Most Nonprofits Have Too Many Donors, Most Churches Have Too Many Members

Great post last week on Harvard Business Review from Hanna Halaburda entitled Fewer Customers, but the Right Ones. Halaburda pans dating site‘s latest promotion–a ten day free trial:

To successfully match people who are looking for a long-term relationship, eHarmony needs not just a lot of people in their database, it also needs people who are ready for a long-term relationship. This seems self-evident, but cluttering up the site with those looking for something else will increase the noise-to-signal ration and make matching harder. In its everyday business, eHarmony does an excellent job by discouraging potential customers who may not be so serious about dating. They ask potential members to complete a very long questionnaire of more than 250 questions. And if the answers suggest that you are not serious enough, they reject you. eHarmony also charges more than — up to a 25 percent premium. As a result, only people who really care about establishing a long-term relationship will end up at the site.

Observation: Most nonprofits and churches have a noise-to-signal ratio which is off the charts. They are based on B-I-S (butts-in-seats) business models. Such models require that the nonprofit or church bring in the largest possible number of potentially interested individuals, in the hope that:

  1. The nonprofit or church can convert marginally interested individuals into passionately interested ones.
  2. Given the sheer volume gathered, there’s bound to be a pony in there somewhere.

The challenge to the first idea is that nonprofits and churches are rarely able to effect this conversion to maturity. They find that they must continue to “cultivate” (yucky word) donors/churchgoers by feeding them a steady diet of the same things that brought them in the door in the first place.

Consider the rescue mission who “acquires” donors by inviting them to donate money to cover Thanksgiving dinners for the homeless. They ultimately find that it’s next to impossible to get those new “supporters” to understand that meals are not the solution to homelessness but that the mission’s long-term structured rehabilitation program is. So the mission ends up having to ask for money for meals month after month, amping up the urgency and the desperation with each passing appeal, and using whatever money is raised for meals to cover the long-term structured rehabilitation program that is really the heart of their model.

Same with the church who tries to recruit attendees through events that have nothing to do with the Gospel. I’m just finishing Todd Hunter’s Christianity Beyond Belief: Following Jesus for the Sake of Others, and it’s a solid and interesting read. A few of the examples Todd provides do leave me scratching my head, however, like the story of the woman who gathered a group of women together in an effort to share the love of Christ with young moms by providing free swimming lessons:

We all thought the swim lessons were a huge success, even though there was no one [who] was converted and only one lasting friendship was formed. We’ve been taught that our role is to develop authentic friendships, to serve others in these simple ways and to pray for them. We can be at peace in this. Jesus wants people to follow him more than we want them to, and he will do the heavy work with them.

There’s bound to be a pony in there somewhere.

And that’s exactly what ends up happening: Nonprofits and churches, unable to “cultivate” donors/churchgoers to greater maturity and involvement in the cause, end up employing various methods to sift through the accumulation in order to find the pony. For the nonprofit, the pony is the rich, active donor. For the church, the pony is the one who can somehow take everything the church offers and manage to knit it into a personal program of growing to greater maturity and involvement.

What nonprofits and churches fail to account for, however, is that this strategy creates what Halaburda calls high “negative externality”–or, more simply put, turn-offs for those who are truly committed:

If the value you’re offering your customers rests on exclusive membership of similarly minded relationship seekers, what happens if you make it easy for others to get in for a while? You might get a lot of people who don’t care that much about a serious relationship, or who are looking for a different product, like a quick adventure. When such people roam around your site, they create a “negative externality” for your core members, who may discover that it’s more difficult to find a long-term relationship — the very service they had paid a premium to get. In a nutshell, when you lower the barriers to entry, you threaten your core value proposition to your most valuable customers.

This is why nonprofits sigh and say, “Right–that’s why what I need is just a few wealthy donors…”

But there’s an alternative. Halaburda’s article includes a link to a free downladable PDF that details a business model that is based on recruiting a smaller number of more committed individuals in the first place. In the nonprofit world, the equivalent would be donor acquisition programs that look and act more like part-time internships enabling individuals to grow to comprehensive maturity in the cause.

For the church, it looks an awful lot like Luke 9:23.

About Pastor Foley

The Reverend Dr. Eric Foley is CEO and Co-Founder, with his wife Dr. Hyun Sook Foley, of Voice of the Martyrs Korea, supporting the work of persecuted Christians in North Korea and around the world and spreading their discipleship practices worldwide. He is the former International Ambassador for the International Christian Association, the global fellowship of Voice of the Martyrs sister ministries. Pastor Foley is a much sought after speaker, analyst, and project consultant on the North Korean underground church, North Korean defectors, and underground church discipleship. He and Dr. Foley oversee a far-flung staff across Asia that is working to help North Koreans and Christians everywhere grow to fullness in Christ. He earned the Doctor of Management at Case Western Reserve University's Weatherhead School of Management in Cleveland, Ohio.
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