If you plot a donor file that relies mostly on monthly giving (think UK, not US) using a histogram with financial values given over last year or 2 years on the horizontal and counts on the y axis you get a plot that looks something like a mix between the “skewed right” distribution and the “symmetric” one.  Do the same thing for the typical US file and you’re likely to get something closer to the “Right tail extreme” distribution.

What does this mean?  It means the file that is largely comprised of monthly givers (again, think Europe, not US) is more “stable”, less variance in amounts with the US file having more extreme, upper dollar values AND far more smaller dollar values (i.e. lower than the average for the file)

It is almost certainly the case that the monthly giver model is the better alternative if one were to factor in lifetime values and retention rates.  In the newspaper business publishers get an extra six months of subscriber tenure if they secure credit card payment versus check.

Sidebar: Recognize this has NOTHING to do with loyalty of greater commitment to the product or brand, merely the power of what we’d call hassle factor barriers to exist – namely taking the time to cancel.  We make this observation only as a side note suggestion that organizations not mistake “good” behavior in the form of repeat monthly payments on credit card as a marker, necessarily, of attitudinal Commitment.

However, one unintended consequence of the monthly giver model is typically a far lower difference in the percentage difference in giving between High and Low Commitment donors compared to a cash/check revenue model.  We know the average, annual difference in giving between High and Low Commitment donors (those who attitudinally love you or have little or no connection to the organization) the US is 131%.  Let us stipulate, there SHOULD be a difference and a big one.  Your best customers or donors are a small percentage of your file and they give a disproportionate amount of your revenue.  The goal is to maximize this by treating them differently WHILE identifying the next best set of propects to build the relationship with to increase Commitment and in turn, lifetime values.

This difference in value between High and Low Commitment monthly givers (it is a fundraising myth to assume all monthly givers are Committed) is far less.  What does this suggest?  It strongly suggests organizations with a large monthly giving segment are leaving money on the table since that difference SHOULD be there and it is only not there because of structural and procedural decisions – namely a “let it ride” mentality for folks secured by credit card.  It is true that many monthly giving programs implement special appeals in an effort to create more “spread” in the value of the monthly givers segment.  However, that does not appear, on average to maximize the “spread”.

Don’t mistake this as an argument against the monthly giver revenue model.  It is categorically the better alternative to cash/check given the positive impact on retention and the soul crushingly bad retention realities of check giver models.

But, that isn’t the point.  The point here is, can the monthly giver model be EVEN better?

What might be a way to make it better?  In our view, more products to sell.  Anecdotally, many charities in the US are starting to think this way and look for alternative revenue streams from their main one – e.g. a “catalog” charity wanting another “product”, a child sponsorship group creating a single-gift product/strategy.

In the commercial sector traditional product companies (think Apple) have different products meeting different needs but also, different versions/alternatives within a given product type – e.g. ipad versions, ipod versions.  Much of this has to do with wanting to attract a larger swath of consumer with different ability to pay and price sensitivities.

More product, more choice, better chance of matching up with customer or donor need/ability to pay and price sensitivity – this, in a nutshell, is the better revenue model and to be fair, many groups are already on this track.  The trade-off is having to manage all these products and that does have cost but this is really nothing more than a different way to segment the world  – i.e. by donor type and need and then building the business around it.