In the nonprofit-donor relationship, it’s easy to focus on the nonprofit’s needs. After all, we’re building the case for support, and asking for help meeting important needs. But what about your donors? What do they need from you? How can you build a relationship with them?

To build meaningful relationships with your donors, you first need to understand how their needs are met — and that starts with recognizing the different ways organizations engage and benefit their supporters.

Closed Loop vs. Open Loop Organizations

Donors approach giving with different expectations, shaped by the nature of their relationship with your organization. For instance, a donor may give to their alma mater for access to discounted football tickets — a transactional gift. But another donor might give to fund scholarships for students facing challenges they once did — a deeply relational gift. Understanding these differences starts with knowing whether your organization operates in a ‘closed loop’ or ‘open loop’ model, as each influence how donor needs are met.

A “closed loop” organization directly benefits its supporters. For example, when supporters become members at an art museum or buy season tickets to the ballet, they’re supporting a nonprofit. They also receive tangible benefits — discounted admission to the museum, or simply seeing Swan Lake.

An “open loop” organization does not directly benefit its givers. Someone else is the beneficiary of the donation. There’s no tangible result for donating to improve clean water access in developing countries or contributing to relief after a natural disaster.

Open versus closed loop orgs

Both types of organizations will see value from relationship fundraising.

What are You Offering?

Whether you’re an open or closed-loop organization, you have the opportunity to meet your donors’ needs by engaging them in a philanthropic relationship.

Dr. Adrian Sargeant’s research on donor behavior has identified several needs that donors may try to meet by donating to your organization, including:

This is where the traditional distinction between “transactional” vs. “relationship” fundraising starts to break down. Tangible benefits that closed-loop organizations rely on, like free parking at the zoo or first pick of seats for season ticket holders, can also meet these deeper needs. Season ticket holders care about the arts. Zoo members value wildlife conservation. Their participation at your organization can be very personally meaningful, making them more than a donor. They are a “Greenpeace Supporter,” an “ActionAider,” or a “child sponsor.” That’s not a simple transaction, it’s a relationship.

Likewise, open-loop organizations can speak to these deeper needs. Explaining how donors’ support benefits recipients, what kind of change the nonprofit is able to make because of the donation, and how the donors helped goes a long way towards meeting the needs for belonging, self-fulfillment, and self-actualization.

Open or Closed, Relationships are Key

Relationship fundraising is about long-term connections, and building that kind of connection can be challenging.

For closed loop organizations, the challenge is connecting supporters with the cause beyond the immediate benefit. What inspires their support, beyond the incentive of free guest pass at the museum?

For open loop organizations, the challenge is more about articulating the intangible benefits they offer.

Consider disaster relief. While not strictly transactional, gifts made in response to a catastrophic event are often one-off, open-loop responses to an acute situation. How do you grow a relationship beyond that one gift?

Or think about your long-time season ticket holders. How can you build deeper relationships that result in planned, mid-level, or even major gifts?

Either way, clear, relationship-building communication is the key to moving beyond a transactional approach. If you can build a donor journey that gives interested supporters opportunities to learn more, go deeper, and connect, you’ll start to have truly mutual donor relationships–they are helping to meet your needs, but you’re also meeting theirs.

The first gift or membership is an invitation to a conversation. In the disaster relief example, your donor journey might look like:

Check out the article: A Relationship Fundraising Approach to Memberships

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For season ticket holders, your journey might start with a transactional incentive and then transition into a relationship. That might look like:

In both examples, there will be people who aren’t interested. This is fine. The one-time disaster donor still helped. The people who just want programming in exchange for money are important to the overall financial health of your organization. Their contributions matter. But creating donor journeys will give you the chance to build something with the people who are most interested, one you’ll miss out on if you never move beyond the transaction or speak to their deeper needs.

Tips for Meeting Donors’ Needs

Open loop or closed, you have the opportunity to take a relationship fundraising approach and create long-lasting connections with your supporters by meeting their needs.

To begin engaging with donor needs:

Relationship Fundraising

Learn More About Relationship Fundraising

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