A dog’s life: Part 3 of 5

This is my third 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.

Reichheld spends more than half of his book making the case for business leaders to understand the true costs of not understanding and incentivizing loyalty. Throughout the book he mathematically proves that:

  • Increasing customer, employee & investor loyalty results in a company spending less on customer acquisition in the long-term
  • Increasing customer, employee & investor loyalty results in increased profits
  • Increasing customer, employee & investor loyalty results in decreasing costs for the company
  • Increasing customer, employee & investor  loyalty results in more referrals and a self-perpetuating cycle of loyalty

After looking at these conclusions through a non-profit lens, I’ve come to the conclusion they are equally true for non-profit organizations. After all, how many times has one of your most loyal donors brought their friends to a special event fundraiser or hosted a cultivation or stewardship event for you?

I also found it interesting that Reichheld spends three chapters discussing the importance of finding and acquiring the “RIGHT” customers, employees & investors. While I understand how this applies to hiring non-profit employees, I had a problem wrapping my head around how it might apply to donors … until I remembered the Rubber Duck Race raffle/fundraiser I used to run every year.

In my six years of running that fundraiser, we built a donor database from a small handful of loyal donors to more than 12,000 donor records. While many of those donors enjoyed purchasing their $5.00 duck adoption for a chance to win a new car, I had a terribly difficult time getting many duck donors to cross over into my annual campaign or other resource development activities.

I also wonder what National Public Radio (NPR) fundraising professionals experience when they incentivize donors with premium giveaways. I suspect Reichheld would say that those who donate in spite of the giveaways would be the “RIGHT” kind of donors and those who contribute in order to get their names entered into a drawing for a new iPad cost you more money to retain in the long-term.

In the end, it becomes very clear to me that building a resource development program with “donor loyalty” at its heart requires a plan that invests (both time and money) heavily in:

  • donor identification & prospecting
  • prospect cultivation
  • donor stewardship

As I did in yesterday’s blog, I will end today with one more link to additional donor loyalty resources from the nice people at studyfundraising.info who posted “Donor Retention and Loyalty“. There is a great bibliography for those of you looking for good reading!

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 June 1, 2011, in Uncategorized and tagged , , , , , , . Bookmark the permalink. 1 Comment.

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