A dog’s life: Part 2 of 5

This is my second of five posts focusing on Frederick Reichheld’s book “The Loyalty Effect” and how the concept of “loyalty” effects for-profit and non-profit corporations equally. If you don’t own a copy of this book, I suggest you buy it, read it, and change your approach to doing business.

Yesterday’s post attempted to set the stage for deeper conversations around the importance of tracking, measuring and implementing loyalty strategies. Before we move forward, I am sharing this short passage from page 37 of the book:

“Imagine two companies, one with a customer retention rate of 95%, the other with a rate of 90%. The leak in the first firm’s customer bucket is 5% per year, and the second firm’s leak is twice as large, 10% per year. If both companies acquire new customers at the rate of 10% per year, the first will have a 5% net growth in customer inventory per year, while the other will have none. Over fourteen years, the first firm will double in size, but the second will have no real growth at all. Other things being equal, a 5-percentage-point advantage in customer retention translates into a growth advantage equal to a doubling of customer inventory every 14 years. An advantage of 10 percentage points accelerates the doubling to seven years.”

I share this passage from the book with you because oftentimes I find myself in a group of people nodding as we talk about LYBUNT rates (aka lapsed donor rates); however, seldom am I engaged in discussions about what does this REALLY mean. I read this small passage and suddenly I found myself involved in a deeper understanding of the entire problem of donor turnover. I hope you also had the same ah-ha moment.

Ask yourself this question: “Every time I talk or think about my organization’s resource development program, am I overcome by a feeling of exhaustion? Do I see volunteers having the same reaction?” If you answered ‘YES,” then you might be suffering from a donor loyalty issue that has squarely put your organization on the proverbial hamster wheel, which means you’re exerting lots of energy and only running in place (just like Reichheld described in the above passage).

What struck me hardest when reading this passage was that most non-profit organization’s experience turnover rates much higher than 5% or 10%.

As I did in yesterday’s blog, I will end today with a few links to additional donor loyalty resources: 1) “Building Donor Loyalty to Meet Your Your Long Term Fundraising Goals” Fund Raiser cyberzine and 2) “Top 9 Donor Loyalty Tweets” by Reinier Spruit who has blogging about Adrean Sargeant’s book “Essentials of Donor Loyalty“.

Here is to your health!

Erik Anderson
Owner, The Healthy Non-Profit LLC

About DonorDreams

Erik got his start working in the non-profit field immediately upon graduation with his masters degree in 1994. His non-profit management and fundraising experience numbers nearly 20 years. His teachable point of view around resource development is influenced by the work of Penelope Burk and those professionals subscribing to a "donor centered" paradigm. Donors have dreams and it is our responsibility to be dream-makers because donors are not ATMs.

Posted on May 31, 2011, in Uncategorized and tagged , , , , , . Bookmark the permalink. 1 Comment.

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