New Industry Research Validates Importance of Recurring Giving
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by Tim Sarrantonio
One of the greatest lessons to come out of 2020 is that nonprofit organizations need more reliable sources of support. While there is rightfully a focus on the inequitable distribution of funds and other principles of community-centric fundraising, there has also been an increased amount of attention to efficiencies in individual giving programs. These two conversations are not mutually exclusive, and there is one individual giving channel that helps bridge the gap between community-building and individual organization support.
Recurring giving (sometimes referred to as sustainable or monthly giving) programs have proven to be one of the most effective and important investments a nonprofit organization can make. Yet the industry research into the empirical support around these types of programs has been limited.
That is why Neon One is excited to debut an abstract of research we have coordinated with University of Texas at Dallas professor Elizabeth Searing and her research assistant Liam Duell from the University of Albany.
Over the past few months, Neon One's research team has worked with her to unpack over 6.4 million anonymized donation records from a subset of our clientbase that draws data from 3,068 Neon CRM organizations.
This research was initiated to help supplement existing work we perform with the Fundraising Effectiveness Project. While we'll debut the full research in a 2021 industry report, this was too important not to share as organizations begin this year's fundraising planning.
Neon One Recurring Giving Study Execution
To begin the research, the Neon One data team worked with Searing and Duell to identify a scope of work to ensure proper statistical analysis while keeping the identity of both our clients and their donors firmly secure and anonymized. We settled on a time frame of data that would look at donations entered into the CRM between July 2018 through June 2020.
The Donation Identification Numbers (IDs) and DonorIDs were structured to be unique to the individual nonprofits, but we also provided ways to review if donors were contributing to multiple organizations. From the initial 6,426,696 records, over 1 million records were dropped because of duplicate entries, phantom matches, not matching with donations, or because they fell outside of the time window.
We also then binned the organizations against BMF and SOI (IRS Business Master File and Statistics of Income) data for nonprofit level annual characteristics. For the purpose of this summary, we're focusing on findings within the 2019 data time frame, and Searing and Duell presented these at the 2020 ARNOVA virtual conference, the premiere gathering of researchers focused on social good data.
Key Findings of Neon One's Recurring Donation Research
What the research uncovered is that any findings are validated by existing inquiries on the topic, such as the "Nonprofit Recurring Giving Benchmark Study" by NextAfter and Salesforce, and Bloomerang's research cited by monthly giving expert Erica Waasdorp.
Let's drill into some of the key highlights first, and then we'll explore practical strategies a nonprofit can employ to take advantage of this research.
- Recurring gifts represent 15.4% of the annual revenue for organizations analyzed.
- The mean gift size of organizations surveyed was consistently around $63! That is $756 a year!
- Recurring gifts are more likely to be initiated in January than in December, where end of year one-time gifts are highest.
- Credit cards represent 84.9% of recurring gifts, followed by ACH transactions at 14.5%.
- Larger nonprofits are less likely to have recurring gifts when compared to smaller nonprofits.
- Subsectors are important, showing employment, international and religious organizations with a high likelihood for recurring gifts while the least likely to solicit recurring gifts are science and technology, grantmaking, and diseases and disorders.
Source: "How Predictable Is Predictable Giving," 2020 ARNOVA Conference, Neon One, University of Texas at Dallas, University of Albany
Previous industry research has shown that recurring givers have a retention rate of 90% and that recurring givers are six times more likely to leave an organization in their will or make a legacy gift to an organization. This points toward recurring giving being one of the most important investments a nonprofit organization can make to lead toward long-term sustainability.
What Can Nonprofits Learn From This Recurring Giving Research?
As we push past one of the most difficult years in recent history for our sector, it is important to focus on the most effective revenue streams to build a sustainable revenue stream for your organization.
With the average first-time donor retention rate at only 14% as of the most recent Fundraising Effectiveness Project report, creating an ideal experience for recurring donors is critical.
Investing resources into a dedicated sustaining donor program is one of the best investments your nonprofit can make in the coming year. Not only should you be looking into the technology to manage the program but also the story you're telling specifically to recurring donors.
- Ensure that your recurring donors are tracked in your nonprofit CRM. In both Neon One and Bloomerang research, recurring donors gave higher amounts than when compared to digital-only platforms like Classy and Network for Good.
- Streamline the ability for donors to give to your organization online. In a recent case study, the International Community Foundation found that by adjusting the donor's experience specific to online gifts, the number of recurring donors increased by an astounding 729%!
- Invest in resources beyond your technology, and tell a compelling story specifically to your recurring donors. As renowned expert in monthly giving Erica Waasdorp suggests, combine the raw power of your data with stories from donors so the feeling they have when they see their gift's impact comes alive.
With our attention split between an increasing number of options and suggestions for revenue sustainability, the stark reality is that there are only so many hours and dollars our organizations have to invest. Finding the best return on investment from those decisions is the biggest challenge you'll face.
Nonprofits need real data to help make their decisions and the findings we've generated with the University of Texas at Dallas and the University of Albany will hopefully empower your team to make a wise investment into recurring giving.