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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/

Categories
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.

Categories
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

Categories
FEP News

Sluggish First Quarter 2018 Raises Concerns for Year-Long Giving Outlook

While relatively little giving occurs in the first three months of the year, data from the Fundraising Effectiveness Project’s (FEP) 2018 First Quarter Report shows some early warning signs for charities and giving.

The Report, which looks at giving data from January to March 2018 and compares it to the same time period in 2017, reveals that every metric the FEP analyzes is on the decline—with the exception of revenue produced by donors giving $250 or less.

Key metrics in the study include the total number of donors (down 6.3% compared to first quarter 2017); total revenue (down 2.4%); and overall donor retention rate (the percentage of donors who continue to give to the same organization from one year to the next, down 4.6%). The number of new donors fell significantly (down 12%), as did the number of newly retained donors (new donors last year who have made a second gift this year, down 18 percent).

“The reason we’re so concerned with these first quarter numbers for 2018 is because of what we saw in 2017,” said Jon Biedermann, vice president of DonorPerfect CRM Fundraising Software. “For the first three quarters of 2017, giving was way behind the pace of 2016. Only a record-breaking 4th quarter increase is why giving increased overall by the end of the year. So far, giving is off to an even worse start in 2018, so we’re concerned about what charities may experience in their fundraising throughout the year.”

Elizabeth Boris, founding director of the Center on Nonprofits and Philanthropy at the Urban Institute, cautioned that there were two major caveats to the findings. First, previous studies by other organizations have found that a large majority of giving occurs in the final three months of the year, October through December. Declines in giving in the first quarter and beyond do not necessarily portend a year of decreased giving.

Second, the new federal tax law, passed late last year, significantly changed giving incentives and may have been a key factor in the extraordinary level of giving that occurred in the last quarter of 2017 (a 47% increase for donors donating $1,000 or more compared to the last quarter of 2016). While it is too early to conclusively state what the exact impact of the new tax law was on giving, it is very possible that the higher levels of giving in the fourth quarter of 2017 created a sense of donor fatigue and led to lower-than-usual levels in the first quarter of 2018.

“The bottom line is that we are now in a very different charitable landscape than we were 12 months ago,” said Jay Love, chairman and chief relationship officer of Bloomerang. “The work of the FEP and the use of the Growth in Giving database—the world’s largest database of actual nonprofit donation history available for public and private research—is going to be critical as we help charities navigate this new environment and inspire donors to support their causes.”

Another concern that the latest data underscores is the continuing trend of fewer donors giving more money. With the number of donors down more than six percent, but giving revenue decreasing by just 2.4 percent, the charitable sector continues to see fewer, typically wealthier donors accounting for more and more of giving totals. “This situation simply isn’t financially sustainable for the 1.5 million organizations that make up the charitable sector,” said Mike Geiger, MBA, CPA, president and CEO of the Association of Fundraising Professionals. “Donors who give $50 – $250 annually are the mainstay of many charities that don’t have major gift programs. The slow, long-term drop in the number of these donors is jeopardizing the work and impact of many charities.”

Data from the FEP’s First Quarter 2018 Report is based on a panel of charities selected from the Growth in Giving database of 154 million transactions from 17,597 organizations and $68 billion in donations since 20015. 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.

Jeff Gordy, CEO of NeonCRM, which contributes data, notes that charities should be very concerned by the decrease in recurring giving, as well as the decrease in major gifts. “Not only are nonprofits attracting fewer major donors, but they are not retaining the donors they already have,” said Gordy. “Nonprofits will need to do a better job of promoting their work and staying in touch with their donors to reverse this trend. This report covers the averages, but there are many nonprofits that are breaking this mold and doing much better.”

You can download the Fundraising Effectiveness Quarterly Report for Q1 2018 here.

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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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Resources

Free Member Webinar – Getting the Most Out of Your Fundraising Effectiveness Project

AFP recently hosted a free webinar for members on the latest from the Fundraising Effectiveness Project and how you can use the data to raise more funds!

AFP members can access the webinar here (login required).

Categories
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.

Categories
Fundraising Metrics

Keeping A Finger On The Pulse Of Your Organization’s Health

We all know that fitness is important to stay healthy, focused, and to overall enjoy our lives. Yet have you ever approached your nonprofit’s fundraising data the same way as you would your own health? When you’re first starting a training program, you don’t immediately jump into the heaviest weights or the highest incline on the treadmill. Today, we’re going to help you dust off those data skills, stretch your analytical mind, and put that brain to work.

What is the Fundraising Fitness Test?

In collaboration with PSI/Adventist, the Fundraising Effectiveness Project has developed the downloadable Excel-based FEP Fundraising Fitness Test (#1). It allows nonprofits to measure and evaluate their fundraising programs against a set of over 150 performance indicators by five donor giving levels. The fundraising performance reports are generated by inserting gift transaction data into the Fundraising Fitness Test Excel template.

However, we are going to concentrate on the primary items to review when first getting started with the Fundraising Fitness Test. Having data is important but we want to focus on the primary indicators that are going to be actionable and informative when you are planning your appeals and campaigns.

What are the standard reports to focus on?

Having over 150 performance indicators can be overwhelming if you’re just now getting into deep data dives that the Fundraising Effectiveness Project analyzes in its own work. That’s why we’ve put together this handy training guide so you can start getting ready for your own fitness test. Let’s look at some of the most interesting indicators that your nonprofit should pay attention to.

Donor Retention RateThe number of donors who gave last year and gave again this year, divided by the total number of donors last year.

New Donor Acquisition Rate – The number of new donors this year, divided by the total number of donors last year.

Net Gain of Donors – The net of gains in the number of donors minus losses in the number of donors from last year to this year, divided by the total number of donations last year.

Average Gift – The total dollars received divided by the total number of gifts received.

Growth In Giving – The net of gains and losses in giving from last year to this year, divided by the total value of gifts received last year.

Lapsed Donors (or Attrition Rate) – The number of donors who gave last year but not this year, divided by the total number of donors last year.

As mentioned, these are just the beginning of the key performance indicators that your nonprofit should be paying attention when loading data into the Fundraising Fitness Test. But why are these important in the first place?

The importance of fundraising fitness

Health is important. And just like our own health care system, your nonprofit’s health can be complicated and frustrating if you aren’t sure what to do with the information you’re given. The above metrics are a great start to understanding what is going on with your donors, but what exactly should we do about it?

We’ve heard from Ben Miller before on the importance of some of the metrics outlined here. Consider that a great starting point if you’re looking for concrete details on what to do when you have the data run through the fitness test. We have also gotten a deep dive from Jay Love on retention—one of the best starting points for understanding how your organization is doing—with some particularly exciting insights into household giving.

Yet why does any of this matter? What happens if you’re bringing in enough money to cover the bills, perhaps even exceeding last year’s revenue goal? What is the Fundraising Fitness Test going to actually do for your organization?

Let’s take a concrete example and unpack it. Let’s say your organization’s overall donor retention rate is at 59%, so you’re keeping a majority of your donors. However, you can’t just look at retention rate for a full understanding of your fundraising health. For instance, what happens if you have a high donor retention rate but have high losses in the number of donors? What story might that tell?

Simply looking at the percentages isn’t enough; your organization must look at the actual people and amounts that are being retained, lost, etc. A high retention rate of small gifts may be completely wiped out by the loss of one or two major gifts. Diving into the people behind the gifts is a vital part of completing the fitness test itself.

How can I act on the information I learn?

Once you’ve taken the test, you need to lay the information out and connect the dots together. Taking the standard reports we’ve outlined above, your organization will begin to identify holes in your donations strategy and should work to plug them. Just like if you went to the doctor and might be hitting your weight goal but have high cholesterol, your nonprofit needs to look at the full picture and create a plan to identify what to do.

Let’s break out a short overview of what can be done for each of the primary reporting items we identified above. Check to see if you see that there are issues when you run your own report.

Retention – Work on your stewardship program, creating processes to communicate with donors in a clear and meaningful way.

Acquisition – Create outreach events that are designed to introduce your nonprofit to new people in your community, such as having a board member host a party where you highlight your mission to the board member’s network of friends that have been personally invited.

Donor Gains – Ensure that any outreach efforts made, such as the board member event, are followed by solid stewardship procedures with a personal touch by appropriate staff and volunteers.

Average Gift – Review the copy of your appeals and see if they either are suggesting too little or if you provide too many options for donors to give. They’ll gravitate toward the lowest ones if you give them too much time to think about it.

Growth In Giving – Segment your donors into giving levels and try to understand the percentage gains in each level. If you’re seeing significant lag or dips in one particular level (especially the highest) then take time to create a specialized outreach plan for those types of donors.

Lapsed Donors – Check the appeal lists you’re sending out. Are you giving special attention to donors who gave at a certain point when you’re doing your appeal but haven’t yet? Spot check your lists for prominent donors and ensure you haven’t missed something.

The above is just the beginning. There are deeper metrics that the Fundraising Fitness Test can showcase, such as the Pareto Principle (80% of your revenue comes from 20% of your donors) or six-year trends of giving. When running your data through the fitness test, approach it as something that must be acted on and you’ll be on your way to a healthy check up year after year.

Categories
Metrics

6 Metrics Fundraisers Can Use to Improve Their Growth in Giving

Ask any fundraiser if tracking their donors giving history is important and the answer should undoubtedly be “yes!” Unfortunately, living in today’s world of Big Data can lead anyone to easily get lost in its vast sea of data points (check out this article in Scientific American about just how big our world of Big Data really is).

Therefore, it’s critical to narrow down which metrics matter most to your organization and how to best track them.

In general, the two most important things to consider about any metric you wish to track are:

  1. Will changing this metric improve my ability to achieve my objective?
  2. What strategies and tactics can I undertake to improve the metric?

To illustrate the how and why these two questions are important, let’s use an analogy we can all relate to – keeping a doctors’ appointment. Your objective is to get to the doctor’s office prior to your appointment time. Consider that there are three possible outcomes: arriving early (your goal to get more time with your doctor,) arriving on time, or arriving late.

Let’s start with these two metrics:

  • The time by which you need to leave
  • How fast you need to travel

Just knowing how fast you are going or what time you left, however, does not help you get to your destination early – unless you can change either your speed or your time of departure. So according to this example, there are two strategies one can undertake to achieve the objective: either leave earlier or drive faster. But you really can’t determine if A is the best strategy without also knowing B. Then, factor in costs associated with both. Driving faster costs more money in gas. But leaving earlier costs more in time. Do you want to arrive early because you need more time with the doctor? Or are you okay with the status quo time allotted? And if you’re late, can you really afford to miss the appointment?

The same is true for fundraising metrics. Take Growth in Giving for example. Growth in Giving is defined as the gains minus the losses. If you gain more than you lose, you have a positive growth, versus losing more than you gain, which will equate to a loss. Simple enough right? This growth/loss number is very important, but if you only have that number to examine and are looking at it alone, then you’re not able to do anything except understand whether you did better or worse than the prior year.

If you really want to achieve your desired result, you need to understand how your chosen metric ties into your overall objective and what strategies and tactics you can undertake to improve that number. (Do you need more time at the doctor or are you just trying to keep the appointment?)

There are six primary metrics and multiple ways to improve their growth in giving. I will review a few of the ways these metrics can grow:

The growth number as it relates to new donors is perhaps the most straightforward but it’s also the most expensive. To improve this number, you must acquire more donors. You can do this through purchasing and trading name and address lists to create direct mail and email, fundraising events, face-to-face canvassing, telemarketing, direct TV, and peer-to-peer fundraising to name a few of the most common and tested acquisition methods. New donor acquisition is very costly at the onset because the return rate is generally quite low. Therefore, it’s very important to track the cost to acquire a donor (your CTA) for each of these programs to determine which acquisition strategies work best for your organization.

To retain or recapture a donor you’ve already acquired, the same basic acquisition strategies apply. However, it’s easier to retain a donor that is already engaged with the organization than it is to recapture. At the base of any strategy to retain/recapture a donor are a few fundamentals. First and foremost is to acknowledge how much their donations have helped the organization and thank them for their gift. Be very clear about how much you value them. Then present them with compelling reasons to continue to donate to your organization. Demonstrate that the need still exists and illustrate clearly how your organization is helping to meet that need by sending your donor regular updates. This all seems pretty straightforward, but it can be difficult to balance your need to ask for a donation while being sensitive to the donors’ ability and desire to donate again.

The retained donors that increase their giving have demonstrated their ability and desire whereas the retained donors that decrease their giving may have lost either the ability, or desire, or both. While it is difficult to gauge a donors’ ability and desire, using a donors’ past behavior can help to predict future donations. Whether you use predictive models like we do at DonorTrends, or Recency, Frequency, and Monetary value (RFM) variables, looking at your donors’ past behavior can help to determine not only how much to ask for but when to ask for it. For example, if you have donors that have given at least $100 every year in December for the past 10 years, it would be a good bet that this coming December is a good time to ask and $100 would be a good amount to ask for. If your objective is to increase their donation, further looking at their past behavior can help you determine what the right amount is to request.
The lapsing new and repeat donors are the donors that are not retained on your house file. The lapsing new donors are the ones that only gave one gift and will lapse at a much higher rate than the lapsing repeat donors. In either case, using the same fundraising methods as described above will help to reduce this number, however, you will need to test and finesse which strategies work best for your organization.

For all of these metrics, keeping track of them year over year will allow you to calculate an average for each. You can then assign a life time value (LTV) to each new donor that you acquire. Those averages will help you plan for the future and know what to expect. I recommend using a 5-year average for your LTV and then adjust your growth based on your knowledge of current trends. Using that calculated average will iron out any variances due to outside influences and give you a good place to start.

Hopefully, I’ve illustrated both how and why it’s so important for you to track these critical metrics. Fortunately, the Growth in Giving Initiative has created a free Fundraising Fitness Test that allows any non-profit to track their metrics. So there are no more excuses for missing your doctor’s appointment.

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Fundraising

Why Donor Retention Is A Game Of Musical Chairs

During many of the presentations I give around North America, I often share research data from the Panel Philanthropy Study regarding the number of charities supported annually and year after year by households in the United States.

Among the many key points of the research study are two sets of data points that every single fundraiser should know about and utilize in their strategy for donor retention:

  1. Dollar Amounts Given By Household Income Level
  2. Number Of Charities Supported Annually By Household Giving Level

The first set of data points revolves around the amount given in dollars annually by each of three household income levels:

The household income levels shown are under $50,000, $50,000 – $99,999 and over $100,000. The study outlines both the average and median giving. Please bear in mind the average can be buoyed upward by extremely large gifts. During our presentations we focus in on the median levels to show just how few dollars there are up for grabs by the over 1.4 million registered charities in the United States.

Notice that the median total amount gifted is $540, $1,000 and $1,850 for the three respective groupings. When any charity analyzes their database to see just how many donors are being retained year after year and multiply that number times some portion of the household giving level can you realize the potential “Lifetime Value” of each household.

This provides a vivid introduction into just how important it is to have a strategy to retain those donors from one year until the next. Only by improving your organization’s donor retention strategy can you obtain your fair share and higher of the household dollars being granted to charitable giving as well as being in position to garner larger gifts and legacy gifts. (Those larger gifts and legacy gifts are most often made after consecutive years of giving to your charity…)

The second set of data points hones in on the number of charities supported annually:

  • Income $50K – 2-3 organizations supported
  • Income $100K – 3-4 organizations supported
  • Income >$100K – 4-5 organizations supported

However, in each income bracket, one of the supported orgs is usually a church (that they attend), and another is most likely a school (that they attended, that their children/grandchildren attend).

The actual number of charities supported annually truly surprises most fundraisers. My guess is that it would horrify most nonprofit board members if they were made aware!

Yes, the number of charities supported annually on the average in the United States is not what anyone of us deeply involved in the nonprofit sector would like to see. With the average donor retention rate being below 50%, in fact closer to 40% in our country we can see just how special year after year donors are!

Digging into the caveats mentioned above provides even more alarming insights. Of the charities supported annually by the various household giving levels, one is usually either their church or some other religious organization, and another is often either their school of some nature. The latter would include a member of the household’s high school or college and/or their children or grandchildren’s schools.

Once those caveats are taken into consideration you can easily see the number of annual giving slots decreases dramatically to either 1 or just 2 or maybe 3 slots for the households above $100,000! (There are often actual gasps when professional fundraisers attending our presentations see this information for the first time.)

Summary

Hopefully, the insights and data above provide the impetus for taking a deep dive into your organization’s donor retention strategies. This dive should include evaluating and comparing your donor acknowledgement processes and your donor stewardship processes. As we have outlined in numerous previous blog posts just moving your overall donor retention level up 10% can increase the lifetime value of your donor base by 100% to 150% or more.

Based upon proper strategies for donor stewardship and retention you can win at the game of “musical chairs” being played by all of the charities in our country vying for those extremely valuable year after year annual donors.