The State of Relationship Fundraising – A Conversation

By Giles Pegram
On April 13, 2015 At 2:00 pm

Category : Best posts Q2 2015, communication, donors, individuals, Latest posts, loyalty, strategy

Responses : 16 Comments

This is the first of two blogs looking comprehensively, and provocatively, at the state of relationship fundraising. In this first blog, we define relationship fundraising, and look at its implications, strengths and weaknesses. In the next blog, in ten day’s time, we look at the challenges faced by relationship fundraisers, the lessons we have learned, and what is the future for relationship fundraising.

So what is Relationship Fundraising?

First, it is a book written by the legendary Ken Burnett. Secondly, and derived from that, is a shorthand for a particular approach to fundraising.

Deal with the book first.

Relationship Fundraising has been a best seller for 23 years. It is an easy read, and if you haven’t read it, I urge you to do so.

And the approach?

Conventional fundraising positions the charity, the charity’s needs, and the scale of the work done by the charity, at the centre of its fundraising. Fundraisers encourage prospects to give, to support the charity, through a giving transaction. Results are measured appeal by appeal, using such tools as ‘response rates’, ‘average gift’, and ‘ROI’ as determinants of absolute and relative success.

Relationship fundraising, on the other hand, positions the donor at the centre of its fundraising. Fundraisers link the donor with the cause, through the charity. As a result, donors have a much better experience, and are therefore motivated to give again, and again. Results are measured by LTV, which is heavily influenced by loyalty, commitment, and satisfaction. Satisfaction becomes the key measure of performance, as it is the key driver of LTV under the influence of the fundraiser and the charity.image1

In short, relationship fundraising positions the donor’s relationship with the cause, through the charity, as central to success, rather than conventional short term transactional thinking.

The goal of relationship fundraising is to raise more money for the cause, and more money for charities as a whole. It is not an end in itself.

So how did you use this approach at NSPCC?

At NSPCC, we translated relationship fundraising into six Donor+ Principles:

  • Our passion will inspire donors
  • People give to help people, not organisations
  • Open their hearts, then open their minds, then open their wallets
  • Understand donors, and what motivates them to give
  • Donors are partners in doing our work
  • Donors are for life

We made a big song and dance. We inducted new people, and existing staff. We got to the point that most fundraisers could read off by heart the six principles. And the result was a lot of good work. People did change their behaviour. A Stewardship department was set up, whose manager was a member of the senior F-R team. So, for example:

  • People realised that fundraising was about donors, not about us.
  • So we realised that if we focussed on the needs of the donor, not the charity, then we would meet the needs of the charity.
  • ScreenHunter_01 Apr. 12 19.41We turned our thinking through 90°, from “Our charity is awesome. – We helped 100,000 children last year. Thank you for your help.”  to “You are awesome. You changed a child’s life last year. Would you like to change another child’s life today?” Effective fundraising is not about your excellence. It is about your donors, and what they can achieve through you.
  • We realised that fundraising was both a numbers driven science and a heart driven art.
  • We gave much more attention to the process and content of thanking and welcoming donors.
  • We also started to give much more attention to reporting back on what donors were achieving through their gifts.
  • We realised that complaints should not be delegated to a back office, or dealt with at minimal cost. They should be listened to, responded to (sometimes by phone by the Appeals Director), and treated as an opportunity to create a loyal supporter.
  • We knew donors were interested in how effective we are. But they can’t feel the work. They can’t touch it. The ‘ feel-good ‘ factor is what they get from our communications about the work. They look at the way they are treated by us; the fundraisers. Donor satisfaction is the best surrogate marker of how effective donors feel about our work.
  • We knew all this in principle, but we failed to assess with rigour what systemic, strategic, structural and operational changes, across departments within Fundraising, and across divisions within the Charity as a whole, should be made. We were at the forefront of charities adopting relationship fundraising. Ken Burnett would support that claim. But we were in the foothills. I realise now how much is left to be done.

You obviously feel strongly. What do you think are the strengths of relationship fundraising?

image3Relationship fundraising is valid because it maximises income from donors in the medium to long term, and therefore optimises the net income that can be used for charitable purposes.

  • Relationship fundraising is about long term income, not short term (see weaknesses).
  • It shifts the balance from acquisition towards retention.
  • Fundraising isn’t a simple process of asking for money, it is about transferring the importance of the cause to the donor.
  • It keeps donors for longer.
  • And it raises more money because of the emphasis on satisfaction, loyalty and LTV.
  • Evidence suggests that giving is inherently rewarding. The brain churns out a pleasurable response when we engage in it.
  • More findings suggest altruism and social relationships are intimately connected. We are hard-wired to “do unto others” in many ways.
  • Communications should always reinforce the donor’s decision to give.
  • Most important factor is how donors feel after the communication.
  • Giving should make the donor feel good, not bad.

Are there any weaknesses with relationship fundraising?

  • Relationship fundraising is about long term income, not short term (see strengths).
  • However, Trustees look at cash received on a monthly basis. They are not being convinced that they should be looking at long term income, via donor satisfaction. This creates a great tension in the mind of the Appeals Director, who wants to pursue a philosophy of relationship fundraising.image4
  • Too many charities think that they exist by right… And employ fundraisers to undertake activities to raise the income to meet this year’s budget.
  • There is no appetite for a fundamental change from monitoring short term results, to creating measures with both a five year time horizon, and a one year one.
  • Even amongst those that can persuade their Trustees, most fundraisers who say they are committed to relationship fundraising, don’t actually know what to do, strategically, structurally and operationally, to make that commitment real.

On 20th April, we will build on the above, and suggest practical ways in which you could transform your fundraising. We look at the challenges faced by relationship fundraisers, the lessons we have learned, and talk about the future for relationship fundraising.

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Giles Pegram (12 blogs on 101fundraising)

Giles is vice-chair of the Commission on the Donor Experience, an initiative aimed at transforming fundraising, to change the culture to a truly consistent donor-based approach to raising money. He is also a trustee of the Institute of Fundraising.


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Comments

  1. Dead on! I’;m looking forward to the next part of the conversation. And very interested in the metrics for relationship fundraising. In a field whose credibility is challenged, solid metrics for building long-term relationships may help turn the tide for Trustees and their support of an organization that invests in qualified staff to practice relationship fundraising.

     — Reply
    • I think this is vital. If we are to move our SMTs and Trustees away from just cash in the year, we need to identify the ” solid metrics for building long-term relationships ” to give Trustees a quantitative measure that they can judge our performance by. In my view, we haven’t created that yet. We must.

       — Reply
      • Thanks Giles – great article and I’m already thinking about how I can put this into practice for the smaller charities I work with.

        One deliberately obtuse question regarding metrics for building long-term relationships though – if doing this is so vital (which I’d agree with) then why haven’t we done it already and what on earth is stopping us from doing it right now?!

         — Reply
        • Hi Mike,

          Absolutely, I couldn’t agree more. I talk more about measurement in part 2, so why don’t we exchange thoughts after you have read that ?

          Best

          Giles

           — Reply
          • Hi Mike,

            I hope my second blog covered your question. http://101fr.org/1HKtBUJ In a sentence, I would say the biggest reason we haven’t done it so far is that relationship fundraising is a medium term philosophy, and yet CEOs and trustees look at annual budgets and monthly cash flows.

            Please read my latest blog http://101fr.org/1cKBflO and re-tweet if you like it.

            Best,

            Giles

             — 
  2. Oh how I enjoyed reading this blog post- I am shortly going to share it with the whole fundraising team in my office.

    As a big fan of Ken’s books ( I actually have Relationship Fundraising and Friends for Life, on my desk… oh and my favourite- The Zen of Fundraising) it was refreshing to read Giles’ opinions on Relationship Fundraising- because this is still so lacking in so many organisations!

    I believe there are some great charities, and fundraisers doing it well, but so many as still lacking in their donor service. I recently read Amazon.com’s values:

    Customer Obsession
    “Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers.” – I think the founders of Amazon could learn alot from Giles as he was so far ahead of his time- and is probably thinking of things we are yet to even dream of. (Who knows!?)

    My hope, as a dedicated fundraiser is that charities invest in their donor service. A really great ‘thank you’ is priceless, and had a brilliant impact on retention- I’ve seen this first hand.

    Thank you for sharing GIles… I await Part 2 with excitement!

     — Reply
    • Thank you Laura. I always value your feedback. Please re-tweet to your colleagues, so I get on the ‘ re-tweets ‘ list.

       — Reply
  3. Really great blog post! Can’t wait for the the 2nd part! Thanks so much!

     — Reply
    • Thank you. I hope the second part lives up to your expectations.

      Best,

      Giles

       — Reply
  4. Great great post. I can’t wait for the second part!

     — Reply
    • Thank you. I hope the second part lives up to your expectations.

      Best,

      Giles

       — Reply
  5. Your explaination of so-called “conventional” fundraising as something which doesn’t use LTV is simply false. LTV is a mathematical calculation based on response rate, average gift and frequency of contact. Those are the real numbers that make up an LTV equation.

    However, fuzzy, poorly defined and often misleading “measurements” like “commitment scores” , “satisfaction surveys” and the like are not components of an LTV equation. And just because your positive perception measurements go up, that does not make your LTV rise. This claim by so-called Relationship Fundrisers that they automatically make LTV rise by pursuing a vague strategy of “putting the donor at the centre of everything” is one big mathematical lie.

     — Reply
    • Hi Derek,

      Your statement that: ” LTV is a mathematical calculation based on response rate, average gift and frequency of contact. Those are the real numbers that make up an LTV equation.” leaves out the most important factor that needs to change, which is of course ‘ length of time as a donor ‘. The LT in LTV.

      That donor satisfaction is a key factor of LTV has been proved by academic study.

      Your other points are similar to those arguments put forward by the Flat Earth Society.

      It is good that there are naysayers like yourself, who help keep the rest of us on our toes.

      Best,

      Giles

       — Reply
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