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FEP News Research

Fundraising Effectiveness Project Quarterly Fundraising Report for Q4 2018

Giving Up Slightly in 2018, But Only Due to Larger Gifts

Number of Donors, Retention Rates and Smaller Gifts All Decrease

Giving increased by 1.6% in 2018, according to the Fundraising Effectiveness Project’s 2018 Fourth Quarter Report, with philanthropic gains being driven exclusively by donors who gave $1,000 or more.

After a sluggish first half of the year, charitable giving rebounded in the third and fourth quarters of 2018 to end with an overall increase. However, the increase was smaller than in 2017 (when giving increased by 2.0%) with other key giving indicators continuing to fall.

While total giving from gifts of $1,000 or more increased by 2.6%, revenue from smaller gifts decreased. Gifts in the $250 – $999 range dropped by 4.0%, while gifts of under $250 dropped by 4.4%. The number of donors also fell, as did retention rates (the percentage of donors who continue to give to the same organization).

“The headline may show an increase in giving, but that increase masks some serious long-term trends that are presenting huge challenges to the sustainability of fundraising and philanthropy,” said Elizabeth Boris, chair of the Growth in Giving Initiative. “Giving is increasing because of larger gifts from richer donors. Smaller and mid-level donors are slowly but surely disappearing—across the board, among all organizations. Philanthropy should not and cannot be just the domain of the wealthy, and the entire sector needs to look at how we reach out to and engage these donors.”

The Disappearing Donors

The total number of donors dropped by 4.5% from 2018 to 2017. In that total are the following groups:

  • New donors to an organization, which dropped by 7.3% from 2017
  • Newly retained donors, those who have given a second time to an organization, which dropped by 14.9%
  • Recaptured donors, those who stopped giving to an organization but returned and gave again to the same organization in 2018, which dropped 1.6%
  • Repeat retained donors, who have been giving to the same organization for at least three years, which increased by 0.2%.

The overall retention rate—the percentage of all donors making a gift to the same organization in 2017 and then again in 2018—dropped almost two percentage points to 45.5% from the 2017 rate. The repeat retention rate (the percentage of repeat donors who gave in 2017 and then again in 2018) remained fairly steady at 61%, while the new donor retention rate (donors who gave in 2017 for the first time and gave again in 2018) fell four percentage points to 20.2%.

“What’s concerning about this data are the significant decreases in the New and Newly Retained Donor Groups,” said Ben Miller, chief analytic officer at DonorTrends, which created the final report. “From past reports, we’ve seen that charities seemed to do well at acquiring new donors but retaining them was a challenge. Now we’re seeing difficulties in acquiring donors, and that could spell real trouble with fewer donors giving. Again, it’s great to see giving increasing overall, but the question remains around the long-term sustainability of the sector if these trends continue.”

Impact of the Tax Bill?

Trends and changes in giving are not typically caused by one single factor. However, the tax law signed in late 2017, which doubled the standard deduction and likely caused many taxpayers to take fewer itemized deductions including the charitable deduction, may have played some role in the results.

“I think one of the reasons that we’re seeing more larger gifts is that donors had to give more—and have other itemized deductions—in order to exceed the standard deduction threshold,” said Jay Love, chief relationship officer and co-founder at Bloomerang, one of the three data providers for the Growth in Giving Database. “What’s fascinating is that over a third of donors—37.4%—in the $1,000-plus gift range were new to that category. That’s a lot of new donors giving significantly more, which tells me that some of those donors were likely giving larger sums in order to itemize their deductions. Smaller gifts also fell, as those donors couldn’t take advantage of the charitable deduction anymore.”

A direct comparison of giving in fourth quarter 2018 vs. fourth quarter 2017 shows potentially more impact from the tax changes. Giving spiked in all three giving categories in the fourth quarter of 2017, when President Trump signed the tax bill into law. In fourth quarter 2018, all three giving categories fell. Gifts of more than $1000 fell by 5%, while gifts in the $250 – $999 range decreased by 12%and gifts under $250 dropped by 15%.

Based on conversations with clients and charities across the country, it is likely that the full impact of the tax bill may not be felt until the end of 2019, noted Jeff Gordy, president at NEONCRM, also a data provider. “I think a lot of donors won’t fully realize how the tax changes affect them until they do their taxes this year.”

Looking Ahead

“These are overall numbers for the entire sector, and despite all the challenges, giving did increase,” said Jon Biedermann, vice president at DonorPerfect, the final data provider. “What’s most important are the decisions your organization makes, its giving and fundraising strategy, and its willingness to focus on donor cultivation and stewardship.” Biedermann added, “None of this research would have been possible without the fantastic collaboration of my industry colleagues, who are also my competitors. We invite other industry colleagues to join our efforts so that we can all work together to reverse these alarming trends.”

Data from the FEP’s 2018 Fourth Quarter Report is based on a panel of more than 4,500 charities selected from the Growth in Giving Database of 161 million individual transactions, which includes more than $72 billion in donations and 18,348 organizations since 2005. Organizations included in the panel have raised $5,000 or more from 25 or more donors in each of the last six years. Revenue figures have been adjusted for inflation.

You can download the report here: http://afpfep.org/reports/download/

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Fundraising Metrics Research Stewardship

Reflections on teaching the Fundraising Effectiveness Project’s Donor Retention Self Assessment Workshop

Over a year ago, my friend and colleague Michael Buckley of The Killoe Group asked if I wanted to teach the Association of Fundraising Professionals’ official course on donor retention, powered by data from the Fundraising Effectiveness Project. Since my company is a data partner of FEP, I jumped at the chance.

It takes a few months to officially approve and schedule the course itself but in late January 2019, Michael and I set up in a conference room at the Marriott in Saratoga Spring, NY and readied ourselves for seven hours of data driven discussion. While he and I had spoken about the key performance indicators of FEP’s data before, we had never done an intensive all day workshop around it and were both excited and nervous to see how long we could keep the attention of our participants.

I thought it would be useful to break down the ways that the course itself is structured and the practical realities of putting this vital data set and metrics in front of actual fundraisers. Here’s what I learned from doing this course.

Overview

The AFP has put together a stellar set of resources for workshop organizers when it comes to getting the course together. A thick and well organized faculty folder was provided as well as access to a recording on how to properly teach the course. Slides were also provided to help guide both faculty and students through the material.

The Donor Retention Workshop has three primary learning objects, which we debuted upfront:

  • Identify effective practices to retain and upgrade donors to improve fundraising effectiveness
  • Prepare a donor retention plan for the participant’s organization
  • Use data from growth-in-giving reports to develop growth-oriented fundraising strategies

With these three primary objectives serving as our anchor, we started to unpack the realities of working with donations data and how to leverage the free tools that FEP has created and put them into practice.

Section One: Why Organizations Lose Donors and Money

As we kicked things off in earnest, I was nervous that putting tons of charts in front of participants would scare away the less data savvy folks in the room. Yet what was great about the course is that it starts off with a lot of great foundational information on why it’s important to pay attention to retention.

Michael and I stressed that retention is an important metric to pay attention to when addressing donor attrition (or having people stop donating to your organization). It is one of the best ways to stop revenue loss at a nonprofit as well as the easiest path to growth of the organization.

Simply looking at overall revenue profit and loss on a yearly basis is a recipe for disaster down the line, since a few large gifts may mask an underlying issue of support of your organization from your donor base. We reminded the room that their donors are not their donors and unpacked excellent research by Adrian Sargeant on lapsed donor behavior.

Section Two: How Keeping Donors Increases Fundraising Success

This is when the rubber really started to hit the road, where we dove into the harsh reality of donor retention impact on long term growth. Sargeant’s research demonstrated that increasing the level of retention by 10% would improve the net growth in giving for a “typical” charity database by 50%. We stressed that retention was both a short term and long term strategy that would never fail.

The top reason that donors stop giving to a nonprofit is that they feel that the organization no longer cares about them, which is why we stressed the importance of prompt and gratitude focused thank you communication. The ability to thank a donor in an authentic way is well demonstrated as the most effective way to keep that donor and we didn’t let our participants forget that.

Section Three: Measuring the Effectiveness of Your Fundraising Efforts

This is where the FEP data really started to come out and play. While I’m personally used to getting up to date findings from the FEP research team, it was really exciting to see how these have been folded right into the faculty curriculum to ensure that anyone teaching this course would be able to speak about the most up to date data possible.

Key findings from 2018 that we related were:

  • Larger nonprofits perform much better than small ones
  • New gifts / donor generate the largest growth in gift dollars / donors
  • Lapsed new gifts / donors represent the greatest losses in gift dollars / donors, particularly for the lowest performing organizations

One of the most effective tools that we were provided were the Kirkwood Case Studies, which were targeted discussion items around a fictional children’s education nonprofit that allowed nonprofits to identify with the issues raised in a way that they could relate with yet not feel defensive about comparing themselves to a “more successful” organization. Kirkwood was designed to be the perfect strawman, creating insightful discussion that generated some of the most exciting discoveries I’ve experienced.

Section Four: Developing a Successful Donor Retention Plan

After an excellent lunch, we got down to the business of unpacking the case studies and seeing what we could actually do with them. One area that was not included in the faculty guide but helped us greatly was the concept of developing Donor Personas.

A Donor Persona is a way of articulating messaging and strategy around a particular subset of donors. For simplicity, we had our groups work on three primary donor personas that we then crafted a strategy matrix around:

  • New Donors: one of the worst retention rates industry wide is around new donors to an organization, with the average organize losing 25% or so of their first time donors. The group came up with a great matrix to unpack strategy, tactics, and metrics around new donor engagement.
  • Lapsed Donors: this is where retention really starts to come into play, since it costs $1.25 to acquire a new donor yet can be significantly less costly to bring a recently lapsed donor back into the fold. The group came up with several strategies around how to bring a lapsed donor back into the fold that focused on providing a personalized touch.
  • Recaptured Donors: the unicorn of the retention world and the one that can cause the most stress and aggravation is trying to bring donors who have lost interest for several years in a row back into the fold. The group had some excellent strategies and tactics to address these types of donors, with a particular focus on individual and personalized outreach.

We encouraged all groups to think about how they would track this information in an effective way. What types of metrics mattered and what were simply vanity metrics with no bearing on outcomes? And in one of the most important growth points in the FEP data, we also encouraged the participants to think about retention in an omni-channel way.

The reality is that the most effective donor engagement strategies are ones that empower donors to give through a wide variety of mediums, yet with only so many hours and resources at our disposal we encouraged the group to be effective in how they would implement any of the strategies they thought of.

Section Five: Review and Apply What You’ve Learned

As we geared up for the end of the workshop, we wanted to ensure that each and every single participant would be able to walk out of the workshop with something actionable specific to their nonprofit. We encouraged each of them to come up with a goal around retention that they could work on, asking them to be SMART about their planning.

The results were fantastic. A few highlights:

  • One participant had run her actual data through the free tools provided by FEP and brought her print out of the results. We were able to sit down and develop a plan that focused on her top level donors with a realistic stewardship plan that involved personalized outreach through phone and direct mail
  • A participant who came up from New York City (!) stated that his organization focuses heavily on email campaigns that were crisis based in their messaging. As he worked through the data in the case study, he began to realize that adding another messaging layer around and educationally based outcomes report to donors would be an excellent way to create a long term relationship
  • We discussed how creating a culture of philanthropy is a two way street, where many times our organizations may be the first exposure an individual has with giving and our ability to steward new donors right away could mean the beginning of a long term relationship
  • We also discussed the importance of using data to demonstrate our own value as fundraising professionals to our stakeholders, especially as it relates to the salaries we draw. Being able to use data strategically will have an immediate effect on morale and burnout in our industry.

The workshop was one of the best educational experiences that I’ve been a part of and hope that others invest the time and very reasonable resources into implementing this course in their own communities.

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FEP News Research

World’s Largest Giving Database Finds Modest Growth in 2017 Giving, Retention Rates

Overall donations to charities in the U.S. increased by 2% in 2017 while the number of donors increased by 0.7%, according to the Fundraising Effectiveness Survey Report.

The report, a product of the Fundraising Effectiveness Project (FEP) and the Growth in Giving database—the world’s largest database of actual charitable donation history—also found that the donor retention rate increased slightly to 45.5%.

The donor retention rate—that is, the percentage of donors who gave in 2016 and again in 2017 to the same organization—has hovered in the mid-40th percentile for the past decade, underscoring just how difficult it is for nonprofits to keep donations flowing from their supporters.

“While the overall growth in giving of 2% is positive, the millions of donors who do not repeat their giving is very concerning,” said Erik Daubert, chair of the FEP. “The fact that nonprofit organizations are losing 54.5% of their donors from one year to another is not a sustainable strategy.”

Daubert also noted how and why the FEP’s findings are different from other sources of data on the health of the U.S. philanthropic sector. “The FEP’s database looks at more than 13,500 organizations and $68 billion in contributions—actual dollars given to charities providing service—and does not include entities like donor-advised funds or complex algorithms to determine overall giving. The database includes a broad representation of many different subsectors and size of charitable organizations, making it an accurate reflection of what’s happening in philanthropy and fundraising.”

The report found that the average gift amount crept forward—a 1% increase from $1,024 in 2016 to $1,037 in 2017. However, nonprofits with less than $100,000 in contribution income declined 8.2% from 2016 to 2017. Meanwhile nonprofits with more than $500,000 in contributions increased 9% in the same time.

“What we’re seeing in general is textbook fundraising—larger organizations faring better than smaller ones,” said Steve Birnbaum, vice president of SofTrek Corporation, a contributing data partner to the FEP. “There are always exceptions, but larger charities—with more available resources to direct towards fundraising—will typically do better than small ones.” Birnbaum also noted that the strength of the report resides in its detailed focus on donor retention and analysis of gifts and donors over many years.

“The study looks at the data in many different ways,” said Lori Overmyer, CFRE, MBA, chair of the Association of Fundraising Professionals (AFP) Research Council. “For example, we know that every $100 gained in 2017 was offset by $96 in losses through gift attrition. At the same time, every 100 donors gained in 2017 was offset by 99 lost donors through attrition. The FEP encourages charities to delve into their own data and provides tools and templates for organizations to use in analyzing their new, lost, lapsed and recaptured donors.”

For more information on the 2018 study, and to download the Annual FEP Survey Report, visit www.afpfep.org/reports

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Research

Fundraising Effectiveness Project Quarterly Fundraising Report for Q2 2017

Our latest Quarterly Fundraising Report™ is out, and the numbers are a bit sobering.

The Quarterly Fundraising Report™ provides vital intelligence on the health of the nonprofit industry. Revenue and retention metrics report on year-to-date (YTD) performance compared against the prior year for all of the organizations included in the survey.

You can download the full report here: http://www.givingindex.net/GiG_FEP_Fundraising_Report_2017Q2.pdf

For an in-depth analysis, check out this blog post by Project Work Group member Jon Biedermann: https://www.linkedin.com/pulse/worlds-largest-gift-database-shows-decline-giving-6-1st-biedermann/

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Metrics Research

76/4, 89/14, 96/33: The New Fundraising Rules You Need to Know

As a fundraiser, you probably know the 80/20 rule: About 80 percent of your gifts will come from approximately 20 percent of your donors.

The 80/20 rule is based on the Pareto concept: a small proportion of causes produces a large proportion of result. The general 80/20 rule appears in many different professions, including science, sports, computer software, and occupational health and safety.

Today, with better technology, research projects like the Fundraising Effectiveness Project (FEP) can drill down into detailed giving data from thousands of charities. And we’re learning that the 80/20 rule, while a useful rule-of-thumb, it isn’t as precise as we need.

Applying the Pareto Principle to data from the AFP-sponsored Growth in Giving Initiative enables FEP analysts to consistently give us new research-based rules, or ratios, that as fundraisers, we need to understand. Most importantly:

Seventy-six (76) percent of contributions comes from four (4) percent of donors—those who have given $5,000 or more.

That’s right, basically three-quarters of giving comes from the top four percent of our contributors!

Furthermore, as shown in the graph below, the corollaries to our new 76/4 figure are:

  • 89 percent of giving comes from the top 14 percent of donors (those who’ve given $1000 or more) and
  • 96 percent of giving comes from the 33 percent of donors who gave $250 or more.

Try this for a truly sobering figure about how top-heavy giving can be: two thirds of donors (67 percent) account for only four (4) percent of giving!

These are the new Pareto figures for fundraising. Now, of course, your analyses may vary. Every charity will be different.

For this analysis, FEP selected data from the Growth in Giving Initiative (GiG) Database at the Urban Institute for 7,015 small-to mid-size organizations.  These organizations raised $6 billion in 2016 from over six million donors. GiG Database providers include Bloomerang, DonorPerfect, Neon and eTapestry (Blackbaud). 

But these findings have remained steady through the last six years of data that the FEP has been tracking giving (and receiving more and more data from an increasing number of participants).

What do we learn from these figures? Three things. First, think about those two-thirds of donors who gave less than $250 and account for about four percent of giving. How much are we spending on them? How are we cultivating them? A lot of people in that group might be new or one-time donors, and we know from other FEP data that donor retention rates for new donors giving under $100 average around 21 percent. If we can turn some of these under $100 donors into, for example, $20/month recurring supporters, we can dramatically transform our giving.

Second, we must identify our key $5,000 plus supporters—as well as potential key supporters—and enhance our donor cultivation efforts for them. Cultivation is critical! Identifying top supporters is easy, but it’s the supporters one or two tiers down— those in the $250 to $999 category, but not yet in the $1,000 up category—that we need to understand and engage with.

Third, we can use new technology to gain even more detailed and accurate data about fundraising—but we must use it! There are great tools, such as AFP’s free Fundraising Fitness Test, on the FEP website (www.afpfep.org/tools) that you can employ to benchmark and analyze your own giving data

I encourage everyone to participate in the FEP and provide their giving data to the project. Working with fundraising software providers, the FEP takes steps to ensure that the data used is anonymous. Talk to your provider if they’re not already involved, or contact the FEP (at fep@afpnet.org) for more information on how to help.

To be the most effective and efficient fundraisers possible, we need the most accurate and detailed data possible. The Fundraising Effectiveness Project is a valuable tool in improving fundraising and understanding what is working, what isn’t, and where we should best focus our efforts.

Our new rules for success, like 76/4, are a direct result of having the best data. It’s time we all got involved for the betterment of our individual organizations and the professional overall.

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FEP News Research

[INFOGRAPHIC] 2016 National Fundraising Fitness Statistics (NFFS)

The National Fundraising Fitness Statistics (NFFS) provides over 150 metrics across giving levels to allow organizations the ability to compare performance. It is this act of measuring and comparing that allows organizations to identify areas that could be improved.

Understanding how your organization is performing is the first step to identifying strengths and weaknesses.

Take for example the Pareto principle represented in the infographic below, the standard 80/20 rule does not directly relate to non-profit fundraising. As you can see, it is actually 88 percent of the revenue being generated by 13% of the donors.

The Fundraising Effectiveness Project and the Growth In Giving Initiative Data providers have made this type of analysis possible for the first time. It is now available for free on the tools section of this website.

NFFSInfographic

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Research

What Drives Donor Loyalty? Findings from the Latest Donor Research

We have a tradition of presenting “sneak peeks” of our donor research at AFPFC prior to releasing it to the greater public. We believe it’s important to do this to garner the reactions and questions from fundraising professionals out in the field every day. And, of course, because we can’t wait to share our findings! It is through the feedback from AFP members that we’re able to create research reports that are not just reflective of what’s going on with today’s donors, but that also contain actionable information.

At AFPFC this year, we gave a sneak peek of our latest Donor Loyalty Study. In this year’s study we went beyond donor engagement and dug deep into what drives donor loyalty. We surveyed 1,136 donors in the United States who made at least one donation to a nonprofit organization in the past 12 months.

Here are a few key findings:

  • Donating is personal. While this may seem like a given, it is overwhelmingly true for all types of donors. The three main reasons people donate to nonprofit organizations are very personal in nature – they have a deep passion for the cause, they believe the organization depends on their donation, or they know someone affected by the nonprofit’s mission.

Reasonsfordonating

  • Volunteering and events play a big role in driving loyalty. Seventy-three percent of those who volunteered and 74 percent of those who attended an event say they are more likely to donate. This is especially true for Millennials, 52 percent of whom say they’re more likely to donate after volunteering for an organization. While you might not ask your volunteer coordinator to write a fundraising appeal, he or she may play a major role in a potential donor’s experience and the decision to donate again.
  • Content is NOT just king … it’s money. Nearly 75 percent of respondents say they might stop donating to an organization based on poor content. This is a real wake-up call for the sector. How you communicate with your donors is one area where you have the MOST control (the content you create), and really need to spend time and energy building out a solid content strategy. Are you spending as much time crafting your email content as you are on your direct mail piece, for example?

Content

  • Quality, length, and frequency matter. Adding to the findings above, the quality of content you are sending to donors really does matter. Seventy-two percent of donors say receiving well thought-out, polished content is important to them. A majority of donors would like to hear from the nonprofit they support at least monthly, and prefer short, self-contained content (short emails, letters/articles, or videos under two minutes long). It may be time to rethink that monthly newsletter and consider how you can break up that content into smaller snack-size pieces that are more personalized to your donors’ interests.
  • Donors trust nonprofits to spend money wisely. By and large, donors trust the nonprofits they support to spend their money wisely (93 percent). In this study, we also attack the “Overhead Myth” head-on, asking donors how they feel about their money going towards “overhead.” A majority of donors are fine with their money going to things like setting up for events, publicizing the mission, reaching out to volunteers and other donors, and even staffing or administrative costs.

Reactions

Overall, donors want to hear from you, and they want to hear about the personal impact their donation is making. When in doubt, ask your donors how they want to be engaged, and then follow through with their preferences.

There’s so much more actionable data in the full Donor Loyalty Study. We’d love to hear your thoughts on our findings and specific topics we should dig deeper into with next year’s research.