The New 80-20 Rule

Ever heard of the “80-20 rule”? It asserts that 80% of funds raised in any campaign will come from 20% of the prospects solicited. However, a growing and massive body of evidence is showing that “rule” to be less and less true. As wealth has concentrated in fewer hands, fewer major donors are accounting for larger portions of annual fundraising and campaign totals. The ratio now appears to fall between 90-10 and 95-5 for most organizations.  

A new 80-20 rule, however, is emerging as the old one crumbles. It is that optimal fundraising performance will be best achieved and sustained if 80% of an advancement operation's time and budget is allocated to increasing the quality of customized engagement for current donors (including those who give annually and occasionally as well as those who have recently lapsed in their giving). The remaining 20% of their time and budget should be allocated to highly targeted donor acquisition. 

That’s right – 80% on retention and 20% on strategic acquisition. The proof can be found in your own data. If you will analyze the last three years of your fundraising data, as a minimum, you will see that at least 80% of your support came from those who had given previously. Exceptions to this rule would include organizations that: 

• are so young that they have yet to accrue benefits of donor retention,
• are hemorrhaging donors because they are in crisis,
• have grossly underinvested in donor retention, or
• have received an unusually large and unexpected estate gift in the recent past two years. 

In conducting this analysis, you should discover something very close to what our research has revealed, including: 

• those who give gifts of $1 million or more to a particular institution in a particular year have given to that same institution for at least 10 previous years,
• the vast majority of estate gifts have come from loyal donors who have given for 15 years or more, usually 20 years or more, and
• estate donors were the most productive source of major gifts, larger estate gifts or some combination of the two.

In other words, the most significant support in any given year comes from long-retained, highly satisfied donors. Gifts secured from first time donors pale in comparison. The same would be true of the giving levels of organizations that have high rates of donor attrition when compared to those that have high rates of donor retention. Therefore, one must conclude that far more effort should be allocated to donor retention and satisfaction than to new donor acquisition.

Achieving these ends, however, entails much more than pumping up the stewardship operation, although greater investment in that area is generally warranted. It requires organizations to place stewardship into the larger context of institutional accountability (as measured by donor satisfaction) and to adopt that ethic as one of the CEO’s top three strategic imperatives. In this way, institutional accountability becomes “everyone’s business.”

Ways in which a culture of accountability can be built from on high include requiring:

• all those in the top three tiers of the administration to memorize the names of the 25 most loyal donors (measured by years of giving) and the 25 most generous donors (measured by total giving) so that each will be able to greet those donors by name at all official events and to acknowledge their valued place in the organization,
• all those who have signature or expenditure authority over major gifts to produce annual impact reports and to write at least two handwritten notes to those donors each year,
• all senior executives, when traveling on the organization’s nickel, to allocate one hour or one meal to meeting with donors in their final destination,
• making donor retention reports a prominent part of a president’s accountability to the operating board, and
• each board member to reach out to at least five major donors each year to inquire as to their satisfaction thereby signaling that donor accountability is affirmed and valued at the highest level of governance.

Ways in which these purposes can be achieved through strong advancement leadership include:

• reorganizing advancement operations to capture these new opportunities including voiding external titles with words such as principal gifts, major gifts, planned gifts and annual gifts; avoiding if not abandoning all giving societies except those that speak explicitly to loyalty, and creating a new vernacular that conveys that the most important functions are donor satisfaction, donor retention, and customized philanthropic facilitation; and
• creating graduated recognitions for loyal donors who achieve key milestones (e.g. 5 years, 10 years, etc.) that convey “increasing insidership” status including preferred access and preferred seating at key events and, for the most loyal, access and the opportunity to opine on privileged communications such as the early drafts of strategic plans.

Does this sound revolutionary? In fact, the revolution has already occurred. Now we must race to catch up to these new realities and great opportunities they represent.