Monday, December 4, 2006, at 12 noon, U.S. Eastern time

Many donors stop giving because they hate the way charities approach them for money -- or they don't feel they get enough information about how their money is used.

That is the conclusion of several researchers who have studied why people don't give. Among the most prominent researchers is Penelope Burk, author of Donor-Center Fund Raising: How to Hold on Your Donors and Raise Much More Money.

How have charities overcome this problem? What can fund raisers learn from new research findings? Is the loss of donors really caused by alienating fund-raising approaches -- or just the natural results of changes in demographics and the overall difficulty of reaching Americans through direct-marketing techniques?

Related Article

• The Vanishing Donor (11/23/2006)

The Guest

Penelope Burk founded Cygnus Applied Research, a fund-raising consulting firm that specializes in conducting research on fund raising and marketing

A transcript of the chat follows.

Holly Hall (Moderator):
    Greetings everyone: I'm Holly Hall, a features editor with The Chronicle of Philanthropy. I hope you'll join our discussion today with author, researcher, and consultant Penelope Burk, who has spent a lot of time looking at the increasing difficulty charities have in finding and keeping donors. We'll be taking your questions for the next hour--all you have to do is click the link on this page that says "ask a question." Penelope, welcome!

Penelope Burke:
    Thanks for inviting me to be part of this forum. I'm looking forward to taking your questions.

Question from Barbara Rabkin, Planned Parenthood:
    What's the Number One way to get and keep a donor, and what is the Number One way to make sure a prospect will never give or never give again?

Penelope Burk:
    According to donors themselves, the way to KEEP donors giving actively once they have been acquired is to provide them with: prompt, personalized acnowledgment that includes a statement of reassurance that the gift will be used as intended, followed sometime later by a report focused on the measurable results achieved through their previous giving.

There is no single best way to GET a donor in the first place. However, the more you know about the donors who currently support you (demographic, psychographic information), the more you can apply this knowledge when selecting a prospect pool. Contrary to the methods of many direct marketers, high-volume acquisition should not be the objective; acquiring the type of donor most likely to give again should be your preoccupation, even if it means a decline in acquisition volume.

There are two ways (sorry, it's not one) to ensure that a donor will not give again: 1. failing to provide him/her with meaningful information on the person's previous gift and/or 2. to over-solicit him/her.

Question from Shannon King, Pittsburgh Symphony:
    How much do you think technology plays a part in the decrease of donors, and should we be moving our focus to those areas?

Penelope Burk:
    It is my belief that technology itself is not responsible for the loss of donors, what we call donor attrition. Instead, short-sighted decision-making by people who use technology is at the root of the problem.

Technology has provided the means by which large numbers of prospects and donors can be solicited and controlled in a database.

Unfortunately, there exists a view in fund raising that the more donors you have, the more money you will make. Beyond a certain threshhold, this is simply not so. The direct-marketing industry has gravitated away from a "high quality/low volume" approach to fund raising in favor of a "low quality/high volume" system that produces short-term results. While technology has made it possible to go in this direction, fund raisers, CEOs and Boards are the ones making the decisions to opt for high volume over sustained profitability over the long term.

Question from Randall Vair, A Better Chance:
    My organization identifies and places academically-talented young people of color in prep schools and boarding schools across the country. We are 40+ years old and have a fairly substantial pool of alumni. Is there a rule of thumb or a good "guesstimit" on what percentage of our revenues should be covered by alumni contributions?

Penelope Burk:
    I'll refer you to: CASE (Council for Advancement and Support of Education) who might be able to provide you with information on the percentage of raised funds emanating from alumni. Also, US News and World Report which ranks universities annually includes several categories concerning alumni and fund raising, one of which is percentage of alumni who give. I would assume that the long-term objective would be to have an increasing percentage of raised funds come from alumni, as these are the donors with the potential for lifelong affiliation. Howevever, these other sources can provide up to date information.

Question from Bill Freeman, Adjunct Professor, George Mason University:
    I have a couple of questions about calling first time donors within 48 hours of receiving a gift: one is practical and one is theoretical.

First, on a practical level, it has been my experience that donors are unlikely to provide their phone number when making a first time gift, I know that I wouldn't. In the research cited in your article, did the organization only call those donors that provided their telephone number? The assumption here would be that not everyone provided their telephone number. If that is true, I am wondering if those that provided their number are a representative sample of the population. I would hypothesize that people who would provide their telephone number probably have a greater interest in either the cause of the organization than the average first time donor who did not. If this is true, then I don't believe the sample is representative of the population. What do you think?

Second, on a theoretical level, I have found that first time donors do not welcome phone calls from the charity they supported. As a development office and as executive director, I have personally been told not to call. I think a personalized thank you note might work better within the 48-hour timeframe. I would be interested in your thoughts here.

Penelope Burk:
    On your first question, for the research described in the article, staff looked up phone numbers of donors who got thank-you calls in cases where their numbers were not provided when they made their gift. The only donors eliminated from this group were those whose phone numbers were unlisted. Unfortunately, we did not differentiate in our test between donors who offered phone numbers and those whose numbers were added to the file before the call.

Your point about whether donors who freely offer their phone numbers are more supportive of the cause than those who don't is very interesting. It is definitely worth noting this on donor files. We haven't taken this into account to date, but definitely will do in the future. Thanks for the insightful observation.

Regarding your second question, we have found very little negative reaction from newly acquired or longer term donors who receive a personal thank-you call after making a gift. The key to success seems to be in the timeliness of the call and in having no agenda other than saying thank you. Calls that are not made for several weeks after gift receipt are less rewarding (because there is a perception that there may be a solicitation involved). Sometimes fund raisers and volunteers are reluctant to call for fear of a negative reaction or because they have had one or a small number of such experiences in the past. This is understandable, but I have never managed, observed, or even heard of a thank-you call test in which negative reactions from donors were in any way significant when compared with the number of donors who react positively. If you have experienced a statistically significant number of negative reactions from donors you have called, however, I would like to hear more.

Personalized thank-you notes are a hallmark of a donor-centered communication progrqam. Better thank-you letters also produce higher retention and gift values. It's not that letters are better than calls, however; both these important strategies should be used to strategic advantage in fund raising.

Holly Hall (Moderator):
    Hello, we just received a question from PBS about how to participate in the discussion. Simply click the "ask a question" link on the Live Discusson page.

Question from Karen, philanthropic organization:
    Thank you for examining certain fund-raising practices and debunking their effectiveness. The ad industry likes to talk about ads as ëcreating relationshipsí and ëbuilding meaningful connections,í which is how nonprofits might think about their communications with donors. That said, what do you think about the formulaic solicitation letter with its underlined stock phrases and pages filled with repetitive sing-song? (Not to mention the address labels, greeting cards, notepapers, etc., that are so often enclosed?)

Penelope Burk:
    I'm not in favor of the typical approach to copywriting in direct-marketing solicitations for the same reason that I'm not in favor of premiums like address labels. There is a short-term benefit (i.e., more donors respond initially to "dumbed-down" and repetitive copy or to appeals containing a token gift. However, their long-term retention patterns are not any better. Although we have only anecdotal information on this, we also find that donors give to premium-based solicitations out of guilt -- "They sent me these address labels with my name on them, so I'd better at least cover the cost." However, the feeling of obligation wears off and is replaced by resentment and/or concerns about the cost of these token-gift solicitations. Once again, it's a question of making decisions that serve the short-term need but may well be compromising long-term support for your cause.

You might consider running a long-term test of groups of donors acquired through one means or the other. Your observations of retention and gift value should extend to at least five subsequent appeals (perhaps more if you solicit donors prolifically in the course of a single year.)

Question from Paula Whitcomb, large nonprofit:
    How do you test what a good dollar "amount spread" choices should be on a reply card? For example, $5, $25, $100, $250, $____, or $5, $10, $20, $35, $50, $____...

Penelope Burk:
    Our donor-centered research determined that over 70% of donors say that the value of their first (acquisition) gift is considerably less than they could have made at that time. The main reason for this decision is "that's all you asked for"; the secondary reason is "not familiar enough yet with the charity to give more." As a first step, then, I suggest that you ask for considerably higher amounts from a small percentage of prospects to see whether you get comparable response rates while securing larger gifts. That will give you the information you need to adjust the spread in gift values on future solicitations. (You should always be testing alternative gift levels with every solicitation, by the way.)

Question from Graziella Macchetta, Villa I Tatti/Harvard University:
    Humanities research institutes are having a particular difficult time raising money during annual-fund campains. They are perceived as not relevant to the world of science and technology today. I cannot imagine a world where the humanities are not part of the education of future generations. Could you share your thoughts on this. Thank you, Graziella Macchetta

Penelope Burk:
    Two things may be worth contemplating:

1. Are annual-fund campaigns suitable for all organizations? Fund-raising methods tend to be uniform while nonprofits are unique. There is no rule that says you have to acquire and renew donors through typical approaches. I often wonder, for example, why a university would attempt to turn alumni into donors by sending them a direct-mail letter. Since they are already unusually well acquainted with the institution, wouldn't an impersonal mass solicitation letter be counter-productive?

2. The most coveted skill in fund raising is the ability to articulate a case in a compelling and original fashion. While organizations in the business of saving lives can expect more universal attention when raising money, those in the business of making lives worth saving are no less essential. Selling that intangible, though, is an art in itself. Hire for this skill as a priority and be open to having your ideas, philosophies, research premises, and internally-focused narratives stated in ways that work for marketing and fund raising.

Question from Fran Troxler, Lutheran World Relief:
    What is considered, by our industry standards today, a good, average and poor donor retention rate?

Penelope Burk:
    When I published "Donor-Centered Fundraising" in 2003, we were tracking retention rates at approximately 50% between acquisition and first renewal, and about 10% by the fifth renewal campaign (closer to 15% in alumni-based fundraising.) Today, however, we are seeing a steeper early decline in retained donors, with lost donors averaging closer to 65 percent between their first gift and the second ask. It is too early to see how this accelerated early decline will affect long-term retention figures across the industry. I would describe the current retention rates as "poor" for several reasons, but these are the two most important ones:

1. High attrition necessitates continuing high acquisition to make up for the early loss of donors. But sustaining a high level of acquisition is increasingly difficult and expensive for nonprofits and the quality of prospect names/lists diminishes as acquisition campaigns increase. Acquisition is more expensive than retention and often runs at a loss. This is absolutely fine if sufficient donors are retained long term; however, that is generally not the case.

2. Why donors stop giving is key in determining an "acceptable" rate of donor attrition. If the majority of donors were discontinuing their support for reasons unconnected with fund-raising methods, then the status quo would be acceptable. However, we generally find that more donors stop giving due to over-solicitation and lack of meaningful information about their gifts at work. As these are addressable fund-raising issues, one would have to conclude that donor attrition is at an unacceptable level.

Any upward growth in retention, regardless of how modest, should be seen as "good" because of the triple benefit of retention -- the next gift is secured, subsequent gifts add up and become more valuable, and the retained donor becomes, at some point, a viable prospect for major and planned gifts.

Question from Emily, Guilford College:
    In the article, The Vanishing Donor, there was mention of thanking donors personally. What is the best way to do this? Students calling and saying thank you? Personal notes on acknowledgement letters? A call from staff?

Penelope Burk:
    All the examples you mention in your question are positive and produce better results (higher repeat giving, more valuable contributions.) Donors see leadership volunteers as especially important and influential when it comes to loyalty and gift value, so if you can convince members of your board to call donors as well as staff, students, academics, etc., you will be even more successful.

Question from Alison Kaplan, The Childrens Aid Society, NYC:
    How much information is necessary to keep a donor informed - can an organization send out too much information, can too much communication drive donors away?

Penelope Burk:
    Yes, organizations can definitely over-communicate. The majority of donors in our national research study preferred a one-page bulletin to a multi-page newsletter. They, like us, are overwhelmed by a world of endless communication but little valuable information. We are finding a statistical correlation between increasing communication and decreasing absorption and retention of information transmitted.

An added thought -- with so many donors on Blackberrys now, even one page is too much. We're experimenting at Cygnus with translating a page of copy into 15 words. This is where communication is headed.

Holly Hall (Moderator):
    It's great to see so many good questions and comments coming in. We have another 30 minutes, so please continue submitting questions by clicking the link at the top of this page that says "ask a question."

Question from Michelle Stephens, human service agency:
    How do you define over-solicitation? How many appeals per year is too many?

Penelope Burk:
    This important question was posed directly to donors in two national studies. Quite insightfully, they said, "over-solicitation is not a frequency of asks in a set period of time; rather, it is being asked to give again before donors are satisfied about what happened with their last gift." In this context, some nonprofits might be under-soliciting. For those with a policy of asking once a year, but able to provide measurable results at, say, month seven, they should be prepared to ask for another gift very soon thereafter. However, the majority of charities are, according to donors, over-soliciting.

Question from Mark, Texas:
    I can remember my father voicing his frustration nightly when someone phoned during dinner to solicit him. That had a great impact on me and my beliefs about philanthropy and fund raising. Do you believe that tomorrow's donors are being similarly impacted by the "retreat" of their parents from various causes? And might that impact affect fund raising efforts thirty or forty years from now when the next generation has all the major giving potential? If so, what can be done today to avert such a crisis?

Penelope Burk:
    Although I would love to think that we could predict behavior of a 60 year old donor based on his opinions and actions when he is thirty, unfortunately we cannot. One's life situations change dramatically as people age. That said, many serious philanthropists in our research said they owed their commitment to giving to their parents who instilled a belief in "giving back" at a very young age.

We do see significant differences between the WWII generation of donors and their children (baby boomers) on issues such as patience (lots of it among older donors; very little within the next generation). This affects timeliness of acknowledgement, for instance, accuracy of information in files, among other things.

It is incumbent on the fund-raising industry to keep up with changes in behavior generation to generation, and adapt fund-raising methods to suit the times. We tend to be one generation behind.

Question from Regina Cialone, arts nonprofit:
    Greetings! I've noticed that among our members at the $150 level and higher we have great renewal rates, upwards of 70%. But for the donors who give the smaller amounts, say $25-$100, the rate is much lower (closer to 40%). Have you heard of any techniques other arts nonprofits have used to bump that number up and retain more lower level donors? Many Thanks!

Penelope Burk:
    Members and donors who make higher-valued gifts often received benefits for their generosity, such as a newsletter in which they can see the results of their gifts at work. However, donors giving more modestly seldom get this kind of communication because the cost would eliminate any profit in their gift.

It is challenging for nonprofits to think in ways other than cost-per-gift. However, our research has shown that retention is directly linked to the receipt of measurable results, so as long as we continue to communicate only with donors making more generous gifts and not with all donors, attrition rates will continue to be disproportionately high among donors making lower level gifts.

Once a donor makes a first gift, regardless of its value, he becomes an investor; investors seek return on investment. If you don't provide it, he will invest elsewhere next time.

Question from Kris, non-profit theatre:
    How can an small nonprofit recover from the "ship is sinking" year? Many small nonprofits make the mistake of announcing that the organization may not last much longer if contributions aren't immediately received. This obviously leaves the impression within the community that the organization is not on steady ground. What are your suggestions on how to change this public image after the fact?

Penelope Burk:
    If the ship is "no longer sinking" (i.e., the emergency-based appeal has successfully recovered your position), then informing donors about this turnaround is not only vital, but pragmatic. Tell them, in specific terms, about your improved position and that tangible progress in programs and services will be made with future contributions made by donors who stay loyal. Then, make sure you deliver on that promise.

It is always risky to use internal financial problems as a theme for an appeal. If you have done so and are still in a poor financial position, e-mail me again.

Question from Alice Simons, Mann Center for the Performing Arts:
    We have tried having board members call to thank donors before, but the general reaction is the donor thinks they are getting a solicitation call (we do not do telemarketing, by the way) and they are abrupt and don't want to talk. We find this attitude on the phone a lot, even if we are just calling to invite them to a free event. Is there something a volunteer or staff member can say right away to calm the donor's fear of a solicitation call?

Penelope Burk:
    First, the call needs to be made immediately, not weeks after the gift is received. Second, try this as an opening phrase:

"Hello, I'm (name), a VOLUNTEER (my emphasis) on the Board of (name of organization). I've just been informed that you have contributed to our organization for the first time (again), and I wanted to call you myself just to say how much we appreciate your support."

Do not ask the donor to do anything, like answer some survey questions, and do not be tempted to say anything that sounds like a lead into a sales pitch.

There will always be some donors who will misinterpret the purpose of your call. Hopefully, though, this will help.

Question from Jodi Wolin, Massachusetts Children's Trust Fund:
    After how many attempts do you stop trying to bring back a lapsed donor?

Penelope Burk:
    When we asked donor respondents why they stopped giving, the majority responses were "over-solicitation" and "lack of meaningful communication on gifts at work." Other reasons were related to issues not connected with real or perceived deficiencies of fund raising. So, if you could eliminate the negative fund-raising issues, your donor-retention rate would be likely to increase. Even a small increase in retention can have a big impact on dollars raised (see one of my previous responses). Donor-centered fund raising attempts to prioritize the things donors themselves say that they need, making them less likely to stop giving. In a donor-centered environment, therefore, donors who become lapsed do so for "acceptable" reasons (i.e., having nothing to do with fund raising). So, attempts to regenerate their support would not be a good investment on your part. Instead, use those saved resources for acquiring new donors or, even better, providing more of your current donors with what they need so your overall retention rate will rise even higher.

Question from Alice Simons, Mann Center for the Performing Arts:
    How can we pay more attention to our lower-level donors without spending too much money just to keep a $75 donor?

Penelope Burk:
    If you give your $75 donor what he needs, he won't be a $75 donor in the future.

Nonprofits in our research study were spending more of their budget on things that did not matter to donors than on things that did matter. So, if you are worried about spending more than you are now in order to maintain the support of donors currently giving modest gifts, then you can likely move money from less-productive areas of your fund-raising budget into meaningful communications and timely and meaningful acknowledgment. One example of where budget funds can be reduced is in formal donor recognition, particularly the publication of lists of donors' names.

Holly Hall (Moderator):
    Hello everyone: Our discussion time has come to an end, unfortunately. I want to thank Penelope Burk and all of you who asked so many thought-provoking questions. A transcript of this discussion will be posted on this page shortly. Meanwhile, if you have other questions about The Chronicle or suggestions for the editors, please e-mail us at editor@philanthropy.com