Nonprofits tend to get addicted to transactions they generate mostly by aiming marketing toward potential supporters with low-capacity.
I call it ‘spray and pray’ marketing and the strategy doesn’t work all that well since most of the funding for nonprofits comes from high-capacity major donors (including bequests). I know this to be true because I’ve studied the data from almost 5,000 organizations in my Fundraising Report Card (an app I invented for the sector about 18 months ago).
No kidding! For most of the organizations using the app, most of their funding comes from just 20% of the supporters. In fact, about 70% of the money comes from just .7% of the donors. You can see that clearly in our benchmarks (scroll down).
Yet it seems that most organizations spend their fundraising budgets on communications aimed at the 80% (low-capacity supporters) instead of the 20% (high-capacity supporters).
Then they get hooked on the transactional nature of their mass-produced, spray-and-pray communications. They spam their wonderful (albeit mostly low-dollar) supporters again and again. They pound them with direct mail. And they call and interrupt them at dinnertime.
Need more money? Just send out another mailer or e-blast! Never mind that retention rates stink. Never mind that donors are lapsing because they don’t find much value in the solicitations.
Assuming you want to raise more money from wealthy people, here’s the big takeaway from this blog post: Highly-considered decisions (big gifts) cannot be treated like transactions.
Nonprofit fundraising requires essentially a 2-step process that takes a long, long time. The first step is getting people into your ‘funnel’ (so to speak). It’s like a first date and it usually occurs thanks to a transaction such as a 5k walk registration, a small donation, or a request to sign-up for advocacy alerts.
However, more and more these days, the first step can be achieved thanks to engagement, not a transaction. In other words, you might inspire a potential supporter to simply like your page on Facebook, sign up for a newsletter, watch a video, download a report, use an app, play a game, or take a survey.
Then, once your potential major or legacy donor has leaned-in, the second step is where things get interesting, but only if it’s done right. However, unfortunately, most organizations never really approach the second step at all. They just keep doing the first step over and over again (mostly with solicitations, not engagement offers). They continue to treat the donor as if they enjoy solely making transactions when they really yearn for a relationship. And relationships require a lot of giving (from you, too!), not just asking and taking.
That means, after the first step, nonprofits need to give, give more, and give even more over a long period of time. Counterintuitive right? But necessary because the law of reciprocity is a powerful influencer. Therefore, nonprofits need to recognize that the second step is a courtship period. That’s the stage when the relationships have potential to grow so, eventually, major decisions will get made (especially among those with capacity to make impact).
What got you here won’t get you there.
This reminds me of a book about getting to the next level by Marshall Goldsmith. It’s titled What Got You Here Won’t Get You There: How Successful People Become Even More Successful. The key takeaway for fundraisers is that while gaining transactions might be a worthwhile framework at the very beginning of the relationship with any supporter, it’s a terrible structure afterwards.
Amazing major gifts are rarely, if ever, impulsive and they don’t happen in transactional settings. Instead, they are highly-considered decisions that take time to evolve and only result in transactions once donors feel they have a relationship with the organization and trust it to carry-out good deeds on their behalf.
So why do nonprofits get so hooked on transactions?
Simple: Because coin-operated, transactional fundraising is easier. All you have to do is sign another purchase order and watch the dollars come in. Sure, the quick hits might feel good to your staff, your leadership, and your board members. But like any addiction that is bad for you in the long-run, soon enough you feel like you need those transaction hits every single day.
And, in the end, your addiction to those transactions ends up becoming unpleasant for the people who care about your mission the most. After all, remember those people (your supporters) were actually seeking to build meaningful relationships with your cause. They weren’t seeking transactions in the first place.
You know it’s true.
Deep down most fundraisers in the sector know that transactional fundraising puts them on a road to nowhere. But, since many of them don’t really enjoy the rejection involved in direct contact with major donors and others have trouble imagining what it would be like to build sincere relationships with millionaires and billionaires, too many feel safer with arms-length, one-size-fits-all communications. Then, as the transactions occur, they get addicted. They get hooked!
They wipe their brows and exhale thinking, “Whew! We got some money in. Now, let’s get working on the next transaction/solicitation request!”
I don’t blame the fundraisers.
There are plenty of reasons why all this isn’t their fault. In order to raise major gifts, one must relate with wealthy people. And, in order to do that, you’ve got to set up meetings with them. But that’s no easy chore and most organizations hardly support their staff’s efforts to land appointments.
Meanwhile, the best face-to-face fundraisers aren’t very good at the role of appointment-setter because they detest the tedious and time-consuming nature of the appointment-setting process. Of course, that makes sense since the work isn’t very fun, especially when compared with conducting meetings. I ‘get’ it. Great fundraisers are like rock stars. They prefer to make their audiences feel good. They abhor the other stuff such as carrying gear to gigs, setting up the stage, and collecting tickets.
There are other things that get in the way. For instance, prospect researchers only identify prospects. They rarely (if ever) qualify them and prioritize them in caseloads. Then the gift officers reach out to them (and remember they hate this part of the job) only to get rejected. Ouch!
Then, leadership doesn’t see results fast enough and they become impatient. So what do they do? They demand another transactional marketing effort, right away!
You can break the cycle.
Here are three simple steps you and your leadership can take to break the addiction, unleash massive giving, and make all of your supporters happier.
1. Start with the end in mind.
Leaders need to accept the fact that the sole purpose for the existence of their transactional programs is to onramp, qualify and prioritize potential major and legacy donors so proper relationships can be built over time. That’s it!
All that spamming, junk mailing, interrupting and annoying should be done (if it’s done at all) with the understanding that it’s a means to an end. It should be done so you can determine who might want a more meaningful relationship with your cause.
Are you getting the point? The purpose of low-dollar, transactional fundraising is really to get people into your ‘funnel’ so you can build trust and learn how you should add value to each potential major donor’s life. In other words, transactional fundraising should only exist to help you initiate the migration process to more impactful giving. It should be used wisely to begin the relationships, not become the entirety of them.
With this end in mind, direct response teams or vendors should be rewarded for every donor they help migrate to major giving ranks. They should never fear losing donors to the major gifts team.
In fact, they should think of these new donors, attendees, subscribers, etc. as leads! Leads that need to be qualified and prioritized for major gift or legacy gift marketing (of fundraiser caseloads).
2. Search for the 80/20.
Once the entire organization buys-in to this kind of migration-minded approach, everyone will need to become hyper-focused on donor passion and capacity. It will become evident that only a small number of supporters truly have the right level of passion and capacity to inspire their desire to make massive impact. And, even fewer will want to have a deeper relationship with you, your staff and your mission at any given time. Therefore, your job is to find out who those people with passion and capacity are, why they care, how they’d like to give, how they want to be treated, and when.
3. Give them what they deserve.
Now, if you’ve started with the end in mind and focused on the 20 not the 80, you’ve got to learn how to give.
Fundraising is not about asking. Whoever said that the number one reason why people give is because they were asked is full of crap! The number one reason they give is because it feels good. Asking is actually a very small part of the consideration process.
Can you imagine saying the number one reason why people get married is because they were asked? Sounds stupid in that setting right? Well that’s because it’s a stupid idea in any setting. The next time you hear someone say that idiom, tell them I said they were idiotic.
People give because they want to find meaning in their lives. Your job is to help them. That requires giving to them in ways that align with their passions, needs, interests, and desires. And you can only discover if you have built a trustworthy relationship.
But that will never happen with a transactional mindset.
So recognize that your transactional communications should only be used to onramp new donors. Focus more on the 80-20. And, finally, adopt a giving mindset. Then you’ll change the lives of your donors forever as you shore up your organization’s future so it can continue making an impact for generations to come.
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