A dog’s life: Part 5 of 5

This is the last 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.

So, we’ve talked about the economics of creating loyalty, the three cogs in the loyalty machine (customers, investors, and employees),  the benefits of creating loyalty, identifying and cultivating the right customers, investors and employees, and the importance of measurement systems with connectivity to incentives & org culture. Today, we will end this “loyalty series” with a brief (and incomplete) discussion about “how to build loyalty”.

Here just a few things Reichhold says in his final few chapters that hit me as important:

  • We need to keep circling back to the question of “how do we build value” for customers, investors and employees. Filtering everything we do through this lens should keep us on the path towards building loyalty.
  • When starting to develop a loyalty-based program, we shouldn’t start with “tactics” but rather we should think strategically. There is a time and place for developing operational tactics, but it is later in the change leadership process.
  • Loyalty leaders are guided by principles: 1) focus the organization’s mission around loyalty and not revenues & profit and 2) use partnerships to “align, motivate and manage”.
  • Loyalty leaders use other loyalty-based companies to benchmark against and learn from (e.g. State Farm, American Express, Northwestern Mutual, A. G. Edwards, Chic-fil-A, and Leo Burnett).

When wading through all of these concepts, two things stuck out: 1) non-profit leaders need to focus on creating “value” for donors and employees and 2) we need to better utilize the power of “partnerships”.

From a non-profit perspective, it is hard to know what “creates value” for donors because many of them are not receiving anything tangible in return for their contribution (special event donors are obviously an exception and so are some NPR pledge drive recipients). What one donor perceives as value might not be seen as valuable by someone else. This is where the idea of “partnership” comes into play and what Penelope Burk says about a donor-centered approach to fundraising. In other words, we need to engage our donors in answering the questions around “creating value” (note – she surveys tens of thousands of donors every year in search of this question). Here are a few ideas you might consider for your organization:

  • Annual in-person meetings with our Top 50 or Top 100 lifetime donors with frank and open discussions about what the non-profit organization can do to create value
  • Focus groups with diverse donor groups and even lapsed donors with frank and open discussions about what the non-profit organization can do to create value
  • Donor surveys getting at the idea of “donor satisfaction”

Of course, tactically speaking there are many different “loyalty tools” in our resource development tool chest (e.g. newsletters; e-blasts; stewardship receptions; programs; activities; volunteer opportunities; mission moments; etc). However, unless we understand what our employees, board volunteers, and donors “value” as part of their involvement with our organization, we cannot effectively employee these tools.

It essentially boils down to communication and follow-through on what you learn.

The other aspect of “partnership” that we haven’t really talked about for non-profit organizations is how to engage and connect customers, investors and employees (aka donors, board volunteers and employees) with each other. One easy way to do this is through any planning process (e.g. resource development plan, strategic plan, stewardship plan, etc). Remember — planning is a means and not an end. Or stated another way — planning is an “engagement activity” and a process that you employ with those you want to get involveddown the road in some capacity.

The idea of building a “loyalty-based” organization is complex. So much so, that Reichheld didn’t just write “The Loyalty Effect,” he also wrote a follow-up book titled “Loyalty Rules” and developed an interesting website with additional resources. My five-part blog series just scratches the surface of this topic. I encourage you to do a lot more reading and then circle back share what you’ve learned with the rest of us.

I’ll end on this note … making the transition from a transactional resource development program to a loyalty-based and donor-centered culture is not something that can be done overnight. It is a change initiative that probably will require you to engage external assistance to help you and all of your key stakeholders frame and guide the process. (That is my self-promotional message for this week. LOL Enjoy the weekend & I’ll see you again on Monday)

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 3, 2011, in Uncategorized and tagged , , , , , , , , . Bookmark the permalink. 1 Comment.

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