The Vanishing Donor

Aggressive fund-raising tactics increasingly alienate contributors

Karen L. Medicus made her first $25 gift to Greenpeace a few years ago, followed by another $50 six months later. Then she stopped giving — not because

her concern about the environment had lessened, but because she didn’t like the way the charity solicited her.

“They started bombarding me with direct mail,” says Ms. Medicus, who happens to be a fund raiser for the American Society for the Prevention of Cruelty to Animals, in Austin, Tex.

“It left a bad taste in my mouth, and I stopped donating,” she says. “I threw all the mail pieces in the trash without looking at them.”

Like Ms. Medicus, a majority of people who give once or twice to a nonprofit group never go on to become loyal donors. For example, last year 30 of the 60 big national charities examined in a major study won repeat gifts from less than a third of the donors they had recruited in 2004. The study was conducted by the Target Analysis Group, a Cambridge, Mass., consulting company.

And it is getting harder to hold on to new donors: The donor dropout rate “has really picked up speed in the last five years,” says Roger Craver, founder of Craver, Mathews, Smith & Company, an Arlington, Va., direct-marketing consulting company. “When I started in this business 30 years ago, donor retention was about 55 percent.”

Slow to Change

Fund raisers say that the growing number of charities competing for gifts makes it harder to retain donors, and that people now in their 40s and 50s are less responsive to direct mail and other mass solicitations than people in their parents’ generation.

But the biggest reason by far for the loss of donors is that many of them are just as angry as Ms. Medicus about the number of mailings they receive and other aggressive fund-raising tactics, experts say.

Even so, most charities that rely heavily on direct-mail and telephone appeals have been slow to change how they interact with new donors, says Penelope Burk, a Chicago fund-raising consultant and author of Donor-Centered Fundraising: How to Hold On to Your Donors and Raise Much More Money.

“It is difficult to transition out of the old system to a new one that is better for the times,” but the need for change is long overdue, says Ms. Burk, who has conducted in-depth research on 250 donors to determine what they want from charities and why they stop giving. Charities, she says, “are now in a state where the entire country is oversolicited and donors have hunkered down, looking for ways to get out from under these negative aspects of fund raising.”

Donors tell Ms. Burk and other researchers that they are asked for money too often, provided with only token acknowledgments of their gifts, and offered little meaningful information about how their money was used. Donors also complain that they are not given sufficient choices about how a charity communicates with them.

The result is what some marketing experts call “churn and burn,” an endless cycle of seeking new donors to replace the ones organizations have alienated.

But because less than 1 percent of recipients typically respond to mass appeals for a first gift, recruiting donors costs far more than it earns for charities. And, with fewer donors sticking around, charities are earning less in contributions from repeat donors, whose gifts over time far outweigh the cost of contacting them.

With the cost of postage and other expenses related to finding new donors escalating, some fund raisers have recently begun experimenting with new approaches to keep donors giving longer. Following are some ideas they say work, along with suggestions from marketing experts:

Regularly monitor what donors think. World Vision, the international relief organization, is one of a handful of charities that measure whether donors are satisfied with its work and how they are treated.

Every six months, an outside company conducts a telephone or mail survey with a sampling of the more than 600,000 individuals who contribute $30 to $35 each month to World Vision to sponsor a needy child in a developing country. Based on the results, the company comes up with a donor-satisfaction score for World Vision.

In addition to asking donors whether their interactions with World Vision have made them more aware of poverty and the charity’s mission, the pollsters ask people whether they agree or disagree with statements such as “I would like to hear back more about how my gift has helped” and “I would like to be able to choose how much communication I receive from World Vision.”

Armed with the results, World Vision has been able to provide more or fewer communications to donors, depending on their preferences, and it has used the results to make other changes.

For example, the charity used to send donors information just about the child they sponsor, but many donors said they also wanted information about conditions in the youngster’s village and his or her country. So, a few years ago, the charity started to regularly provide such information.

As a result of such changes, donors are giving for longer periods of time. A decade ago, the average sponsor gave for three years, says Atul Tandon, World Vision’s senior vice president for donor engagement. Now the average is five years, and World Vision’s donor satisfaction score is now 30 percent higher than when it first started polling donors.

Several consulting companies have recently created questionnaires, usually based on research about donors whose giving has lapsed, to help nonprofit groups measure donors’ feelings of satisfaction and commitment. The goal: helping charities predict which donors will become long-term supporters and make adjustments to increase donors’ loyalty.

Charities using mass solicitations have long conducted rigorous analyses of donor behavior — the percentage that make gifts in response to mailings, the size of average gifts, and how frequently they give, says Dirk Rinker, president of Campbell Rinker, a Valencia, Calif., marketing company.

What’s missing from the equation, he says, is an understanding of donors’ attitudes about whether a charity is meeting their needs. Examining donors’ behavior without also assessing attitudes, he adds, “is like playing tennis with the handle of the tennis racket, rather than the whole racket.”

Focus on donors, not money. In 2003, the University of Montreal’s annual fund was in trouble. Even with 21 paid employees who called alumni and other potential contributors to ask for up to $1,000, the university was losing annual-fund donors. Most of the 40,000 people on its list had not given for six years or more.

“We were having a lot of complaints from donors because the only time we reached them was to ask for money,” recalls Caroline Montana, director of the annual campaign. That approach, she says, was “sales driven,” with an emphasis on numerous calls and aggressive pitches for money.

Ms. Montana persuaded her boss to let her experiment with a new approach: using fewer callers and asking them to focus on meeting donors’ needs for information. She whittled her telemarketing staff down to just five employees and told callers to talk to people for as long as they wished.

Complaints have since dropped to zero, says Ms. Montana, and two donors who previously made only modest gifts each pledged $5,000 in the initial months of the new approach.

Under the old system, only 22 percent of donors reached on the phone renewed their gifts; with the new approach, 55 percent now do so. And among repeat donors who agree to a bigger gift, their donations are 50 percent higher, on average, up from an average increase of 12 percent with the old system. What’s more, the university used to have to call 90 percent of donors back to remind them to pay their pledges; now, only 5 percent require such calls.

“Our concept is that donors need us — what can we do for them? It is not just asking for money,” says Ms. Montana.

Respond swiftly to complaints. Most donors are willing to make a subsequent gift to a charity if a complaint they have about the group is resolved, researchers say.

For example, two British marketing researchers, Adrian Sargeant and Elaine Jay, have found that 94 percent of donors with complaints about a “minor problem” with a charity would be willing to give again if their complaint were resolved immediately. Among donors with a “major problem,” 82 percent would give again if the complaint were resolved promptly.

Donors who take the time to lodge a complaint are likely to be those who care the most about a cause with the potential for long-term giving, the researchers say. Less-committed donors with a problem often simply stop giving without making the reason clear.

Two years ago, Catholic Relief Services, which has nearly 500,000 donors, hired six employees who contact and establish relationships with direct-mail donors who, over time, have given $1,000 or more. One of their duties is to monitor any complaints the donors may have and respond. For example, if a donor complains about the volume of mail, the charity offers to reduce the number of mail appeals, send only acknowledgments of their contributions, or take the donor off its mailing list entirely.

“We do a follow-up mailing to confirm that we heard what they said,” says Jean Simmons, who heads the charity’s direct marking. The complaint level has since dropped from 2 percent among donors to 0.3 percent, she says.

Give donors choices. Some charities give new donors options about what type of information the charity will send them and how often the nonprofit group contacts them.

In 2004, CARE began sending its new donors a welcome brochure followed by another mailing: a postcard with a postage-paid tear-off reply panel that lets them determine how often they want to hear from the organization and what types of communications they prefer.

Donors can select from among several options, including “I don’t want telemarketers to contact me with urgent requests for help,” “I don’t want to receive any mail from CARE,” and “Please contact me only in times of crisis.” The postcard also states “CARE’s Pledge to You,” including “We will keep in touch with you according to your wishes and preferences.”

Giving donors choices is one reason that CARE is holding on to donors longer, officials say.

Currently, about 42 percent of donors make gifts annually, up from a low some years ago of 22 percent.

“If we follow through on their wishes, they create a longer-term relation with us,” says Erich Fasnacht, CARE’s director of direct marketing.

Provide meaningful information. The Boy Scouts’ Dan Beard Council, in Cincinnati, says more donors are willing to honor their pledges now that the organization lets donors know what their gifts are accomplishing. Before making the changes, scout officials say, donors, mostly the parents of scouts, had little understanding of the council’s operations because they interact only with the local scouting unit their child joins.

Two years ago, the council revised its thank-you letters to parents who make donations to the council and began sending them out within a week of receiving each gift, rather than waiting until the end of the month.

For parents who pledge a monthly gift to the council, fund raisers began adding an insert to the monthly mailings they receive, describing the council’s accomplishments in a particular area, like the number of scouts who attended summer camp or how many achieved the Eagle Scout status. Each insert includes a photo of the project described and ends with the statement: “Your investment in scouting supports programs like these.”

In addition, fund raisers also began inviting groups of parent donors each week to spend an evening at a Boy Scout camp and have a free steak dinner donated by a local restaurant. At the dinners, no one is asked for money.

“We had about 300 guests come out this summer to eat steak, take a tour, and see kids running around,” says Andy Swallow, director of development. “We get an amazing number of calls, just thanking us for inviting them even when they can’t come.”

Mr. Swallow says the amount of unpaid pledges has shrunk from 9 percent of all dollars pledged down to 3 percent in two years. And the council is raising $1.6-million annually, up from $1.4-million.

Reduce solicitations. Many direct-marketing experts argue that frequent appeals do raise more money — even if they also attract a lot of complaints. Some charities solicit their donors as often as once a month.

But other experts, like Ms. Burk, the consultant and author, say that approach is shortsighted and based on an emphasis on the dollars raised annually, rather than on developing long-term donors. Loyal donors, she says, cost far less to solicit because a higher percentage of them give in response to a mailing or other appeal.

“If you ask fund raisers if they want more donors or more money, most of them will say both,” she says. “But in fact there is an optimum number of donors, beyond which you start to make less and less because you are churning,” losing a high number of donors each year by not providing the information and other services that keep people giving year after year.

“If the success of direct-marketing operations were measured in terms of donor retention rather than volume,” Ms. Burk says, those practices “would change tomorrow.”

Ms. Burk says that she has worked with a handful of charities, showing them how they can earn just as much or more by reducing the number of solicitations. With one large national organization that was soliciting its donors every six weeks, she says, “we just finished proving that if they reduce solicitations down to four per year, they will increase their net revenue by 11.1 percent.”

Thank donors personally. Research has found that thanking donors personally promotes their commitment to a cause and increases the amount of money they subsequently give.

Ms. Burk conducted a study of 2,250 newly recruited donors who had responded to direct mail from an organization that serves people with disabilities. Of those donors, 220 received a telephone call from a board member within 48 hours after the charity got its first gift. Otherwise, all donors were treated exactly the same in terms of the number and timing of the subsequent solicitations they received.

Among donors who made a second gift, those who received the thank-you calls gave nearly 40 percent more on average than the others. And by the end of two years, 70 percent of the donors who got the calls were still contributing. Meanwhile, more than 80 percent of the other donors had quit giving.

Several charities now ask their employees or board members to make telephone calls to thank donors without asking for money, although few groups have tracked the results of such calls. Catholic Relief Services makes thank-you calls to all new donors, and, unlike most other charities, it also makes additional thank-you calls for every subsequent gift those donors make, as long as the contribution is $25 or more.

“This is very unusual in the field,” says Ms. Simmons, the head of direct marketing. “It is an investment.”