The Catholic Fundraiser

Understanding and Retaining Your Donors in an "Experience Economy"

Posted by Kn Moy on 10/12/18 8:34 AM

Donor-Prospect-Sipping-CoffeeFew things impact fundraising results as much as the changing attitudes and behaviors of donors as our nation’s economy evolves.

Today’s donors aren’t the same donors of the last century when direct mail fundraising success rates peaked. Just how much donors and their behaviors have changed over the past 50 years can be easily recapitulated in the evolution of the morning cup of coffee for America’s consumers.

COFFEE-AS-A-COMMODITY — A pound of coffee beans, which makes around 50 cups depending on how strong you like your morning coffee, sells for $1.06 on the futures and options exchange in New York. Coffee sold in this way is the second-most, commonly-traded commodity in the world. As a commodity, a morning cup of coffee costs around 2 cents. In America’s Agrarian Economy of the previous century, consumers considered a cheap cup of coffee … a good cup of coffee. The cheaper … the better.

COFFEE-AS-A-PRODUCT — In America’s Industrial Economy that followed the Agrarian Economy, abundance came from making things. The world’s second-most, commonly-traded commodity was dried, roasted, ground, vacuum-sealed, and packaged to become a product that was sold in retail outlets. As a product — the second type of economic offering in our nation’s economy — a cup of morning coffee costs around 18 to 24 cents. Choice and convenience drove consumers to stock up their pantries with their favorite morning brew.

COFFEE-AS-A-SERVICE — Next came America’s Service Economy in which services became the key economic offerings. The good old coffee pot became a thing of the past. Consumers could walk or drive to their favorite coffee kiosk or corner café and have their morning coffee made the way they like it. This is coffee-as-a-service — the third type of economic offering in America’s economy. As a service, a cup of morning coffee costs anywhere from $1 to $2.

If coffee-as-a-commodity sells for around 2 cents per cup, and a cup of coffee as a product costs around 18 cents to 24 cents, and, finally, a cup of morning coffee that is provided as a service can cost $1 to $2, why are today’s consumers so willing to pay $4 to $6 for our morning coffee at Starbucks?

Welcome to Today’s Experience Economy!

Today, when consumers stop in at their local Starbucks for their morning coffee, they’re not paying for coffee-as-a-commodity, or coffee-as-a-product, or even coffee-as-a-service: They’re paying for coffee-as-an-experience.

Asserts Starbucks founder Howard Schultz: “Unlike many other places that just sell coffee, we built our brand through the Starbucks Experience. That experience represents something way beyond a cup of coffee.”

Today, financial experts define experience as the fourth economic offering in our economy today, right alongside a commodity, a product, and a service. Each of the four economic offerings grew out of a period of time in our nation’s history when consumer attitudes and behaviors drove economic growth around a central economic offering. That is: 

  • In the Agrarian Economy, consumers drove demand around commodities.
  • In the Industrial Economy, consumers drove demand around products.
  • In the Service Economy, consumers drove demand around services.
  • In today’s Experience Economy, consumers are driving demand around experiences.

COFFEE-AS-AN-EXPERIENCE — Experiences are a distinct economic offering in today’s Experience Economy, as different from services as services are from goods. Today’s consumers — our donors — not only desire experiences, they expect them from the brands that they follow. More and more brands today are responding to this mega-trend by explicitly designing, promoting, and continually optimizing the experiences by which they engage their customers. 

  • By 2020, according to new research conducted by Salesforce, 89 percent of businesses will compete mainly on customer experience. For the leading companies in our marketplace today, customer experience has already overtaken price and quality as the key brand differentiation.
  • Over 70 percent of all buyer decisions today are based on customer experience. In the hierarchy of next-gen consumer expectations today, the top priority is “memorable brand experiences.”
  • Steve Jobs, Apple’s iconic founder, always insisted that “you start with the customer experience and work backwards to the technology.” Apple, the world’s most successful brand, is also the world’s leading Customer Experience Management (CXM) company today.
  • According to Harvard Business School, the one thing that differentiates Fortune 100 companies from the rest of the Fortune 1000 is their commitment to CXM, the science that drives today’s Experience Economy.

DXM: The Breakthrough Difference for Charities Today

At the nonprofit think tank DXM Institute for Changemaking Innovation, we believe that nonprofit organizations that define, systematically monitor, and improve donor experience will thrive in today’s Experience Economy.

We are already seeing that harnessing and optimizing your donor’s experience is the single most important factor for achieving breakthrough success in fundraising today, even as the success rates of traditional, transactional fundraising continue to decline.

The next generations — the Baby Boomers, Gen X, and Millennials (Gen Y) who are already giving 74 percent of all dollars to charity, and represent 88 percent of the donor universe — are the “experience generations.” According to Gregory Yankelovitch, the experience generations are no longer buying products and services, “but are buying experiences delivered via products and services.”

Here are the percentages of each generation that now spends less time and money on goods and services, and more on experiences that engage them in personal and memorable ways: 

  • Baby Boomers who control 80 percent of all financial wealth today … 72 percent.
  • Gen X who also prioritize experiences for their children … 81 percent.
  • Millennials, another generation for which experiences have greater impact on them than the stuff they own … 80 percent. 

We believe that donor experience is the “missing piece” of the today’s donor puzzle. By harnessing the science of CXM taught in our nation’s leading business schools today, we can create better, faster, and more sustainable revenue for nonprofit organizations. 

We are the first in the nonprofit sector to be certified in CXM (2007). We have named the nonprofit version of CXM, DXM. DXM stands for “Donor Experience Management.” 

Two Upcoming Opportunities to Learn More About the DXM Approach

Join us for the Boom! Workshop, a 3-hour introduction to Donor Experience Management: 

  • Thursday, October 18, 2018, at the Sisters of Notre Dame in Chardon, Ohio
  • Tuesday, November 6, 2018, at the Carmelite Retreat Center in Darien, Illinois

 Interested in attending a workshop? Learn more and register for one of our upcoming workshops happening this fall! 

View Workshops

Kn Moy

Written by Kn Moy

Kn Moy is the Senior Fellow for Philanthropy Innovation at the nonprofit DXM Institute for Changemaking Innovation. Over the past decade, as direct response fundraising results have continued to decline, Kn has been driving the testing and implementation around a new and breakthrough fundraising approach for next gens — known as DXM or Donor Experience Management — with both nonprofit organizations and agencies serving nonprofits around the nation. He was recently invited to join the faculty at the Lilly Family School of Philanthropy at Indiana/Purdue Universities (IUPUI).