Effects of Donor Priority Strategy on Relationship Fundraising Outcomes

• DOI: http://doi.org/10.1002/nml.21092
• Date: 01 March 2014
• Author: Christian Scherhag,Silke Boenigk
• Published date: 01 March 2014

Effects of Donor Priority

Strategy on Relationship

Fundraising Outcomes

Silke Boenigk, Christian Scherhag

University of Hamburg, Germany

Nonprofit organizations commonly implement donor priority

strategies, yet little research has explored the effects of this

relationship strategy. Whereas previous research highlighted the

positive effects of benefit segmentation and analyzed donor

motives to choose a specific donation level, this study investi-

gates the effects of priority benefit perception on relationship

factors such as donor satisfaction, donor loyalty, upgrade/

downgrade intentions, and voluntary behavior. Based on data

from the German cultural sector—804 donors of a friend circle

that differentiates two donation levels—the results of the par-

tial least squares path analysis show that donors’ perception of

priority benefits positively affects donor satisfaction and donor

loyalty. The study also shows that a priority strategy negatively

influences intentions to downgrade among higher-prioritized

donors and positively enhances intentions to upgrade among

lower-prioritized donors. Applying multigroup comparison the

authors find that most relationship effects do not differ signifi-

cantly across higher- and lower-prioritized donors. This study

thereby supports the implementation of donor priority strategy

among cultural organizations because of its advantages for

developing strong relationships with donors of all levels. Several

managerial recommendations are given; for example, managers

should better implement only a few instead of a large number of

donor levels, should determine carefully which benefits to offer

at the different levels, and analyze the donor base in order to

identify donors with strong potential for upgrading.

Keywords: benefit segmentation, donor prioritization,

upgrading, cultural organizations, relationship strategy

Correspondence to: Silke Boenigk, University of Hamburg, Management of Public,

Private & NPOs, Von-Melle-Park 5, D-20146 Hamburg, Germany. E-mail: silke

.boenigk@wiso.uni-hamburg.de.

NONPROFIT MANAGEMENT & LEADERSHIP, vol. 24, no. 3, Spring 2014 © 2013 Wiley Periodicals, Inc 307

Published online in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/nml.21092

308 BOENIGK, SCHERHAG

Nonprofit Management & Leadership DOI: 10.1002/nml

A

DONOR PRIORITY STRATEGY is a widely accepted and imple-

mented customer relationship management (CRM) tactic

used by nonprofit organizations, especially in leading inter-

national cultural organizations such as Tate Modern (London) or

the Metropolitan Museum of Art (New York) (Hayes and Slater

2001; Paswan and Troy 2004; Pope, Isely, and Asamoa-Tutu 2009).

These organizations prioritize donors according to offered benefits

and potential donation volume (Masters 2000; Sargeant 2001a;

Slater 2004), though the number of donation levels varies among

organizations. For example, the Metropolitan Museum of Art of-

fers ten donation levels: MetNet, individual, family/dual, sustain-

ing, contributing, donor, sponsor, patron, patron circle, and

president’s circle. In return for donations, donors at different levels

receive free entrances to special exhibitions, invitations to curator

talks, and exclusive dinners.

Therefore, a priority strategy is defined here as a donor (mem-

ber) relationship strategy that implements various donation levels

with increasing benefits, depending on the individual amount of

donation provided (Glynn, Bhattacharya, and Rao 1996; Paswan

and Troy 2004; Scherhag and Boenigk 2013).

This strategic approach is, in a sense, a customer loyalty pro-

gram for the nonprofit context, as realized through a sort of mem-

bership scheme (Slater 2004) embedded in customer relationship

management and aligned with the idea of building strong and trust-

ing relationships with individuals while also gathering data to iden-

tify the most valuable donors or supporters (Ernst, Hoyer, Krafft,

and Krieger 2011; Helmig and Boenigk 2012; Kristoffersen and

Singh 2004; Kumar, Sunder, and Ramaseshan 2011).

Yet donor priority strategies are relatively rarely implemented in

the German cultural sector. A 2010 market analysis, conducted

by the authors, showed that only 22 percent of German cultural

organizations apply donor priority, which we interpret in compari-

son to the international cultural sector as rather low. Why might

such cultural organizations in Germany or elsewhere hesitate to

implement the strategy? As first glance, only positive effects occur.

First, implementing a donor priority strategy seems to promise

greater relationship fundraising success, because the organization

can focus its resources on the most profitable donors (Polonsky and

Sargeant 2007; Sargeant 2001a; Weir and Hibbert 2000) and meet

individual donors’ needs more precisely (Bennett and Barkensjo

2005; Rentschler, Radbourne, Carr, and Rickard 2002; Sargeant,

2001b). Second, the nonprofit organization gains an opportunity to

establish long-term relationships with important donors and

upgrade these donors to higher donation levels (Bhattacharya

1998). Third, donors might develop social networks by choosing a

certain donation level, indicate greater identification with the organ-

ization, and even engage in voluntary behavior (Boenigk and

A priority

strategy is

defined . . . donor

(member)

relationship

strategy that

implements

various donation

levels with

increasing

benefits.