Thursday, March 31, 2011

Downgrading: where asking for less results in getting more

For years some of my colleagues and I have been banging on about the need to seriously consider actively downgrading regular, monthly donors.

Are you going mad, Jonathon?

Possibly, but not on this one. The rationale is simple. There are certain groups of regular givers for whom we know, statistically, they are likely to stop their ongoing giving. Their characteristics have predetermined that they'll fall out of love with us really quickly and hence cancel their gift.

I'm talking about 'younger' face to face recruited donors. By younger I'm talking under say 25 (may vary by client).

We look at data for F2F donors every day. Whenever we run the data through some geeky data modeling, its spits out the same result every time. Younger donors are more likely to stop their giving in the first 3 months than 'older donors'. There are other criteria that dictate attrition levels, like payment type and housing type, but hands down every time age is the most significant variable.

So for me its always been simple. If we know statistically that a group is likely to cancel, would we not be better off tackling this head on rather than sitting back waiting for the inevitable?

Well, I was incredibly excited a couple of weeks ago when a Canadian client shared they have been doing exactly this. And guess what, its working.

Of course, by working you need to ensure that the drop off in income from either doing nothing and the lower average gifts is offset by more supporters staying on board.

Let's do the math.

Scenario A. I have 1,000 donors giving me $20 a month ($240 a year). The data shows me that I'll likely lose (because of the make up of the data) 300 in the first 3 months. So my $240k in annual income is, in crass terms likely to be around $168k if we do nothing.

Situation B. What if we took the 300 "likely" cancellations (the "younger" ones identified above) and asked them to consider dropping down to $10 a month? Assume of those 300 two thirds of them say yes, the other 100 we can't reach of decide to cancel anyway. We now have 700 donors @ $20 per month and 200 donors @ $10 per month. That means my annual income is now $192k, a far better result than sitting on our hands and doing nothing.

There are a few things to consider here:

- Do it on the phone. Make sure the call is intended as a donor care one, not an administrative one. Thank, check in, share, acknowledge. Then discuss their giving level and how comfortable they are.

- Test the timing of this. Likely done best around month 1 after sign up, but play around with this. See what works for you.

- Just because someone may agree to lower their financial commitment, don't forget them. F2F recruited donors need to feel the love, albeit in a slightly different manner. They don't behave like donors from 'traditional' media. Long letters and dry newsletters are a waste of time. Punchy, shareable and relevant content all the way.

If you do this, let me know how you get on.

When asking for less means getting more. Sometimes direct response just doesn't make sense.

Jonathon

3 comments:

Lisa Hopkins said...

Really interesting stuff, Jonathon. We've done done welcome calling and the impact on attrition so far has been v positive. I'd suspect on the type of call that you're talking about there would be some who wouldn't downgrade but equally wouldn't cancel, as the act of contact in iself would be a reassurance. However would be I retested to hear how the following year or 2 went compared to usual - and whether attrition is being stemmed or delayed.

Excellent to hear about new phone ideas and results - more please!

Chuck English said...

I'd be really interested in knowing more about the calls that were made to monthly donors. There's an significant communications challenge in an organization asking donors to reduce their giving. While the call could be framed from a donor care perspective, there is the possibility that the collateral message is that the organization doesn't need he money that badly. Asking a donor "to consider dropping down" is different than asking whether she is comfortable with her current giving level. I love the fact that it is a proactive and data driven strategy. Just wondering how they met the communication challenge.

Jonathon Grapsas said...

Hi Guys

Thanks for your comments.

Lisa, spot on. The fact we reach out and make the contact/effort is in itself likely contributing to the bonding (like your welcome calls).

But of course, you may find some people self select themselves to actually upgrade (although thats not the focus).

And yes years 2, 3 and beyond will be critical to ensure long term is greater (caveat of course is just because you attempt this doesnt mean you take your eye off the ball and brilliant donor care as important as ever).

Chuck, I agree there is a challenge, but I don't believe the message is "We dont need the money", it should be "we just wanted to check you're comfortable with the amount you're giving."

Any sign of awkwardness or uncomfortableness then would be followed by a discussion of how we could make that more manageable for them, now. Perhaps even an offer to lower their gift for a set period, and then back to their original amount.

Cheers
Jonathon