The Downward Donation Spiral

It’s that time of the year again when the leaves are falling, the air is crisp and thoughts turn to year-end appeals.  The letter may be in draft form or written and approved; the priming and prepping of board members to write those personal notes on letters to select donors may have begun.

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But you might actually want to stop the process and consider the findings from the Association for Fundraising Professionals’ “2015 Fundraising Effectiveness Project Survey Report.”  This report reflects the responses of just over 8,000 nonprofit reporting on their 2013-2014 fundraising year.   Here is the first sad statistic that jumps out at you:  since 2006, the average donor retention for a nonprofit has been a mere 44%; it “peaked” in 2005 at a gloomy 46%.  And we all know it is easier to keep a prior donor than win a new one.  But the picture gets even bleaker.  Here are some of the study’s findings.

• For every $100 that an organization brought in, it lost $95 due to a returning donor giving a smaller gift than the previous year and donors who lapsed completely; this produced a net gain in fundraising of only $5. The gains came from new donors, previous year donors upping their gifts and recapturing donors who had previously lapsed, in that order; the loses came from repeat donors lapsing, prior donors giving a smaller gift and last year’s first time givers not giving again, in that order.
• For every 100 new donors a nonprofit got, it lost 103, for a net loss of three. While new donors made up 39.3% of an organization’s gain in donors (recapturing lapsed donors was the rest of the gain), loss of the first time donors from the prior year was 31.3%.

These data points actually look at lot worse when compared to pre-recession statistics.  In 2007, nonprofits only lost $86 for every $100 brought in (a $14 net gain) and only lost 82 donors for every 100 brought on.  But that was then and this is now.

Add to all of this the statistic that has eaten at me for years:  charitable giving still, year after year, only makes up 2% of our GDP.  It would appear that we are caught in a downward spiral that isn’t being stopped by any of our current methods of wooing and keeping donors and dollars.  It is certainly possible to read these statistics from the Fundraising Effectiveness Project as hard proof of the reality of the vortex model of giving.  If that is the case, either we need to adjust expectations and/or come up with new approaches to fundraising.

But any way you read this trend data, it looks as if we have hit a new reality, where donor loyalty as defined as year after year of giving, and where that giving might even be small increases over time, is no longer the case.  We may not yet know the why of all of this—the vortex at work or the continued growth of the nonprofit sector providing donors with too many options on which to spend their money or others things at play—but we do know that one way or another, what we are doing now isn’t the best return on our investment.   So, before you act on what you were going to do for your end of the year appeal, you just might want to give it some second and third thoughts—and perhaps some innovative thinking.