Way back in 2011 I reported on The Future of Fundraising, a monumental session of brainiacs hosted by Blackbaud and summarized by Adrian Sargeant that sets forth needed changes if our sector is to grow and thrive.

It’s well worth reading the summary to see how far we’ve come — or not — in the past six years.

Today I want to focus on one of the recommendations from that summary. As I somewhat indelicately put it: “Encourage the adoption of monthly giving. No shit! Serious Monthly Giving or Sustainer programs produce 600% – 800% more revenue. Get to it. Now!”

Fortunately, in the six years since that report many more organizations have taken up the call to focus on monthly giving — particularly in the U.S.  I’d like to think that some were inspired by our post on the Fundraising Land Grab featuring insights — and concerns — from Chuck Longfield and a terrific ‘how to’ book by Erica Waasdorp.

Fast forwarding to monthly giving/sustainer programs, the Blackbaud Institute for Philanthropic Impact has published a two-part study titled, Sustainers in Focus, and both parts are worth a serious read and heed.

Today, we’ll start with Part 1: Uncovering the Value of Retained Revenue. Chuck Longfield, the founder of Target Analytics and now Chief Scientist at Blackbaud, deserves to be sainted for his 30+ years of diligent study of ‘the numbers’ of nonprofit fundraising. Millions of numbers from thousands and thousands of organizations. Chuck is the author of these studies and you’ll find his analysis both practical and detailed.

I view my job as summarizing some of his key findings, while recommending you read his full report.

A Message to the Naysayers and Cynics

Many organizations  work on a Fiscal Year that starts in July, so they’re now hard at work polishing their budgets. And, of course the cynics, naysayers and bean-counters are probably battling away against either starting or investing more in a monthly giving program. So let’s get their objections first.

Three reasons commonly offered as reasons to avoid building a monthly giving program:

1. The need for a big investment in recruiting sustainers. Expensive media such as telemarketing, face-to-face or door-to-door solicitors.
2. Negative impact on cash-flow.
3. The presumption that sustaining donors are a less valuable class of donor.

Here’s what Chuck’s study concludes: “We examined 10 years of donor base data from multiple sustainer programs across most sub-sectors. Without a doubt, the data reveals that the barriers of investment and negative cash flow are manageable and the idea that these programs provide little value is dead wrong.”

Of course, it does takes an investment to attract a monthly donor. And if you work for an organization that demands every dollar invested in fundraising pay back immediately, then forget it.  But if your organization is wise and willing to wait for a pay back that may take as much as a year or even 18 months you’ll see in detail in  Part 1: Uncovering the Value of Retained Revenue  why that longer-term investment is well worth it and why these donors are so valuable.

Bottom-Line According to Chuck’s 10 Year Study:

“Sustainer giving is extraordinarily valuable because people give more and it substantially increases donor retention. The combination of these factors not only means a great yield from each donor, but lower costs and higher income!”

Here, according to Chuck, is the key metric we should be using to measure the effectiveness of these programs — retained revenue. Chuck notes, “…while donor retention is the common measure, retained revenue is rarely used to evaluate fundraising performance. This is unfortunate because it works exceptionally well to measure the return on investment (ROI) for acquiring new or reinstating lapsed donors and… converting retained single gift donors to sustaining donors.”

The object of Chuck’s retained revenue analysis was to track income from single gift and sustainer donors as their numbers declined through attrition over a 10-year period. So, in each year he looked at the income attributable to those in the original group who were retained and continued active support.

Here is what his study found:

• Retention is better. “As a function of higher retention and lower attrition, the slope of declining value in retained revenue is more gradual than that of single gift donors. While the retained revenue of 2006 sustaining donors decreased 63% in the decade, the retained revenue of single gift donors decreased 95%. Thus, the ROI in sustaining donors acquired in 2006 was considerably greater than the ROI in single gift donors; this is a finding that calls for more research including randomized trials.”
• The benefits are immediate with new donors. “Contrary to negative assumptions about developing a sustaining donor base, the benefits are immediate and substantial. To make that assessment, our analysis included averaging income per donor for the two years preceding sustainer status and comparing it to the average revenue per donor in the year of and year after conversion.”
• A retained donor is an even better sustained donor. “Those who delayed their commitments to sustaining support for two years proved even more valuable in 2008 (the year of their sustaining commitment) than their 2006 sustainer cousins. The explanation may simply be improved fundraising practice. But a more likely explanation is that a donor who has already renewed support at least once has more value than one who has not. Conversion of retained donors to sustaining supporters may, however, affect cash flow in the year of conversion.”

In short, although the costs of retaining single gift donors can vary significantly from organization to organization, it’s important to note that sustaining donors continue to provide uninterrupted support while single gift donors require re-solicitation, usually with several efforts each year.

Get all the fascinating details in this study to see if your experience matches Chuck’s findings. Click here.

Tomorrow we’ll cover Part 2 –Proven Practices for Success and some words of wisdom from both Chuck and monthly giving guru Harvey McKinnon, the author of the classic, Hidden Gold.

Meanwhile, please share your comments and experiences on budgeting, planning and financing recurring or monthly giving programs.

Roger