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Donor Experience Why CRM Fundraising is broken and how to fix it.

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Overview The non-profit sector has grown rapidly if measured by the number of organizations. Alas, it is also shrinking by the more meaningful measure of private giving as a share of national income. On this score it is down 11% over the past decade.

A smaller pie and more mouths to feed is a recipe for disaster and yet, status quo thinking and activity dominate within organizations. The stagnant growth curve can be bent, but only with a willingness to do business very differently. But the all-important question remains ‘how?’

Fundraising “success” today is heavily predicated on using past transactional data – recency, frequency and monetary amount (RFM) - stored in a CRM. Every time a charity and a donor financially interact the charity updates the donor’s RFM history. Using basic segmenting or micro-segmentation (if external data has been appended) or in some cases, predictive analysis, the charity uncovers propensities of donors so they can be “nudged” towards optimal profitability.

Unfortunately, the Constituent Relationship Management promise has not been nearly as effective as promised. According to some estimates 50% to 70% of CRM initiatives fail to achieve their goals. Correspondingly, fundraising – which relies so heavily on a CRM and historical donor data – is stubbornly stalled. One could argue the weaknesses cited with CRM – namely very little “R” and not a lot of “C” either – apply equally to much of the fundraising done today. Consider these other parallels:

• CRM Fundraising is very good at receiving, but not very good at giving. Look no further than dreadful retention rates as proof. After all, if donors were getting what they came for when they walked in the front door, why do they leave so quickly out the back?

• CRM Fundraising asks donors to provide access and information without adequately telling them what they will get in

return. How often is gift impact and donor benefit talked about, but clearly (based on industry trends) not consistently or widely delivered?

• CRM Fundraising pigeonhole donors based on past actions without informing them how to build a more

advantageous profile. CRM and fundraising prompt donors to become more valuable to the charity without promising greater value from the organization.

• CRM Fundraising is fairly effective at measuring its successes but provide little information about its failures. We

faithfully record when donors respond positively to automated prompting and prodding but have no insight when donors do not respond in the predicted way.

• CRM Fundraising is therefore, unable to determine whether failures are the result of faulty assumptions, incorrect

information or poor execution. • CRM Fundraising is unable to tell how these “failed” interactions affect the donor relationship. It treats all failures as

the same and all failures as neutral, when in fact the equity in the relationship may have been weakened or undermined by a poorly executed communications, “engagement” or service encounter.

• The worst case scenario is the last interaction results in the donor’s decision, unbeknownst to the charity, to stop

giving. This critical failure – that the charity is oblivious too - will be met with 2 to 3 years of organizational spend against this donor (and all others like them) and a sea of red-ink on the balance sheet.

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Charities should discount the value of a donation if the experience to make it was

negative. Conversely, it should add a premium value designation

to a donation resulting from a positive experience.

The Alternative Consider this from a recent Agitator blog post, “Facebook recently announced they have begun referring to people as “people”, not “users”. And before Facebook weighed in Jack Dorsey, the creator of Twitter noted, “It’s time for our industry…to reconsider the word ‘user’. We speak about ‘user-centric design’, ‘user benefit’, ‘user experience’, active users’, and even ‘usernames.’ While the intent is to consider people first, the result is a massive abstraction away from the real problems people feel on a daily basis….They deserve our utmost respect, focus and service.” The charity that shrugs this off as soft and fuzzy rhetoric is destined to stay on the current path of low/no growth. This is because the change in mindset is far harder than cranking out another appeal per the Excel production schedule and ignoring, or otherwise not qualifying and understanding, the “failures”. It is about re-thinking how we should interact with donors armed with knowing what actually matters to them, and whether a given experience, communication, appeal or interaction was a failure or not. It is also about recognizing the need to discount the success of a donation if the experience to make it was negative. Or conversely applying a premium designation to a donation resulting from a positive experience. The hackneyed, buzzword phrase that embodies this is “donor experience management”. But, make no mistake. Buzzword or not “donor experience management” is the missing ingredient for growth in the charitable sector. Getting into the donor experience business means,

1) Every time a charity and donor interact, the donor learns something about the charity. But, do not mistake “learns” for dumping the kitchen sink of programmatic information on them. We are talking about donors learning something about the basic experience with you, the benefit they derive, the feeling they get, etc…

2) Depending upon what is learned from each experience; donors may alter their behavior in ways that affect their individual profitability.

3) Thus, by managing these experiences, charities can orchestrate more profitable relationships with their donors.

Donor experience management gathers and analyzes information on the interactions between charities and donors – at the individual donor level. This information is fed back to the charity in a self-calibrating system or set of processes that makes optimal use of every opportunity to influence donor behavior. Donor experience management examines both the quality of the charity’s execution and the efficacy of the result. It is far more than just the binary world of “donated“ or “not donated.” It focuses on the individual donor experience, revealing the impact of the experience on behavior and accordingly indicating opportunities for improvement or reinforcement.

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In Practical Terms What Does This Look Like? Consider the microcosm of the online donation experience. “Success” by fundraising and CRM standards is somebody hitting the final “donate” button resulting in updating the recency, frequency and monetary amount and all but assuring a wave of e-appeals and in all likelihood, a lot of direct mail for the next 24 to 36 months. The donor experience management approach assigns importance to the actual deed of making the online donation. This means the charity cares about evaluating how easy or hard the process was for the donor and if there is anything about the experience that could be improved. To get this information we go to the source: we ask the donor. This is done with a request for feedback (see Figure 1) on the website confirmation page and email confirmation. The questions asked are short and purposeful – e.g. did donors find what they were looking for, was the process easy or hard? And it also provides an open-end comment box. With the aid of inexpensive technology, some business rules, and a donor-centered mindset this individual donor‘s feedback can easily be responded to. First with an automated email that is responsive to the feedback (e.g. apologize if the giving experience was frustrating). And then with a second level of human follow-up based on automated, real-time case management reporting (click here to learn more). Strip away the technology aspect (which is important because it makes all this scalable) and we are left with a rather pedestrian and “unsexy” but highly human interaction-- a call from a donor service representative. Remember, the goal of experience management is to make optimal use of every opportunity to influence donor behavior. A person empowered to fix problems (however routine) or build on positive experiences in a time-sensitive and context-sensitive way will have a disproportionate, positive impact on future behavior. Based on our research and other data in the nonprofit sector there is significant financial upside to turning up the volume of activity on donor experience management with charity touchpoints and responding to the feedback from the increased volume of experiences using real, live people.

Figure 1

The average return on investment for resolving a problem or otherwise having a human interaction after a dissatisfying donor experience is 70%.

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If only the proper servicing of the donor experience were considered a “fundraising channel” equivalent to other activities like online or special appeals then organizations would surely be chasing this ROI. They would be doing so by increasing the volume of experiences and measuring them. In short they would be collecting more feedback across more touchpoints and staffing accordingly to insure high-value human follow up. More globally, the retention rate of supporters is highly correlated (figure 2) with the degree of complaint resolution. A charity stands to double its retention rate among those with complaints or unresolved issues simply by taking the collective finger off the “mute” button and giving serious attention to the donor experience. It is worth underscoring that most organizations need to redefine “service” in order to scale up this opportunity and get more donors providing more feedback. True “service” needs to be more than waiting for the phone to ring or the info@charity.org email inbox to fill up. To really get the benefit of donor experience management the charitable sector needs to proactively and consistently solicit feedback with the same fervor with which it solicits donations. The number of non-financial interactions (e.g. appeals received, web pages visited, donor service interactions, events attended, petitions signed) for any given donor will, in most cases, greatly outnumber the financial ones. By virtue of volume alone these non-financial transactions, which are ignored or unsophisticatedly lumped together in the CRM Fundraising world warrant serious attention. Any organization that claims a donor experience mindset and approach will make optimal use of every opportunity to influence donor behavior to assure it does not miss this immense opportunity. The benefits of Donor experience management and more specifically, the new data that results from applying it – feedback data – extend beyond the 1 to 1 follow up with donors. The data can and should be aggregated for point-in-time analysis to identify systemic negative issues or positive opportunities in the donor experience. This type of data provides what CRM Fundraising and “outcome-only” data of “clicks” and “visits” can never give you (no matter how much you torture it); an answer on the why of donor behavior. Nor can the usual approach to CRM data answer questions like this:

• Why do people click on one thing and not another, is it location, lack of interest, lack of understanding?

• Why do those who don’t click on anything behave that way? Did they still get value from it?

Figure 2

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• Why do visitors spend x amount of time on our site? Are they really engaged or does our navigation suck?

• Why is it that we only have one percent conversion rate? Only when the questions and answers focus on “why” (and by extension,” how to fix it”), can charities make smarter investments. For example, investment in the online giving process (see Figure 3) to change what is known to generate more positive experiences and increase the probability that the donor will give again. The notion that the donor experience can be strategically managed is consistent with the goal of increased loyalty and donor commitment. The longer donors stick around the more profitable they become. So why not take steps to eliminate experiences that drive them away and invest in scaling up those experiences that keep them coming back and back. Summary A fact-based, donor-directed approach to donor experience management assures the nonprofit of the ability to continually align charity performance with its donors’ needs and behaviors by making make small, day-to-day and donor by donor adjustments as well as organization-wide changes. CAVEAT: The benefits of donor experience management and its natural by- product – loyalty - do not occur simply because donors have more experiences with the charity over time. Quantity or frequency of contact is generally irrelevant and almost always misunderstood by the sector. To move up the loyalty/profit curve organizations need to offer the types of experiences that will strengthen relationships with donors, and influence donor behavior. Some experiences add little value to the relationship, others actually harm it. The proportion of experiences that positively influence a donor’s relationship and profitability may be small or large, and these experiences may be initiated by the donor or planned by the charity. Relying exclusively on CRM Fundraising makes everything planned, typically one-sided and reliant on incorrectly tallying “successes” while ignoring (fixable) failures. There is a better alternative.

Figure 3

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DonorVoice The Experience and Relationship Company

US Contacts: Kevin Schulman, Founder and Managing Partner

kschulman@thedonorvoice.com

Josh Whichard, Partner jwhichard@thedonorvoice.com

UK Contact:

Charlie Hulme, Managing Director chulme@thedonorvoice.com

Phone: 202-246-9649

www.thedonorvoice.com