing everything possible to increase their “customer lifetime value.” Chris Yeh, the VP of Marketing for PBWiki, shares an example of how Geico insurance did this when he called their customer service number for roadside assistance.
“After providing GEICO with my location and arranging to wait for the tow truck, the GEICO dispatcher told me, ‘From looking at your account, it looks like you’re now eligible for a big discount on our comprehensive coverage. Since you’re going to be waiting for the tow truck anyways, would you like to hear more?’
Fifteen minutes later, I had agreed to add $1 million in additional coverage for my car and home, at a cost of right around $100 per year.
I’ve been a GEICO customer for 16 years already, so it’s not much of a stretch to speculate that I might be a customer for another 20 years. That means that GEICO turned a costly customer service call into an incremental $2,000 in lifetime revenue.”
What is the most important thing that nonprofits can do to increase their “customer lifetime value?” Craver puts it this way, “Start treating donor service as a profit center, not a cost center.” For customers of Geico and other product companies, roughly half the reason an individual will stay or go to another doesn’t have anything to do with the product—the insurance policy, for example. It has to do with the level of service they receive.
The same holds true for your nonprofit. Half of the reason that you will retain your constituents has nothing to do with the product—your mission or the success of your organization. It will depend on how you interact with your customers—your supporters.
It all comes down to how you maintain relationships. Upselling isn’t just a sales tactic. When done right, it will deepen the sense of satisfaction that people feel by supporting your organization. And you can measure that satisfaction in your bottom line.
Katrina VanHuss and Otis Fulton have written a new book, Dollar Dash, on the psychology of peer-to-peer fundraising. Click here to download the first chapter, courtesy of NonProfit PRO!
Katrina VanHuss is the CEO of Turnkey, a U.S.-based strategy and execution firm for nonprofit fundraising campaigns. Katrina has been instilling passion in volunteer fundraisers since 1989 when she founded the company. Turnkey’s clients include most of the top thirty U.S. peer-to-peer campaigns — Susan G. Komen, the Cystic Fibrosis Foundation, the ALS Association, the Leukemia & Lymphoma Society, as well as some international organizations, like UNICEF.
Otis Fulton is a psychologist who joined Turnkey in 2013 as its consumer behavior expert. He works with clients to apply psychological principles to fundraising. He is a much-sought-after copywriter for nonprofit messaging. He has written campaigns for St. Jude’s Children’s Research Hospital, The March of Dimes, the USO and dozens of other organizations.
Now as a married couple, Katrina and Otis almost never stop talking about fundraising, volunteerism, and human decision-making – much to the chagrin of most dinner companions.
Katrina and Otis present regularly at clients’ national conferences, as well as at BBCon, NonProfit Pro P2P, Peer to Peer Forum, and others. They write a weekly column for NonProfit PRO and are the co-authors of the 2017 book, "Dollar Dash: The Behavioral Economics of Peer-to-Peer Fundraising." They live in Richmond, Virginia, USA.