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Have donors reduced their giving?

Fiona Paterson, Fundraising Strategy & Data Consultant from Pareto Fundraising takes a look at results from tax time appeals run in Australia looking for trends that can inform our understanding of the current marketplace.

Tax time is the biggest time for cash gift giving in Australia. It’s usually a time to celebrate our biggest appeal of the year. It is also the time of year I am most often asked ‘How are other charity’s appeals doing?’

This year, as a result of low consumer confidence and concern over the impact of the GFC on our donor’s decision making, many fundraisers felt increased anxiety as the end of June and the end of financial year approached.

With Tax appeals often contributing a large proportion of an organisations annual cash income and recent insights from the Pareto Fundraising Benchmarking cooperative showing us high value gifts (those in excess of $1,000) are given predominantly during May and June, we were keen to see what trends could be observed this Tax time.

This year at Pareto Fundraising we worked on, or supported, over 20 tax appeals. Strategies employed, channels utilised and lodge dates varied across charities. This week I have taken a look at preliminary results across our partners hoping to answer the question ‘How are we faring as a sector’?

So what did I see?

  • Around half of charities chose to set targets at or below 2008 actuals. The other half set their targets above 2008 actuals, aiming for growth.
  • Across the charities we collaborated with, income per thousand donors mailed has increased over 2008 levels for one third of the appeals and two thirds have decreased. Increases were between 6 per cent and 69 per cent and decreases were not as extreme, between -4 per cent and -24 percent^. This is reflected in the results of the Pareto Fundraising Benchmarking members, where 14 charities have participated in a comparison of appeal results and one third saw an increase (13 per cent to 233 per cent) in income per thousand over 2008 and two thirds were down (-1per cent to -38 per cent).
  • Response rates have varied widely. The impact of a change in targeting strategy (usually decreasing mailing volumes), a change in ask strategy (usually from soft to specific) and the maturity of the data file (in particular files where the cash giving base is not being refreshed with new donors) has seen many go up and some go down but no discernable trends, or difference from 2008.

Average gifts presented no clear trends either, from a -28 per cent decrease to an impressive top increase of 77 per cent. The majority of increases can be arbitrarily attributed to a change in ask strategy and many of the larger decreases are the result of a decline in the number of high value gifts (with a handful of lower value gifts or non-responses from this group of donors having a big impact on overall average gift compared to 2008. Overall, there were two distinct groups of donor bases with two distinctly different outcomes.

The two groups

Group One – predominantly cash donor bases, first tax appeal working in collaboration with Pareto Fundraising.

The experience with these appeals shows us that despite the GFC there is room in many donor bases to grow. Across the board these appeals have exceeded results from 2008, increasing income substantially, by an average of 104 per cent, over 2008 income (i.e. they doubled their tax income in 2009!).

This outcome was reflected across the benchmarking group as well where all predominantly cash based charities saw increases in their income over 2008.

Why?

The implementation of a combination of the following strategies has allowed these charities to maximise response rates, increase average gifts and minimise contact volumes.

  • Applying a segmentation model based on previous giving behaviours
  • Using this segmentation model to identify those most likely to respond to a cash ask at Tax time
  • Using individual, previous gift levels to make personalised ask s (as opposed to a one size fits all strategy)
  • Repeatedly asking donors directly for a cash gift (and nothing else)
  • Using a strong case study to represent the need and telling a clear story presenting the solution and how the donor can be part of this
  • Presenting an income target required to implement the presented solution and using a deadline to encourage prompt response
  • Employing a follow up approach to non-responders, asking again against the target
  • Focusing effort on the top 20 per cent of donors (with a variety of high touch, personalised approaches)

The next challenge for these organisations will be to ensure continued commitment from their cash donors – with regular giving conversion being explored by most as a reliable strategy for identifying more committed donors. Our experience has seen that strong cash response provides the best prospecting ground for regular giving conversion (i.e. active cash donors are your best regular giving prospects).

Group Two – programs focused on regular giving, donor base a mix of regular givers and (declining) cash donor volumes.

Many of our charity partners, and the benchmarking group, have focused their fundraising strategy on the recruitment and conversion of regular givers (as this is the number one growth funding stream in the marketplace today and is delivering substantially higher income than the majority of cash only giving programs).

The result of this strategy is a diverging base of committed regular givers and left over cash donors (people who have chosen not to convert to regular giving). The majority of regular giving recruitment strategies see limited new cash donor recruitment and the outcome of regular giving conversion strategies sees the most committed cash donors convert to a regular gift.

The outcome is that the most engaged cash donors convert to regular giving, more regular givers are recruited in addition and the cash only donor pool starts to dwindle through natural attrition and donor resistance to commit.

A good proportion of cash donors who convert to regular giving will continue making cash gifts when asked and regular givers recruited through direct mail, phone and online can be approached for cash gifts successfully^^.

The outcome this tax time has been stability, and in many cases, growth in the cash giving from these donors (regular givers with previous cash giving behaviours).

It is the cash only donors that present a concern. Response rates and/or average gifts are not hitting targets for many charities. Lower response or average gifts from middle and low value donors coupled with lower response or decreased gift value from high value donors has seen income from some charities dip below 2008 levels and for others simply maintain, due to improved performance from cash gifts given by their committed regular givers.

In all cases the strategies described above for Group One have been employed by these causes for several years, indicating the opportunities described for the first group have already been taken advantage of.

For charities in this group, those that saw growth over 2008 were able to maintain their cash pool giving (usually through the behaviour of new cash recruits) whilst maximising income from regular givers who also give cash.

If you aren’t acquiring new cash donors and are therefore reliant on a shrinking pool of cash donors you may well be feeling the effects of less committed giving from these donors this tax time. If you have increased the giving opportunities for donors this year it would be worth looking to see if your donor’s normal giving has simply been transferred to another method of giving. For example, have some given online at tax time when they normally give via direct mail because you sent email reminders or promoted online as a response channel?

Understanding the impact that regular giving conversion has on the makeup of your donor base is key to predicting future behaviour of your left over cash donors. If you have a regular giving program and aren’t asking your regular givers for cash, then^^^ considering this approach is an opportunity for growth.

Armed with these insights, my focus now is on ensuring future appeal targeting takes these observations into account, that strategies and income expectations for cash donor pools within regular giving focused strategies are refined, that strategies are reflective of the need for high value donors being given the most effort, and lastly helping those charities yet to venture in to regular giving, to get their programs going.

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^ I have used income per thousand donors mailed as a way to address the variation between volumes mailed between charities and I have compared against 2008 levels because each charity employs a different approach for setting targets.

^^I have seen limited success in asking face-to-face recruited regular givers for cash through the mail (though using a considered test approach can help you uncover those face-to-face recruits who may be responsive through the mail) but don’t discount the opportunity to test using other channels to approach for additional cash gifts. Proposition is key as is appropriateness of how, when and what you ask for.

^^^Asking regular givers for additional cash gifts will not impact on your attrition if handled appropriately. Using a long-term approach to developing a relationship with your regular givers, and respecting their regular gift as the most important way they support you is essential.

About Fiona Paterson

Fiona is a Fundraising and Direct Marketing professional with over ten years experience helping to find, keep and grow donors through the expert management of strategic fundraising and database marketing programs. Enthusiastic and passionate about data, Fiona has a solid background delivering successful fundraising programs globally for clients including ChildFund Australia, Children’s Cancer Institute of Australia, MSF Hong Kong, Leprosy Mission New Zealand and WWF-Australia.

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