The True Value of Monthly Giving Programs

While in D.C. two weeks ago my good friend Roy Jones and I shared a lunch conversation about Monthly Sustainer fundraising programs.  Specifically, why more nonprofits don’t have sustainer programs, how we can promote and encourage organizations to start them, and what the long-term value (beyond just current year net) really is.

Then a few days ago I saw that Roy wrote a great post on this topic over at Roy Jones Reports.  I hope you enjoy his thoughts on the subject. . .

Do you have a “PREAUTHORIZED GIFT” program? Why Not?

It doesn’t matter whether you call it a pledge program, recurring gift program, monthly giving program, sustainer program or preauthorized gift program it is the same technique and they all add up to a huge additional revenue stream for your organization or charity.

The bottom line is when a donor gives you permission to systematically collect a specific amount money on an agreed upon date each month you are going to increase annual giving exponentially.  Test after test has concluded that the life time value of donors who participate in preauthorized giving will increase from 100 to over 1000 percent.

Just do the math…. If you get just 100 people to give you $50 per month that is an additional $60,000 a year for your organization; 500 people would be an additional $300,000; and 1,000 monthly donors at $50 per month would be $600,000.  You cannot afford to delay implementing a monthly giving program.

Preauthorized giving is so successful because it focuses on how the donor wishes to give.  It is donor centric in its application.  The offer therefore combines the convenience of giving with the savings to the charity.  In addition, you emphasize that “time is money” and giving through this method has immediate impact on their local community.

Preauthorized giving programs make it easy for donors because they never have to make another decision whether to give.  Preauthorized gifts can be collected in any form the donor deems as the easiest for them.  Gifts can be collected by credit card; electronic funds transfer (EFT), or bank draft (ACH).  Bank drafts (ACH) are different from EFT’s because the use the Federal Reserve’s Automated Clearing House (ACH) system.  ACH transactions usually offer lower fees and no expiration dates. Of course, some donors like to send a physical check each month in the mail each month and in those cases your organization will want to do a monthly thank you and reminder letter to this group.

Just remember the most successful sustainer or preauthorized giving programs allow donors to give any way they want, whenever they want. The best programs are always integrated across all of the marketing channels with an emphasis on using the telephone to close the deal.  Also, pay special attention to recruiting new donors to the organization to pledge monthly. You will have much greater success with new donors that with converting your existing multi-donors.

There are huge advantages to implementing a preauthorized giving program. Target Analytics recently released a study highlighting just some of the advantages:

• Monthly sustainers tend to be younger than single gift donors
• Monthly sustainers give significantly more per year than single gift donors
• Monthly sustainers have higher retention rates than single gift donors.
• The majority of sustainers continue as sustainers when they renew each year.
  • The higher retention rates from sustainers result in much higher loyalty over the long term.  Compared to single gift donors, many more are still giving after three, four or five years.
• Monthly sustainers account for 10% of the donor population, contributing 21% of the total income.
• Multi-year sustainers give on average 9 gifts per year compared to a multi-year single gift donor that gives on average 1.6 gifts per year.  Note: 9 gifts out of 12 per year equal a 75% fulfillment rate.

Harvey McKinnon in his book “Hidden Gold” says that preauthorized giving will become more prevalent as more Americans move to on line giving.   He notes that 50% of Canadians now pay ALL of their bills through EFT or on line.  He notes that 50% of Canadians, 85% of Europeans, and 95% of the Japanese use EFTs to pay bills and make all of their donations.

In addition to the HUGE spike in revenue, there are lots of advantages to not-for-profit organizations and charities using preauthorized gift programs.  McKinnon outlines some of the biggies:

• Builds a better relationship with donors.  Monthly giving helps donors feel special, elite and plugged in.  Monthly givers should be your top prospects for wills, bequests and planned gifts.
• Keep donors giving longer. Preauthorized monthly giving dramatically extends the giving life of a donor over decades, not just a few years or months.
• A sustainer program lowers your overall costs of fundraising and improves your fundraising cost ratios.
• Sustainer income grows over time.  Within a few years it is not unusual to see 5 to 7 percent of your entire 0-12 month file giving in a preauthorized program.  This can essentially double your organizations overall income

HOW TO GET STARTED?

1. Good Record Keeping. First and foremost you must have a database or system of accounting to track each member you sign up to ensure timely processing of the contribution every month.  The worst mistake you can make is to launch a program, beginning signing up donors for monthly pledges and then not be able to track the donors giving.  So make sure you have a system that works for sustainer donations.   I am not suggesting you buy an expensive system for tracking monthly gifts. I have seen many outstanding programs managed on an Excel spreadsheet or simple ledger system.  The most important thing is processing gifts on the same day for each donor each month.  Donors often get frustrated if EFTs or credit card payments get deducted “willy-nilly” anytime of the month.
2. Ask Every New Donor to Make a Monthly Pledge.  Test after test has proven that the best time to get a donor to make a monthly commitment is immediately after getting involved in an organization.  They are excited.  They have made an initial investment and now, if you ask them that will have an annual plan through monthly giving some amount they are comfortable with to your organization.
3. Segment and Target before a Special Appeal.  Monthly preauthorized giving programs are not for every donor.  Never, never, never mail your entire donor file a standalone appeal exclusively soliciting a monthly gift.  Target and segment your prospects beginning with donors who have given three or more times in a calendar year to your organization.  We often call these donors “multis” because they are donors who give multiple times in a calendar year.  What you are looking for are “super multi” donors who can give 12 or more times a year.
4. Suppress your major donors who give more than $1,000 a year.  Although major donors often make three or more gifts a year, you do not want to give them the opportunity to reduce their annual giving by pledging 12 smaller gifts a year.  Major donors are very sophisticated and they have money to donate because they can add.  If you write a $1,000 major donor and ask her to pledge $50 a month, make no mistake about it, she will do it and you’ll end up with $600 a year instead of $1,000.
5. Suppress your “super duper” multis.  You will have some donors on your file who are already writing 10 or more checks a year.  I have seen some donors who literally write a check every week, more than 50 checks a year.  Leave these donors alone!  If they are already giving that frequently you run the risk of suppressing overall giving anytime you lock them down to only making 12 donations a year.

A recurring donations program will dramatically increase the lifetime value of your donors while reducing your cost of fundraising.  It takes time, patience and tenacity but get started and stick with it.  In the end you may just double your net revenue each month.