The growth recipe: more, better and more diverse
At the Ifunds Customer Day, the central theme was data-driven fundraising. As a speaker, I took the opportunity to explain best-practice fundraising. One of my points was: growth occurs when you consistently combine three things: more donors, better quality, and from more diverse channels. Together, those three form the growth recipe for any fundraising programme: more, better and more diverse.
I am always somewhat surprised when there is no growth in the donor base and at the same time no internal alarm bells go off. Of course, people work hard and we’re all doing our very best, but the fact that we’re not growing often goes largely unnoticed.
So, more, better and more diverse is the recipe.
More
Every charity loses donors. Without acquisition you will eventually be left with no one. So you have to recruit new donors. And, let’s not make it more complicated than it is: if you want to grow, you have to recruit more donors than you lose. The loss is of course related to quality. I’ll come back to that in a moment. But the volume you recruit certainly does play a role in the net equation.
There are too many charities whose active donor base has been flat for years. Whereas if they were to recruit just a little more, and manage to maintain that volume year after year, they would start to grow.
Better
It is less immediately visible, but another area where you can make a big difference is quality. You can define quality as (1) a higher gift value so that a donor gives more in gross terms, (2) lower investments so that a donor gives more in net terms, and (3) higher retention so that donors stay longer and therefore give more over the total relationship across the years. In this blog, it’s about higher retention. But all three obviously have an impact on long-term ROI and LTV.
Major acquisition channels with low retention are currently contributing significantly to the absence of growth, but potentially they are a game-changer. Read that previous sentence again.
Because every percentage point of retention that we can improve in such a large acquisition channel has a huge impact on the long-term business case. Every conversation about those larger acquisition channels should therefore be exclusively about quality, quality and quality. More tips in this blog. Note: retention is also something you can steer. Don’t let it just happen to you; give it the attention it deserves. Not only once donors are already with you, but especially at the point of acquisition.
Improving by a few percentage points every year will eventually generate so much more income.
More diverse
Having a greater variety of acquisition channels has many advantages. What matters here is that the quality of your recruited donors almost automatically improves. This is because nine times out of ten, new channels deliver better retention than your existing acquisition channels. So diversification of your acquisition portfolio almost always leads to higher retention of your newly recruited donors.
Risk diversification is, of course, the other important aspect of a more diverse acquisition policy. Imagine: your most important channel disappears, is restricted, faces new laws and regulations, etc. What then? For many charities this would mean sheer panic. So as a sector we need to invest more in diversification. If I zoom out and look at the past 25 years, the overall acquisition business case has deteriorated considerably. Investments have increased and retention has decreased. But large-scale investments in new channels, staff or innovation remain on the back burner for the majority of charities. So there is work to be done.
The rules of the game
“More, better and more diverse” is not spectacular. The secret lies in a few simple rules of the game.
Work with pre-planned monthly targets per channel, and evaluate each monthly batch on all three of the quality indicators mentioned above.
Continue to follow these monthly batches over time to make the monthly retention pattern visible from every angle (for example: agency, type of acquisition, location, age group, value segment, fundraiser, etc.).
Constantly think about which new ways of acquisition you can test, which new propositions you can develop, which new target groups you can reach (not young people!), which new techniques you can use, etc. etc.
Plan several large and small tests each year.
If quality thresholds are met, scale up; if not, move on to the next idea to test. This way you prevent “more diverse” from becoming a hobby and make “better” the standard that “more” has to live up to.
Ultimately it is about finding the balance between quantity (volume) and quality (retention) in order to generate as much net income (profit) as possible for the organisation’s mission. So keep long-term (12–60 months) ROI, LTV and net income in mind as the main KPIs for evaluating your acquisition.
It is not a secret recipe. We more or less all know how it works. But often knowing and acting on it are too far apart. You have to plan growth. Do the maths yourself.
Plan your long-term growth on the basis of more, better and more diverse. And then you will grow.