How Much Money Will You Waste This Year?

By Charlie Hulme
On January 16, 2014 At 2:00 pm

Category : acquisition, Best posts Q1 2014, Latest posts, loyalty, opinion, strategy

Responses : 4 Comments

2013 was full of negative press about wasteful charities. Much as we refute the claim the fact is we are wasteful; just not of the things we are accused of. waste not want not

Real waste is the money we spent on PR and strategists who had us cowering rather than robustly defending ourselves. How many potential donations have we wasted by obfuscating instead of standing up? Why did we accept the premise of the accusations and whimper rather than reject it and fight? When did we decide people were too stupid to understand it would take more than a £3 donation to save the world?

Real waste is the time we’ll spend reading/writing that same old blog about what we’ve learnt this year. Why don’t we look at what we could (should!) have learnt decades ago? Why are the masterful studies on relationship fundraising and loyalty by Ken Burnett and Adrian Sargeant, though widely known and acclaimed, fundamentally ignored? Are our retention figures so good that we can afford to ignore the issue for yet another year?

Real waste is throwing money at acquiring ‘donors’, around half of whom don’t stay long enough to cover the cost of their acquisition, when a 10% increase in loyalty could yield a 200% improvement in lifetime value.

Real waste is spending 10 times more acquiring a new donor than you’d spend to keep an existing one.

waste-not-want-notReal waste is trying to drive loyalty using tautological methodology.  Our sector is full of well paid educated professionals who believe a good pattern of past giving makes a good donor, because a good donor has a good pattern of giving! Their recency, frequency and monetary value definition of loyalty is all effect with no cause. The only strategy they’re left with is to pump out enough stuff through enough channels in the hope that enough people respond. Sophisticated charities that have redefined loyalty are seeing enormous improvement in lifetime value, yet far too many still cling to outdated, circular logic.

Real waste is focusing purely on ROI without looking at how these ‘donors’ will behave after we’ve recruited them. What’s the point of having an Excel sheet presenting a good initial ROI if the lifetime value is abysmal?

Real waste is the time and money we spend on tests that rarely beat the control. A successful retailer once said “…half the money I spend on advertising is wasted but I don’t know which half”. That may have been true when he said it, but it’s not today. There are empirical tools you can use to find out exactly what your donors respond to and what they don’t. There’s a lot of talk in our sector about the need to fail faster, but if we work smarter there’s really no need to fail at all.

Real waste is not knowing which of your offerings, or which of the experiences you create, help or harm commitment. images

Real waste is the relationships we lose through swapping lists. We call ourselves ‘relationship fundraisers’ then treat our donors as commodities to be traded rather than allies with a shared conviction. Not only is it bad manners it’s bad business. The moment you swop a donor their value to your organization drops by an average of 10-15%.  A typical reciprocal donor supports 11-12 charities; what chance does that give you of building a real relationship with them in the short term let alone the long? It’s awful to think how many potential legacy gifts we’ve wasted chasing that extra £3 a month.

Real waste is prioritising the short term (supposedly) urgent, over the long term important. All these issues are fixable but in our rush to bash out the next campaign (which inevitably compounds the problem) we’re too busy to fix them.

TRAGIC waste is the lives that will be lost each year it takes us to fix these issues.

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Charlie Hulme (28 blogs on 101fundraising)

Charlie is MD of Donor Voice. He helps charities uncover what, of all the things they do, cause relationship strength and what is harmful. Partners see a massive improvement in performance, value and retention. Voted top speaker at the Institute of Fundraising's National Convention in 2013, he writes frequently for SOFII, 101 Fundraising, the Institute of Fundraising and many others.


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Comments

  1. Couldn’t agree more. As Seth Godin says, organizations die slowly, then suddenly. Many of the organizations that practice the wastes you list are dying slowly. One day, they’ll simply go “poof” and their staff and leadership will actually wonder why!

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  3. Yeah you are absolutely right. Let us not waste money anymore!

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