Sunday, October 31, 2010

What "Value Added" Can Nonprofits Offer in This Economy to Current and Potential New Donors?

These days, all kinds of businesses, including the nonprofit sector, are having to figure out how to both keep current revenue streams while increasing them.  Many businesses are practicing "value added" which means the customer or in nonprofits' case, the donor, receives a bit more, than they used to, for giving what they have in the past.  Nonprofits can use "value added" to retain donors and acquire new donors and then retain these new supporters, as well.

I'll use the for-profit sector to demonstrate my point.  Let's say that in my local town's for-profit sector, if I've always been a customer of a local restaurant, Pete's Pizzas.  Let's say that Pete wisely saw the economic downturn coming, back in 2006, and began then cutting any unnecessary business costs, tracking which pizzas his customers ordered the most, and then he bought those pizzas' ingredients in bulk, and did other internal business operations to conserve his business' spending.

Pete also wanted to be sure to retain the customers he's had.  So, in addition to cutting costs, tracking where his spending is highest and purchasing in bulk to reduce costs, he also researched and tried out a few different customer benefit programs and ideas to be certain that his long time customers would continue to patronize his business during the tough economy.  Pete tried a customer punch card where anyone who buys a pizza gets a hole punched into their card, until six holes are punched.  When the customer buys the seventh pizza, and presents the fully punched card, it's free.  He also initiated a lunch deal to help his customers spend less on lunch, and keep his customers coming in.  The deal is one large slice of any pizza, a medium soft drink, and a side salad all for $5.99.  The combination of the items in the lunch, if ordered ala carte, would come to $8.75 but the customer saves $2.74 in this lunch deal.  Finally, Pete created a 2 For Tuesday pizza deal.  Any two pizzas, that are ordered together on Tuesdays, will be 'buy one, get one free', where the customer is charged for the more expensive pizza, of the two ordered, and the second (lesser expensive one) is free.

Pete ran the numbers on all of these "value added" programs before he initiated them, to be certain that he would still make money on them, but he also checked, too, that they were good deals for his customers (weighing them: against his former pricing for the same meals, against competitors' valued added programs, and against his business' income needs).  He only implemented the "value added" programs that, after the math was run, demonstrated that he'd still make money and his customers would get some good deals.  It's worked!  Pete is spending less than he did back in 2006 and 2007, saving a bit more monthly than he used to, and has not seen business decline but rather Pete has seen a slight uptick in business since providing customers with the value added offers he has!

In the nonprofit sector, today, it works the same way.

Donors who usually give, let's say $35 a year, in the past (before the economic decline) would most likely simply receive a thank you letter (good as a tax receipt besides providing thanks).  This is fine.

Today, many donors (after giving at common and not particularly high dollar amounts) are getting more than they used to, though, to retain them and demonstrate that the organization knows their contribution at this time (in this economy) is invaluable.  Some nonprofits have adjusted the gift amount level for donors to receive goodies such as totes with the organization's logo, note cards, calendars, and other tchotchkes.

Other nonprofits have increased, in response to donors' support, the detail in communication that explains what a donor's dollar will do this year.  This does not cost anything more (except perhaps one of the volunteers' times in researching and tracking real data).  For example, perhaps when a donor gave to, let's say, the American nonprofit, Save the Starfish, a donor used to be informed, simply, that their contribution would go to: the Wild Starfish Preservation Program, the Starfish Living in Aquariums Support Program, and the Public Education and Outreach Program.  All of this was true.  Three years ago, though, the board of directors at Save the Starfish, being sensitive to donors' hesitation to give as often or as much, wisely decided to be more specific and detailed when explaining to donors where their dollar is going and what it will do.  This is not so much as "value added" (which it is, as it's a clearer report for the donor to understand what exactly their support is going to do for American starfish species), but it could also be thought of "more details added" which is a value to both the donor (who will be connected with the end-result benefit of their contribution) but is also a value to the organizations, too, as the donor wishing to really do some good for starfish will understand exactly what their dollar is going to accomplish, and thus be retained.  Today, in this hypothetical scenario, anyone who gives to Save the Starfish receives a 9x5 inch laminated, water proof, Starfish Field Guide that depicts and describes the 50 most common starfish species that exist along the United States; a thank you letter; and a clear description in that thank you letter where their donation was allocated and what the program it was allocated to will do in explicit terms and numbers.

For example, perhaps now, the Save the Starfish thank you letter to donors states, "...Your contribution of $X will be broken down into thirds.  One third will go to the Wild Starfish Preservation Program, one third to the Starfish Living in Aquariums Support Program, and the final third to the Public Education and Outreach Program.  The Preservation Program funds fifty different Ph.D. researchers across the United States working in three different oceans to document, study, and recommend to local fisheries' management how to best preserve and support these 500 different starfish species and their natural habitat.  The Support Program funds 200 different credentialed aquariums across the United States, a minimum of one in each state (including, Puerto Rico, Guam, Hawaii, and Alaska), funding research on 200 different starfish species' preferences in captivity to ensure a higher quality of life and longevity for future captive starfish.  Finally, the Public Education Program funds 250 different credentialed public schools, universities, and technical schools who educate students about marine biology, ensuring they teach a unit exclusively on star fish for at least two full school days, including the latest findings and theories on starfish species, their natural habitat, and their future welfare.  X number of people will attend the Public Outreach Program between 2011 and 2012.  The annual report for 2011 and 2012, respectively, will include actual numbers of starfish species studied, preserved, and public outreach students attendance; including what was accomplished (in specific data and numbers) as a result of our three programs."

Value added to a donor's experience should not be gimmicky and should not minimize or trivialize an organization's mission statement, its reputation, or its persona in the public.  Any value added for a donor's experience should underscore for the donor (and even the general public who has yet to give) exactly what the donor's support will accomplish, when given to your organization, in regards to the organization's mission statement.   Donors want to see positive change per the recipient organization's mission, and if they can be shown exactly what their gift will do (even including how much of each dollar that the organization raises actually goes to the organization's programs and services in ratio to how much of each dollar is spent on the organization's overhead costs and administration) they not only feel confident about the organization and the results of their contribution, they buy into that organization, and these are the donors most likely to give again, and again - and that's the idea.

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