Yes, The Donor Pyramid is Really Dead

When it’s our time to go, we all gotta go — dinosaurs and pyramids alike!

An Open Letter to Andrea Kihlstedt — Part 1

[I am responding to Andrea Kihlstedt’s Open Letter to me, Is The Donor Pyramid Really Dead, in the Guidestar blog. 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 into is 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 as 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’d like to talk more about how to get unstuck in Part 2 of this open letter (watch for my full response to be published on trust.guidestar.org on July 8th.) But until then I’ll leave you with this link to Nine ways to get it wrong, an insightful post by Jeff Brooks talking about the many ways nonprofits who’ve not yet fully embraced the changes wrought by the digital revolution are going astray.

 What do you think? Time to retire the pyramid and substitute it with a faster-paced, more fluid model that aligns with the current zeitgeist?