3 Reasons Why Recurring Giving Is Crucial to Your Fundraising (both today and tomorrow)
Have you wondered why recurring giving programs are important? Do you accept recurring donations? Do you focus on them? One of the interesting things I’ve found in my career as a charity nerd (official title) is how valuable recurring donors are to organizations but how little time, attention, and resources are spent on recurring giving programs (generally speaking). There are many reasons and misconceptions but Harvey McKinnon, one of the foremost recurring giving thought leaders in the world and author of Hidden Gold (a classic) put it this way:
The single largest obstacle to a successful [recurring] giving program is buy-in.
So as we begin to share more of our findings from The Nonprofit Recurring Benchmark Study and run more experiments on recurring giving I want to take a bit of time to help bolster the case for recurring giving and get you bought-in (if you are not) and provide some ammo to help get others bought-in. So here are…
3 Reasons Why Recurring Giving Is Crucial To Your Fundraising
1. Good for you
Greater Lifetime Value
The 2017 Target Analytics donorCentrics Sustainer Summit — a benchmark study about recurring giving — found that “sustainers” (another name for recurring donors) are worth up to 4x more than those from one-time donors over the life of their giving (and for small organizations, it’s more like 11x!
Classy recently released The State of Modern Philanthropy and in it, they found that recurring donors were worth 5.4x more over their lifetime than one-time donors.
4 times. 11 times. 5.4 times. The main point here is that recurring donors are much more valuable when it comes to lifetime value.
More Money In a Year
Now, you may be thinking “well that’s all well and good but I need more money now!” I’d probably respond that you are being too short-sighted and that lifetime value is THE only metric that really matters for your fundraising but then I’d get off my high horse and let you know that Network for Good found that monthly donors gave 42% more than their one-time counterparts in a year. And that the Sustainers in Focus study shows how recurring donors in their 1st year are worth 52.5% more than one-time donors
Then I’d hop back on my high horse and ride off into the sunset.
To boost lifetime value, you can either get people to give more (which I’ve already covered) or you can give them to give longer (this is donor retention). And it’s the difference in retention rate that really drives much of the lifetime value difference for recurring donors.
When you compare the 1st year donor retention rates of new recurring donors (52% according to the 2017 Target Analytics donorCentrics Sustainer Summit) to that of all 1st time donors (23% according to the Fundraising Effectiveness Project — infographic from Bloomerang here) you can see that new recurring donors are more than 2x more likely to give again in year two compared to all first-year donors.
But if you expand that time period to 10 years, recurring donors are 4x more likely to be giving compared to one-time donors (according to Blackbaud Institute’s Sustainers in Focus). And some folks see recurring donor retention rates in the 85% to 95% range.
Donor retention not only helps drive lifetime value but the longer giving period allows your organization to better build relationships with these donors which can lead to increased volunteering, advocacy, and even planned or legacy giving.
Predictable Cash Flow
I hope you’re sold on recurring giving already but just in case… it gets better.
Because donors are giving every month, you can spend less time and money on advertising, direct mail, etc. to ensure that they give again. So the net revenue (revenue from the donor minus costs to acquire and keep) is much greater as well. This isn’t to say you shouldn’t communicate or spend time and money on recurring donors (you should) but it is cheaper to keep a donor than to try and get one back or find a new one. Especially when it comes to recurring donors.
And because the donation is recurring on a set schedule (most often monthly) your organization can better project and predict revenues (and costs) into the future. Your finance folks will love this because with so many unknowns in the fundraising world, being able to know you’ve got some revenue coming in allows you to make better and more accurate strategic decisions.
Those are all reasons why monthly giving is good for your organization but it’s also good for donors as it is a high impact, high convenience form of giving.
2. Good for donors
Giving $300 seems out reach for quite a few donors or is maybe a bigger decision. But for many people giving $25 a month is very doable which adds up to that $300. Recurring donations allow people to make larger donations while managing their own cash flow.
A study in The Science of Giving found that giving in smaller amounts more often made people happier than giving larger amounts less frequently. So even if someone had $300 to give at once, they, in theory, would be happier giving it away in $25 increments throughout the year.
Another study in The Science of Giving offered people the chance to give $120 away all at once now, all $120 at once later, or in $10 increments each month for a year and found that the majority of people (61.5%) chose to give every month compared to all at once now (29.8%) or all at once later (8.7%). This gets at how simple it is for our brains to think about equal payments. It’s mentally convenient.
Recurring giving programs often also have some other convenient factors like allowing donors to upgrade, downgrade, and cancel at their donation at anytime, consolidated tax-receipts, and getting asked less frequently for donations (in theory).
So recurring giving can be a great way to give for all kinds of donors — young and old, low and high capacity, male and female — which is partly why recurring giving programs for nonprofits, and similar subscription purchasing for for-profits, are growing.
3. Growing (and should continue to do so)
In that 2017 Target Analytics donorCentrics Sustainer Summit report — which covers 38 organizations, 20.5 million donors, 61.4 million donations, and $2.52 billion in total giving — saw an unprecedented increase of 25% in recurring donors in 2017. 2016 saw a 15% increase (nothing to sneeze at) and the 5-year increase from 2013 to 2017 was 70%!
The availability of tools to make the transaction side easier certainly helps but the recurring style of transaction is becoming more prevalent in other industries as well.
A McKinsey study on subscription e-commerce found that 15% of all online shoppers have one or more subscriptions and that the subscription e-commerce market has grown 100% over the past 5 years.
This style of purchasing — to replenish items you need, get curated items you may want, or access to content and offers you like — is particularly relevant to 25 – 44-year-olds. That demographic group is only going to command more attention in the philanthropic space as they age and have more disposable income.
Recurring giving is good for you in that it provides more predictable revenue today, a lot more revenue in the future, and allows for more relationship to develop with your donors over time with fewer resources required.
It is good for donors as they can give in a way that is high impact (greater giving over time and happier while doing so) and high convenience (easy to understand, set up, and cancel).
Recurring giving programs, and similar subscription e-commerce plans on the for-profit side, have been growing rapidly over the past 5 years and seem to be only accelerating in terms of growth moving forward.
If you don’t have a program, now is the time! And if you do, it can always be optimized. Good luck!
Get the Free Nonprofit Recurring Giving Benchmark Study
We worked with Salesforce.org to better understand how recurring giving fundraising was being done through the eyes of the donor by giving three different gifts — one-time, one-time and converted to recurring, and recurring — to 115 nonprofits in 9 different verticals and tracked the giving experience and communications along the way. We even reported one card as lost and the other as stolen to see what kind of systems nonprofits had in place.
Get all the stats, info, and more insights for yourself and download The Nonprofit Recurring Giving Benchmark Study today.