This is the third post in a 4-part series on “Why the Healthcare Sector Has to Focus on Major Gifts Now!”
In the midst of a global health crisis, it’s devastating that healthcare sector non-profits are doing a really poor job of retaining donors. I mean, the whole non-profit industry is only retaining about 41% of their donors. But the healthcare sector is somewhere in the 30-35% range.
And what about donor value retention?
Most non-profits don’t look at this metric. How do we define value retention? Quite simply, if you track the giving behavior of a group of donors (let’s say all donors giving $1,000+ cume) in one year, and then track the performance of those same donors in year two, you’ll see a tremendous number of donors who stop giving (donor attrition), but you’ll also see a great number of donors giving less (value attrition).
No one looks at this number. Leaders and managers focus on just donor retention rates, (although that doesn’t boost the outlook much, as donor retention rates are so low). Very few organizations have visibility into how many of their donors are giving less each year.
What Richard and I have found over and over is that typically non-profits lose 40-60% through donor value attrition, year over year. And non-profit leaders don’t even know it, because new donors are covering up the loss.
See this chart below:
View #1 is how most non-profit leaders evaluate a major gift program. And, on the surface, it looks pretty good. 21% growth! But you really need to evaluate it by using View #2. See what happened to the donors from Year 1 to 2. Almost 50% loss in value. It was the new $1,000+ donors in year 2 who helped bring growth to the overall program, masking the behavior of the donors from the prior year.
So, what happened to that group of donors from year 1 to 2?
Before I get into that, I want to point out that in the health sector, donor value attrition is even WORSE! It’s in the 60-80% range. Why? Because those donor files are filled with low-dollar acquired direct response donors and event donors. Those donors are notoriously poorly performing donors who don’t give past their initial gift and rarely give larger gifts in subsequent years.
So, why is value attrition so high? It’s because front-line fundraisers are not cultivating, stewarding, and caring for donors correctly.
It’s really that simple, yet it’s something that eludes most non-profits, especially health-related non-profits. And, speaking directly to all you health care non-profits, because you rely so heavily on direct-response, peer-to-peer, and events to bring in revenue, you’ve mostly neglected the mid and major donors in your file by not having a real mid and major gift program.
This is where the American Cancer Society (ACS) was three years ago. Back then, their value attrition rates were around 65%. Now, they are down to 40%. For them, that translates into millions of dollars that they have retained!
What did it take?
It was nothing groundbreaking. It was no new fundraising strategy. It was simply creating a disciplined, structured, and managed approach to the mid and major gift fundraising. We know it works because hundreds of non-profits that have adopted The Veritus Way of mid and major gift fundraising are all seeing reduced donor and donor value attrition and a ton more net revenue.
Let me give you a few strategies that ACS adopted:
- They are now working with qualified donors – not donors that met a major gift metric, but donors that actually want a relationship.
- The MLOs and MGO are learning what their donors’ passions and interests are and creating offers that match them.
- ACS has a revenue goal and plan for every donor.
- They have tiered their portfolios.
- ACS has solid management support for their fundraising team. Veritus has helped co-manage their mid and major gift officers by meeting with them weekly to make sure they have accountability and focus, ensuring the front-line fundraisers are equipped to succeed.
This is how you reduce donor and donor value attrition. And, when you do, your revenue skyrockets.
Other Blogs in the “Why the Healthcare Sector Has to Focus on Major Gifts Now!” Series:
- Healthcare Non-Profits Must Diversify Their Revenue Streams
- Moving Beyond an Events-Based Fundraising Model
- You’re Bleeding Donors and Dollars! (this post)
- You Need to Take Your Own Medicine