Donor counts down, but the sky is not falling

In its recent Index of National Fundraising Performance, Target Analysis Group found some information that might scare you. Or might not:

... revenue for the entire year of 2006 grew a median 0.7% over 2005. Median donor counts are down 2.8% from 2004 to 2006, and have fallen a cumulative 1.4% over the past five years. This appears to be due not only to declines in new donor acquisition, which is down 6.7% over the last two years, but also to declines in both first-year and multi-year retention rates.

You can take this with alarm, as at The Agitator, in Danger Ahead?: a shrinking universe of donors is being masked by increases in average giving. How long is that sustainable?

But I don't think most of us need to be afraid. Two reasons:

1. The donor universe isn't shrinking; it's just changing. We're at the beginning of a generational changing of the guard in the donor-aged population. Boomers are different from the older generation, and they're just starting to show up in significant numbers. From the under-60 group, you typically see lower response rate but higher average gift. Get used to it, because that's the way it's going to be for a few decades.
   
2. Fewer donors/more revenue is something many organizations are doing on purpose. They've discovered value is more important than volume when it comes to a healthy donor file. One $20 donor is better than two $10 donors; you'll get the same gross revenue either way, but from the one donor you'll get it at a better ROI -- and you'll walk away with more net revenue. Organizations that know this are not seeking the high volume of low-dollar donors. The result is just what TAG found: lower numbers of donors, but higher revenue.
   

Give it a try. It's working bottom-line magic for several Merkle|Domain clients.

Technorati Tag: 2006+results

Comments

[a fundraiser]

I completely agree with you Jeff. I've been meaning to respond to the original post The Agitator ran back on April 6th... but I just got so busy.

I've heard of the discussion Target held on the conference call with participants and it sounds like list rental, package selection, ask strings are definitely paying REWARDS for higher ROIs.

But I am even more impressed with organizations that have found sophisicated ways to chop the poorest responding segments from their renewals and annual fund mailings. You've written about it before Jeff - in every mailing there are ultimately segments of low dollar donors who barely break even (if that!).

If you mail three renewals, analyze whether its' cheaper to drop out your lowest panel of donors in the third segment. Its intentional decisions by organizations that are tweaking around the margin who deserve the credit.

The world has changed and national adocacy groups no longer need to churn large groups of low dollar premium donors in order to say "WE HAVE ONE MILLION DONORS." Respect in politics and fundraising is evolving.

[Jeff Brooks]

Good questions. I'm not sure old-school direct mail fundraising is exactly "taking a toll," so much as it's just fading -- and there are many nonprofits that just don't know how to change. That stuff used to work, and in a lot of cases it still does work (though we should probably define "work" in this case pretty loosely). The older generation is still here, still giving, still the majority of donors. It would be foolhardy to trash everything that works with them today. It'll go away eventually, whether we're ready or not.

The ways we've been targeting higher value donors (i.e., raising average gift at acquisition): Renting higher value lists; putting demographic overlays on lists; testing away from offers that drive low average gifts (even where high response might qualify it as a winner -- there's some very complicated math behind the decision); higher ask strings.

[Mark Rovner]

Great post, and I think your diagnosis is essentially correct. Isn't it also possible that all those years of unrelenting, impersonal, and gimmicky direct mail are taking their toll, especially with cynical boomers?

Curious what you are doing tactically to aim for higher value -- shift in ask strings? Segmentation differences? Anything else?