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Yes, the Donor Pyramid is Really Dead: An Open Response to Andrea Kihlstedt

[I am responding to Andrea Kihlstedt’s Open Letter to me, Is The Donor Pyramid Really Dead, posted in the GuideStar blog June 25th. She was responding to my recent posts on the death of the Donor Pyramid in Fundraising Success Magazine: R.I.P. Donor Pyramid? and Maximize Social Business Blog How Social Media Toppled the Donor Pyramid – What that Means for Nonprofits.]

First, let me say this is a great dialogue to be having. The donor pyramid is a sacred dinosaur, and it’s good to challenge old assumptions from time to time. After all, the dinosaurs had a very good run, but even they became extinct.

Andrea says “no, the pyramid is alive and well,” making the case that (especially in capital campaigns) not all donors are equal. She also finds use for the pyramid in other campaigns, noting a Kickstarter campaign she recently worked on in which the biggest gifts came from donors who were approached face-to-face rather than via online strategies.

In many ways Andrea and I agree. Major gift fundraising is extraordinarily important. I see no end to the trend of smaller numbers of donors giving larger gifts to fewer nonprofits. The Pareto Rule (80/20) is alive and well. Organizations will definitely want to deploy the lion’s share of their resources where they’ll get the biggest bang for their buck.

What do you want to build to get bang for your buck?

It may be time to revisit your definition of ROI. Is it purely based on cash (net income after expenses), or should it also be based on influence (a net return on the time and energy you invest in persuading folks to become influencers and advocates on your behalf). The latter might be characterized as a return on engagement (ROE).

The fact that nonprofits should be investing in strategies to develop major gift supporters does not mean that the best place to stuff those prospects is into the old donor pyramid. Nor does it mean that the only type of major gift is a cash donation. What about the gift of influence or advocacy? What about the $100 donor who is able to persuade 100 other donors to match their gift? Certainly that person is equally valuable, if not more valuable, to your organization than a single $10,000 donor. Yet that supporter would not even show up as someone worth cultivating were s/he to end up stuffed into a pyramid model. They’d be at the bottom.

I haven’t seen a real pyramid in a long time. Many organizations have a bunch of donors at the bottom, another bunch at the top, and none in the middle. An hourglass. Others have a smattering of small and major donors, and a huge compliment of mid-level donors. A beach ball. Some even have mostly major donors and very few supporters at low and mid-levels. An inverted pyramid.

Is this bad? Not necessarily. The pyramid model presumes it’s ideal to have a bunch of small donors as your foundation. But research is showing us that most nonprofits are losing these donors practically as fast as they can acquire them. A recent study by AFP and The Urban Institute reviewed millions of records in thousands of databases, finding that average donor retention was 39%. So, yes, attrition was 61%. Research from Adrian Sargeant and Penelope Burk reveals the situation to be even worse, showing nonprofits to be losing up to 70% of their donors before they ever move up the ladder. And it seems to be getting slightly worse every year.

So something nonprofits are doing isn’t working.

It’s harder and harder to build a pyramid these days.

How’s it working for you? Are you assiduously working the pyramid along traditional lines – targeting acquisition of massive amounts of new donors at lower levels; then steadily renewing as many as you can… renewing them again… upgrading them… stewarding them… warming them up to a major gift or capital campaign ask… and then ultimately reaping the reward of a legacy gift? If so, are you winding up with a pyramid (or an hourglass, beach ball or inverted pyramid) on your hands?

Or perhaps you’re doing as Andrea suggests, and are bringing folks into your pyramid at multiple levels. Andrea likes the pyramid image because, if nothing else, it reminds you to focus your attention on larger gifts. Your donors may not “climb” to the top; they start there because you’ve seen the value of instituting a major gifts fundraising program. Okay, swell. But if that’s the case, do you really need the pyramid image to remind you to focus your attention on larger gifts? Honestly, I can’t imagine why. Because the pyramid model presumes a steady march to the top as the pathway to donor engagement and investment.

The path to donor loyalty is changing.

It’s not going to come from forcing folks to climb a ladder or pyramid. It’s going to come from meeting folks where they are. So rather than fight what you’ve got, why not evaluate your areas of strength and do what you can to capitalize on those?

Allow me to further explain my meaning by referencing another article, by Tony Elischer, about Rebuilding the Donor Pyramid. Aside from the fact that the rigid, linear pyramid model no longer accurately reflects your constituents’ engagement journey with your organization, Tony highlights another, much larger problem. And it’s one I’m increasingly hearing from some of the leading lights in the social benefit sector:

When it comes to adapting to change, nonprofits are SLOW AS MOLASSES.

And the digital revolution is all about speed. Tony points out that simply adding on a bit here and there (e.g. slapping up a Facebook page, assigning an intern to tweet now and then or otherwise slowly moving towards embracing an intentional, integrated inbound marketing) is not going to cut it. It’s not a fundamental enough change in the way you do business to yield an especially different outcome.

If you find yourself fixating on past strategies that are no longer working as well as they once did, then it’s time to begin your evolution. In today’s fast-paced digital landscape, slow won’t cut it any mo.’ Out with the old, in with the new. Otherwise, that molasses pit you’re swimming in is going to devolve into quicksand and swallow you alive.

I know a lot of you still love your pyramid. That’s okay. It had a good life and served its purpose on earth. But all things – even pyramids – must eventually die. So, let’s offer a fitting eulogy. You can still carry the pyramid in your heart and in your memory.

But, truly, the time to retire the pyramid and substitute it with a faster-paced, more fluid model that aligns with the current zeitgeist has come.

Less and less folks come in at the bottom (through direct mail) and then work their way neatly up the pyramid to the pinnacle of giving (capital campaign and legacy gifts). More and more folks find us through social channels. It simply makes sense to find and adopt a new model that begins here, meeting folks where they are.

Why do we keep trying to force folks where they are not?

We tend to get stuck in old ways. Not only do we not adapt to change, but something about the way nonprofits are structured makes it easy for us to put on blinders and not even notice that change is occurring. We don't want to know! Change is hard. It means admitting we don't know stuff. Learning new things. Working harder and smarter. And nonprofits are run by a combination of volunteer boards and often poorly paid staff. How much harder do volunteers want to work? They already have day jobs. And how much harder do underpaid staff want to work? It seems easier to just make excuses to stick with the status quo.

Why do we keep sinking into the muck, sticking our heads in the sand? Getting Stuck, stuck, stuck?Don't despair! There is an alternative.

How to get unstuck. Accept your challenges; face them head on.

The first step, of course, is identifying these challenges. Do you know what yours are? Does your leadership (staff and volunteers) agree? Once you’re aligned, focus on the key challenges you face in attracting and retaining donors; then invest in addressing those challenges.

HINT: Your greatest challenges will likely be very similar to those faced by for profit marketers. Not to mention members of your family. Your friends. And, well… just about everyone!

Cut through all the noise. Capture attention. Retain attention.

Digital has changed how people want to connect with, interact with and possibly build a relationship with you. You need to think through how things now happen in real time (e.g., are folks finding out about you through a letter you sent in the mail, or through something they saw on the internet? Are they reading your email appeals at their desks or on a smart phone just before bed)?

What do people expect from you, and what’s in it for them if they give you a modicum of their attention?

Effective selling — fundamentally human selling — understands the need to provide something of authentic value. If you’re not providing something of value then you’re going to go out of business. It turns out that a lot of what we human beings long for – especially as we work our way through Maslow’s Hierarchy of Needs -- is a sense of connection and vitality. Maslow used these terms: Physiological, Safety, Belongingness and Love, Esteem, Self-Actualization and Self-Transcendence to describe the pattern that human motivations generally move through.

Rather surprisingly, here’s where you actually can go back to some tried-and-true (ultimately very personal), human strategies. And if you work these into a re-imagined, energized framework –a vortex rather than a pyramid – you’ll develop the energy flow you need to catapult your organization into the present and future (no more hunkering around in the shadows of the past).

What is the real impact of social media on how we change our fundraising and marketing strategies?

Andrea called me out for writing that "Social media toppled the donor pyramid." She believes social media is a great adjunct; something that can be used as an additional tool to push folks up, up and up. First, allow me to say I in no way intended for folks to substitute social media for major gifts fundraising (or, for that matter, for any fundraising strategy that is truly working for folks and yielding a positive return on investment). Rather, I used "social media" as a stand-in for the "digital revolution'" which has fundamentally altered business as usual. This means, again, that many of the ways folks find us, connect with us and invest with us have changed fundamentally. It behooves us to pay attention to these changes and to meet folks where they are.

Social media is not an add on.

It’s not something that can be siloed off to marketing or IT or some department separate from fundraising. Nor is it something that can be relegated to an online giving coordinator or social media manager, while everyone else on the fundraising team continues with business as usual. Social media is now central to the way folks connect with us; it must be completely integrated into our strategic plan.

Of course, there is still an honored place for face-to-face major gifts fundraising within this strategic plan. On average, 80% of gifts come from individual donors, and a good 80 to 95% of the money from these folks (depending on the charity) comes from the top 5 to 20% of these donors. If the place where Joe Major Donor happens to first encounter my nonprofit is at a party attended by the board president, then let the cultivation begin! It's just that we're no longer limited to looking within our pyramid of supporters to find potential major donor-investors.

In Part 1 I mentioned a great article by Tony Elischer, also about Rebuilding the Donor Pyramid. He offered a number of suggestions for getting unstuck -- shaking of the shackles of past strategies that are no longer working as well as they once did. Shake off the dinosaurs by embracing Tony Elischer’s guiding principles:

  • Donor share, not market share. Start with your biggest supporters – donors, volunteers, advocates and ambassadors – and make the most of them. The game today is quality, not quantity. Of course you must invest in donor recruitment, but not at the expense of donor development. Invest in a stewardship and major gifts cultivation program.
  • Mine your group of ‘trydonors’ or ‘trysupporters’ -- people who respond once; then wait to see if they enjoy the way you respond or if they feel that their initial ‘test’ has moved anywhere. You’ve got one chance with these folks. Don’t blow it.
  • Follow up with ‘incidental donors’ -- people who indirectly support you by buying tickets to an event, purchasing merchandise or some other activity with an indirect link to your cause. This is often a forgotten source of valuable warm prospects.
  • Segment your two main donor audiences -- regular donors (aka members) and committed donors – and approach them strategically. Draw in regular donors with specific requests tied to unambiguous, attainable outcomes. Approach high net worth individuals with a range of more personal strategies (e.g. small group get-togethers, tours, etc.) that key into particular areas of interest. This means breaking down your case for support into smaller, discreet packages; then giving your would-be major donors some discretion and control over how their gift is used. If I am passionate about children and education, then your programs targeting these issues are of greater interest and value to me than those targeting seniors. Don’t waste my time talking to me about programs in which I’m only minimally interested.

You can no longer sit back and wait for folks to “do the right thing.”

It’s up to you to lead folks to where they will be most naturally inclined to find you… follow you… give to you. And you can only do this if you listen and pay attention. Stop getting sidetracked by your own plans, which you’ve often created in a vacuum – or perhaps haven’t seriously revisited in many moons.

Life is what happens while you’re making other plans. The digital revolution has breathed a whole new kind of life into our engagement with prospective supporters, making it possible for folks to become involved with you (and your competitors) in a myriad of ways. You must see yourself at the center, and do all within your power to create the type of magnetism that draws folks close.

The longer you delay in responding after someone enters your orbit, the more likely it is that this supporter will have already spiraled out of your grasp.

And that’s why I exhort you to speed up! That’s the only way you’ll be able to go with the flow. Simply superimposing an energy flow on top of a static model (the old donor pyramid, as depicted in Andrea’s new design ) is not going to cut it. Why? Because the pyramid model assumes you’re in control. You’re not!

The circle offers many opportunities for folks to be influenced by forces outside your organization’s control. Likewise, your champions can influence others in their networks far beyond the reaches of those you’d have previously been able to reach. So aren’t these major influencers – who may have it within their power to leverage numerous donations -- as worthy of your one-to-one attention as those who give you major cash gifts? There’s absolutely no reason that social channels cannot become part of the pathway to greater donor investment.

To succeed in today’s world, you must have the courage and discipline to not only build strong relationships with large donors but to do so as well with active followers, activists and influencers. You can join the circle and become a part of the forces that influence behavior, or you can try to beat ‘em and control things from the outside. The latter is a losing battle.

This brings us back to Maslow’s hierarchy of human needs and our universal longing for a sense of connection and vitality. This connection is fostered when you join and encourage community. Trying to control things puts you in the role of puppet master. No one wants to be a puppet.

But does nurturing community online need to suck your focus away from spending quality offline time with your major gift prospects (something Andrea is worried about)? No, absolutely not!

Am I saying you must do it all? Major gifts and social media? Sadly, yes. There’s simply no way around this. Doing more costs more. And it’s one of the reasons I’ve written a lot about revisiting your notions of how much you should spend on overhead. Because you’ve got to spend money to make money. The primary reason the digital revolution has changed how businesses operate is that folks have more on their plates. You can choose to push stuff off the plate (which will inevitably mean losing some donors to other organizations) or you can get a bigger plate.

Back to the Vortex Model.

The pyramid still reminds me of tombs. I prefer to engage with my supporters in a more dynamic space. A swirling energy vortex into which folks both enter and exit. Sure, not every point of energy within the vortex is equal. Some will fizzle out, while others gain momentum. It’s my organization’s job to fan the flames and facilitate the donor experience wherever the energy is burning the brightest. This donor experience is a journey, not a destination.

Journey on. You can now build relationships with folks in ways that previously were unimaginable. No more limiting your imagination to that static old pyramid, please.

Claire Axelrad The preceding is a guest post by Claire Axelrad, J.D., CFRE. Claire was named Outstanding Fundraising Professional of the Year by the Association of Fundraising Professionals and brings 30 years frontline development and marketing experience to her work as principal of her social benefit consulting firm, Clairification
Topics: Nonprofit Leadership and Practice