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Keeping the Donors You Have
Retaining Loyalty with DRM
A customer service revolution is brewing. Hotels, credit card companies, restaurants, financial services companies, and even airlines are all changing the way they treat customers. Why? Because a satisfied customer is a loyal customer. Nonprofit organizations are also beginning to understand that. Remember, keeping current donors costs less than acquiring new ones.
Donor relationship management (DRM) is an excellent way to retain your nonprofitís donors. Letís explore donor-retention strategies and how DRM methods can aid these strategies.
Learning From the For-Profits
DRM might be referred to as relationship marketing. At its core, itís about establishing one-on-one relationships with your donors. You can enhance donor-retention by making loyalty more convenient. To implement this method:
These are just the basics, but one California marketing firm has expanded upon them. They identified six key strategies necessary to meet the challenges of DRM:
Tips for Effective DRM Use
DRM can be an effective tool for your nonprofit. But you must first learn how to use it. Here are some tips to consider when implementing your plan:
Have a profile of donors. Your DRM system can personalize its solicitation efforts by combining past giving history with external demographic, psychographic and behavioral information. By viewing a donor or prospective donorís complete picture, you can create targeted and more effective fundraising opportunities.
For example, one of the most profitable giving programs is the monthly sustainer ó those who give each month via check or credit card. By setting up a monthly sustainer program for donors likely to make an automatic monthly gift, you can dramatically reduce your cost-per-dollar-raised and increase retention.
Know your most profitable donors. The donor is always right ó but not every donor is right for your nonprofit. Without a complete profile of your donors, you run the risk of not knowing who is most important. Unlike commercial enterprises, nonprofits are often named in a donorís will or estate plan. While some donors give only small annual gifts, they may bequeath your nonprofit quite a bit more in their wills. In 1999, donors bequeathed almost $15 billion to charity.
Provide a varied product mix. All donors differ, as do their reasons for giving money to charity. The more you know about your donors, the better equipped you are to provide giving opportunities that suit their needs. Create a matrix of giving components that customizes a giving program for each donor.
For example, gifts of appreciated stock can easily be combined with charitable gift annuities to create a potent mix of capital gains tax relief, income tax savings and lifetime income for older donors with significant investment portfolios.
Get the most from your front-line
employees. The front line is the bottom line. Your key employees must have access to donor databases so they can build personal relationships with important donors. Every donor interaction provides an opportunity to learn more and encourage other giving opportunities.
Know your donor share. This refers to the percentage of a particular donorís lifetime charitable gifts to your nonprofit. Most nonprofits receive 90% of their gifts from 10% of their donors. Competing for a greater share of each current donor is far more profitable then finding new ones.
A DRM Success Story
Like most business theory, DRM probably isnít particularly impressive on paper. But, many nonprofits have benefited from implementing this program. For example, a large Washington, D.C. nonprofit was spending a great deal of time and money marketing its planned-giving program to anyone who requested information by direct mail. The cost to respond to these inquiries was well over $60,000 annually. Letís look at how this nonprofit used the four-step DRM process to increase top-line revenue.
This nonprofitís DRM results were dramatic. DRM increased not only their revenue, but also donor retention. Satisfied donors encouraged their friends to get involved.
Rise to the Challenge
Although the organizational and technological challenges associated with DRM can be daunting, nonprofits can launch a DRM program by putting their most valuable donors first. But the program must be instituted one step at a time. Fortunately, this process can generate significant early gains and ensure ongoing profitability. For help setting up a DRM program for your nonprofit, please contact us today.
(c)2001-06 Fraser CPA - Last Updated 05/01/2006