Today’s Podcast: The Importance of Donor Retention Hosted by Financing Solutions Stephen Halasnik. Financing Solutions is the leading provider of Lines of Credit to Nonprofits.

Today’s Guest Is Steven Shattuck

Steven Shattuck is the Chief Engagement Officer at Bloomerang, a leader in Donor Management Software. Steven is a prolific writer, and speaker, as it relates to donor retention. In Steven’s free time, he is actively involved in a ton of other nonprofits including his own nonprofit, Launch Cause, which is dedicated to helping emerging nonprofit organizations in the Indianapolis area enhance the impact of their work. Steven graduated with honors from Ball State University in 2006 with a degree in Telecommunications and Creative Writing. He resides in Indianapolis with his wife, son and daughter.

Steven will be talking about the importance of Donor Retention and the tools that are available to help nonprofits.

Podcast summary from Nonprofit MBA Podcast

The Disappearing Middle Tier of Nonprofit Donors

Stephen started the podcast by asking Shattuck if there was a trend, as mentioned by a recent podcast guest, where fewer donors are giving small amounts of money, advising fundraising to focus on the bigger donors. Shattuck by saying that data, such as data from Giving USA reports, does suggest that middle tier donors are decreasing. However, it has been the case that eighty-ninety percent of a nonprofit’s funding is going to come from only ten to twenty percent of its donors. The sector is now facing harder times though to get that ten to twenty percent of loyal long term donors who have the capacity or to get beyond their capacity give a large chunk of funding. Small donors or a handful of mid-level donors can’t really be relied on. Shattuck continued, it goes back to donor retention.

A nonprofit is usually not going to get a stranger to dop a million dollars in their lap. Usually, those giving big gifts, whether it is a planned gift or a contribution to a capital campaign, are people that have been giving to that nonprofit for several years before making a larger commitment. That is why Shattuck preaches the importance of retention. The stories of surprise large gifts are easy enough to make headlines, but not realistic enough for nonprofits to count on.

Stephen asked Shattuck key areas of focus for nonprofits in donor retention. Shattuck’s first point was recognizing that donor retention does take a focus and prioritizing it, including getting board involvement. Part of that is getting all to understand that when nonprofits are only retaining about forty-five percent of their donors year after year, it is troublesome on that nonprofit’s time and resources to replace half of their donors every year. There needs to be an organizational cultural decision to do something about it.

Shattuck mentioned that there was a lot of interesting research from people like Penelope Burke and Donor Voice, a think tank funding studies and surveys in terms of donor engagement and loyalty. A lot of it comes down to just a couple of concepts. Like one, thanking donors — quickly and personally. Not just sending out a template letter that every single donor gets regardless of the amount or how often. Part of this is phone calls and handwritten notes, something that really shows the donor that the nonprofit took some time to recognize them as the valuable donor they are. The other key thing is explaining to the donor the impact they are having on the mission they are donating to.

Fundraisers often communicate the impact but frame it in a way that the nonprofit itself is taking credit for it. With donor communications, however, it is best to turn that spotlight from the nonprofit to the donor instead. Shattuck gave an example, thanking Stephen for the donation, stating that because of him, they were able to feed so many people and put kids through college. He continued by saying that whatever those mission moments, impact statements are telling the donor those stories and not just waiting until the end of the year. He said it was important to tell those stories throughout the year. Many of the more successful nonprofits, and some that he donates to, do a great job of constantly communicating their successes. These are a couple of ways to up a nonprofit’s retention rates. He said the real work of fundraising , however begins after the gift.

Donor Stewardship — For All Levels of Donors

Stephen asked if the post ask fundraising was acknowledging the donor, telling them those stories, and getting to know the donor so that one can, when it comes time to ask for more money, contextualize that ask based on the kinds of things the donor is interested in and from the things the fundraiser has learned about the donor. Shattuck answered it was mostly the relationship-building component. They then started looking at what Bloomerang does, Shattuck’s current employer, from a big picture perspective and seemingly having it down to a science.

Shattuck commented that one thing he thought they did better than any other database product is to provide previous interactions, from volunteer involvement to board member to being an employee, etc, that the person might have had with the organization. They will store those interactions and also provide a thermometer with engagement monitoring, whether they’re colder, warm, really hot, or on fire. This insight is more than just a passive constituency list meant to help transition different donors and volunteers into the next appropriate levels. This allows Bloomerang customers to be really proactive and engaged with their supporters.

Stephen mentioned that, as a donor, he never gets phone calls. That it’s always emails, and maybe if he gave more it would warrant a call. Shattuck said that broke his heart to hear Stephen talk about his $5,000 gift like that. That for some organizations, $5,000 might not be much compared to their other gifts, depending on that organization’s major gift threshold versus a different organization’s threshold. And that $5,000 might mean a lot to the person writing the check. Shattuck voiced his opinion that so often some rely too much on what they consider a major gift to be organizationally versus what the donor can. He is not a big fan of segmenting thank you’s based on gift amounts. He believes that a $5 donor should get a thank you call if it’s their first gift. Especially because stats support spending time and effort on turning the first gift into a second gift.

A Phone Call Could Make all the Difference

Furthering this idea, Shattuck said, if he were running the development department, he would change the gift acknowledgment policies to call first-time donors and to create a “welcome system” to welcome them into the nonprofit’s family of donors. Then hopefully the organization can get to know them and gain insights to help move them to the second gift and then perhaps also volunteerism or monthly giving — something more long term.

Stephen and Shattuck then discussed the point that nonprofits typically put more value on big-dollar donors than new donors and perhaps for various reasons new donors rarely give capacity. They might be cautious because they are not so sure on the impact of their gift and testing the waters. So it’s more understandable if a nonprofit has large volumes of new donors with only enough time to make a couple calls a day. The larger donors might take more focus. However, if board members and volunteers are involved in the process, then it would become a worthwhile endeavor. The research shows there is nothing more important than thanking the donor in terms of getting them to give again.

Someone may be a millionaire, a middle-class person that has been saving all of their life and they don’t have anyone to leave their estate too and it would be a mistake to miss that person from assuming they were simply a smaller donor. There is a problem currently with culturally judging people. However there could be donors out there that could start off with a smaller amount, with the nonprofit not knowing they are capable of more.

Stephen also mentioned the fact that personally thanking takes time talking on the phone to donors and personnel. When he asked Shattuck if there are companies out there that donor calls could be outsourced to, Shattuck responded with probably. Shattuck said it was an interesting concept, and something comparable would be outsourcing the handwritten notes. With the digital age, Shattuck is starting to see the pendulum swing to analog methods. After getting bombarded with all the digital channels and asks, those analog methods — the phone calls and handwritten notes — stand out. These old school tools that organizations have always had are now almost a secret weapon because they are so rarely used.

Using volunteers and others involved with the nonprofit, non-employees, would be one way of outsourcing donor phone calls, Shattuck recommends, without losing the personal touch of that thank you method. Penelope Burke has particularly interesting research on board member phone calls and how they pay off much more than anyone else making a phone call. There are several other routes and those involved with the organization, like service recipients, to explore in order to make donor calls possible for organizations.

Using his experience at Xerox having to call customers as an example, Stephen said if he was an executive director of a nonprofit, he would make everyone call donors. Even if they had little experience with making those kinds of calls. He then transitioned to smaller nonprofits, those making less than five million dollars in revenue, asking Shattuck if he believed their culture was more driven to providing the services or raising money.

Shattuck explained that he thought it depended on the cause type they operated in and where their funding comes currently. For a majority grants and fee-for-service nonprofit and government funded, then yes they will probably be less likely to have a culture of fundraising and making donor calls. This is a more vicious cycle because it becomes harder for them to culturally make that shift and go out when there isn’t that big base of donors to start with. Shattuck typically sees larger nonprofits being worse at the donor thank you’s and personal touches. He sees the smaller nonprofits better at personal touches and telling stories because they are kind of living on the edge and have that smaller group of donors and know they have to hang on to those people because that could mean the difference between making payroll that month or not. If they do a good job and stick with it, then they are going to grow and have that culture and scale really well.

Where Software can Change your Culture

Using a personal example from Financing Solutions, Stephen explained how software can make a change for a company. People were filling out their forms online, but they weren’t getting back to them quick enough. And because Financing Solutions wasn’t getting back to them quick enough, they couldn’t get the potential client on the phone. Because they couldn’t get them on the phone, everything was getting backed up. When Stephen looked at the analysis, he found that the software they were using wasn’t really built for it. So he found a new company, Velocify, with a number one priority with making sure that the relationship manager got back to the client super quick and had a set schedule for followup. Financing Solutions made a huge jump in customer satisfaction and in results from changing to that software. Stephen said he could see where an executive director of nonprofit focused on the program services could get a donor management service and change the culture.

Shattuck agreed, saying absolutely. Excel cannot be used to accomplish the kinds of things he has been talking about. Like alerting the nonprofit when they have a new donor, causing red flags to call and engage with them. Shattuck said the database is first, but would add on things like a survey tool to ask current supporters, “how are we doing?”. That information from important questions is vital, rather than guessing. The third thing for Shattuck is wealth screening tools. To see capacity for those that are already in one’s database, and to see if they are currently giving at or below that capacity. This could influence potential future asks.

These tools don’t always perhaps get the kind of attention they deserve compared to emails and social media. Same with phone calls and handwritten notes. Things that worked a hundred years ago, still work now, and will continue.

Stephen continued conversation with two questions. If bloomerang had the built in tools for screening wealth and conducting the surveys. Shattuck answered that Bloomerang does indeed have built in tools for both. He said some people could piece together the work on their own, but it would take more work. This is why Bloomerang put the investment into tools like that for their clients. He commented that some of their clients live and die by these tools.

Being a big software guy, Stephen said he can see where the donor management software would be a necessary thing. He asked Shattuck at what level does it make sense for a nonprofit to get a donor database like Bloomerang. Shattuck explained that they give Bloomerang for free to clients making less than $100,000. They want people using the database so they can grow into that full database package. He said he doesn’t think there is too small of an organization to get out of the spreadsheets, that email programs are not a database, though they do need email marketing. There isn’t anyone that is too small to use a database product.

Stephen summarized with:

  1. Be aware about current donor retention strategy.
  2. Come up with an action plan for a strategy.
  3. Gather those stories from different employees that can be used to thank donors and put in a centralized location for the full team to draw from.