In some of our recent posts we’ve focused on the unique opportunities presented to open loop organizations in fundraising. As a reminder, these are organizations whose beneficiaries will likely never be donors. This week I want to zero in on closed loop organizations, the organizations whose beneficiaries will one day help fund future work.
So what is unique about closed loop organizations? Because they are supported by donors who have been impacted by the organization’s missional “impressions,” they have the opportunity to leverage those impressions to create a donor relationship. If and when they do, they avoid the cost of creating new impressions purely for the purpose of finding new donors.
Leveraging existing impressions makes closed loop donor acquisition far less expensive than open loop acquisition if impressions are leveraged well. Unfortunately, they rarely are, in my experience. The great benefit to closed loop fundraising is that the organization or institution doesn’t have to explain to the donor the value of the charity. They have experienced it firsthand. The great challenge is that their donor base is largely limited by the scope of their outreach—the number of beneficiaries they serve. So every impression is critical.
Here are two ways to develop an effective acquisition strategy in your closed loop organization.
1. Cultivate a culture of philanthropy.
Closed loop organizations must keep in mind that every interaction is a potential deposit into the bank account of a prospective future donor. The beneficiary may not have the capacity, inclination, or propensity to give at the moment they are being helped, but eventually they will.
So it is critical that those early impressions establish a strong desire in the beneficiary’s mind for a long-term relationship with institution. How can we encourage them to keep coming back, to resource the organization, to become part of our team, to volunteer when they can’t give, to learn more, to eventually give?
One approach is to think about how you can create a “culture of philanthropy”—a sense that the services the beneficiary is receiving are possible because of the generosity of a community of donors, great and small. “You stand on their shoulders, and someday, we would love to invite others to stand on your shoulders as part of this very special group of people.” In fact, the longer the period of time from being a beneficiary to becoming a donor, the more important the culture of philanthropy becomes.
For example, at higher education institutions, the culture takes shape the moment a prospective student first steps on campus for a tour, continues through their years on campus, and extends at and after graduation. Prospective students certainly aren’t asked for a gift on the tour! But they learn the opportunity to be part of the institution was made possible through donors who have effectively reduced tuition and expanded infrastructure so students don’t have to bear those costs. As well, the first impression is important to establishing a pattern of communication that will eventually create the culture we are talking about.
Current students might be encouraged to volunteer and make a small gift, according to their means, as a demonstration of their commitment to their class, a special project, a club, someone in need on campus, or some other institutional cause. The idea is to encourage the student to increasingly see themselves as part of a very special group, a community of people who have the honor of continuing the legacy of the institution they hold dear and that has had an impact on them. Giving as an alum becomes an extension of that commitment of support they first exhibited as a student, not an invitation to a brand new behavior.
Time and again, I’ve observed analytics that show donors who give two consecutive years are far more likely to continue that behavior. Getting students to give, while they are still in your care, dramatically increases the likelihood that they will make your institution a philanthropic priority after they have graduated. The same is true for other kinds of nonprofits. So find ways to make those initial gifts an easy decision.
2. Remember the process.
Like their open loop counterparts, most impressions fail to materialize in a new donor relationship because of a weak link in the chain of activities that lead from the initial missional impression to a gift. In fact, I’ve observed many closed loop organizations who have a sufficient number of impressions to drive their acquisition strategy. They just don’t leverage them well. The secret lies in appreciating that acquisition is usually not a one-step process. Multiple steps typically are required.
Each step in the process should include an invitation to take the next step. Impressions should invite me to exchange my contact information for something I value, to connect and move from anonymity to identity.
My contact information should never, ever be abused, but should include an invitation to a more personal level of engagement with your organization or institution. That engagement should invite me to volunteer my time or consider a gift. If I do choose to volunteer my time, that certainly creates an opportunity to invite volunteers to give.
Donor stewardship and cultivation should include invitations to make a sustaining commitment of support. But the reality of the acquisition process is often very different. My former colleague and dear friend, Buddy Williams, once equated a broken acquisition process to a neighbor who comes over to meet a new family that just moved onto the block. He knocks on the door and, when it’s opened, exclaims “Hello! Would you like to go on vacation with us?” It’s just wrong. Why don’t we just get to know each other first.
I recently heard about an organization doing direct mail acquisition in a way that produced phenomenal results. Their secret? They didn’t ask for a gift! Instead, they respected the acquisition process by offering a free subscription to their e-newsletter for three months. After three months, they asked for a gift of any size to continue the subscription. Response rates skyrocketed.
The best approach to closed loop acquisition is what we refer to as “relationship fundraising.” Invest in the relationship. Don’t become hyper-focused on any one transaction. That approach of developing a culture of philanthropy and investing in the long-term relationship will pay dividends in the future.
To learn more about the “relationship fundraising” approach, download the relationship fundraising pocket guide.