A lasting impression

Charity Times

April 2008

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With the increasing focus on driving down fundraising costs, getting the relationship right with existing donors should be an obvious priority. Peter Davy asks how this can be best accomplished, and why many are failing to get it right.

Cancer Research UK is already the biggest fundraising charity in the UK. In its last financial year it raised £411 million from its supporters. Now it plans to grow again, increasing its spending on research from £315 million last year to £400 million by 2010.

Allowing for fundraising and other costs, that means a considerable jump in the charity’s net income. And that, says its executive director of fundraising and supporter marketing Richard Taylor, means increasing the value it gets from its existing supporters.

For CRUK this is an obvious choice. It faces a problem other charities probably wouldn’t mind: it already has about six million supporters on its databases. As Taylor points out, that limits the scope for recruitment. “If you’ve got as many as one in ten of the population supporting you at some point, increasing the number of givers is going to be increasingly difficult,” he says.

However, there are arguments for this approach in any charity, because the problem CRUK faces is shared to a greater or lesser extent by other fundraisers. As Joe Saxton at nfpSynergy explains, the costs of recruiting donors has increased in recent years, although this has been offset by increasing lifetime values.

However, that means that to remain profitable charities have to invest in promoting loyalty. “Otherwise you’re putting all your effort into opening the taps to pour donors into the bath without making sure the plug’s in,” as he puts it.

And building loyalty can really pay off. Adrian Sargeant, chair in fundraising at the Indiana University Center on Philanthropy in the US and professor of nonprofit marketing at Bristol Business School, says improving retention rates by as little as 10 per cent can increase the lifetime value of a fundraising database by anything between 150 and 200 per cent. The database grows faster; less money is needed to recruit new donors; and long-term donors are more likely to upgrade their giving, support emergency appeals, recommend friends or even leave a legacy.

“Even tiny improvements in loyalty make a big difference,” he remarks.

Of course, it’s not that simple. For a start, there’s an important distinction to be made between loyalty and retention. As Karen Rothwell, director of marketing at the RSPB, explains, charities tend to measure the latter because they can do so relatively easily and it makes a good proxy for loyalty. “But we shouldn’t forget that it is just a proxy,” she says. “You also need softer measures of how engaged and supportive your donors are.” Otherwise, she warns, you may just be measuring apathy.

Saxton agrees. Particularly when it comes to regular givers retention can be a poor indicator of loyalty. “Certainly it’s possible to carry on giving to an organisation without being loyal to it,” he says. “Someone can keep a direct debit in place for years and just forget about it.”

The problem with this is that a request to upgrade their giving can then be just as likely to prompt the donor to cancel their donation entirely. And, indeed, exit polling confirms that about 10 per cent of those who stop giving to charities do so because they have no memory of ever having started.

What this reflects is that charities by and large aren’t that good at building relationships with their donors. “Most charities pay lip service to how important it is to understand their supporters, but I think there’s a lot more said about it than done,” argues fundraising consultant John Grain.

In fact, they can even struggle to provide a basic level of service to supporters. Last month (March) Grain’s company published the results of a mystery shopping exercise that attempted to identify how well 25 development charities cultivated the relationship with donors in the first six months after an initial gift of £10 made by credit card.

The majority of the charities were well known names. The results were not encouraging.

Out of the 25, only 11 offered to send the donor further information about the charity to keep them up to date, and none offered any control over what the donor would receive. Even more worrying, 11 failed to ask about Gift Aid, 14 failed to even acknowledge the initial gift and three (including two big brands) failed to contact the donor at all.

“I fail to see how you can claim to be focussing on retention if you haven’t even said thank you,” Grain points out.

This is a real problem for charities because the quality of service they receive from the fundraising team is a key determinant of loyalty, according to Sargeant. “It’s not rocket science,” he says. “People who say they are very satisfied with the quality of service are proven to be much more loyal.” Despite this, very few charities regularly measure donor satisfaction.

Next steps

It has to be said that moving beyond this remains a challenge, though. A number of big charities, for instance, have already sought or are seeking to introduce CRM (customer relationship management) solutions similar to CRUK’s to improve their understanding of their donors and boost values. None so far have really cracked it, says Guy Harris, managing director at direct marketing specialist DMS. At least one major charity that started doing so a few years ago is still struggling to implement the original vision, he says.

Similarly, the attractions of gaining a single view of donors and amalgamating existing databases can belie the difficulties involved. “It’s a fantastic idea,” says Saxton. “It’s just an awful lot harder to achieve in practice.”

Too often charities imagine that amalgamating a number of old database “dinosaurs” will result in a new, single, nimble, “gazelle-like” result, he suggests. The reality can be somewhat different. “In fact you normally just end up with one even bigger dinosaur,” warns Saxton.

Still, it is worth persevering with such efforts – and not just because it will mean more money for charities from those on their books.

As Sargeant points out, the sector has increasingly relied on list swaps in recent years and a dwindling band of donors, albeit more generous, are responsible for its voluntary income. Long-term that doesn’t look entirely sustainable. “It’s not growing the charity pie,” he says. “What we need is a little more of the genuinely missionary stuff, bringing new supporters into the sector.”

The problem with that is that it’s expensive. With list swaps, charities may hope to break even on donor recruitment; if they’re after new donors, they can lose half of what they put in to it. With so much focus on keeping fundraising costs down, the only way this will be attractive to charities is if they can be confident those donors will provide decent lifetime value. In the long term, the key to gaining the next generation of donors may prove to be learning how to look after the ones the sector already has.

How it will work

The key to what Cancer Research UK dubs its supporter relationship management (SRM) programme is achieving a “single support view”.

“It will enable us to learn where they come from, why they support us, what their preferences are and what their motivations are,” says Taylor. “Getting those insights means we can track their journey with us more clearly and talk to them in ways that will deepen that relationship and keep them with us longer.” First, though, it means spending a lot of money on IT and consultants.

The charity currently has six different databases – one for legacies, one for direct marketing, another for community fundraising, events and so on. These are to be amalgamated into one.

Furthermore, the charity has also restructured to accommodate the new strategy. A central marketing department will replace separate functions found in each of the fundraising departments, and will ensure coherence in its campaigns and prevent the charity from competing against itself. Other central departments will deal with supporter relationship management, high value relationships, community fundraising and events, and strategic development.

“It’s about organising the charity around the supporter bases so we can plan more clearly,” explains Taylor.

Such an approach should serve the charity well, suggests Harris at DMS. Much of the reason for the failure of CRM programmes, he suggests, is that charities aren’t prepared to change the way they work to accommodate them. “Too many fail to appreciate that CRM isn’t just a piece of software,” he comments. “You have to organise your group around it as well.”

However, it’s not going to be easy, and it’s a major change for a charity of CRUK’s size. “It’s complex; it’s expensive; and it takes time,” says Taylor. “This is a long-term project.” Despite this, though, the results he hopes for mean the project would pay for itself within three years.

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