I fear the Greeks, even those bearing gifts

The new Fundraising Effectiveness Project data should have me doing cartwheels, or at least my poor middle-age imitation of cartwheels.

In the first half of the year, nonprofits have seen, year-over-year:

  • A 7% increase in total donors and donations
  • A 12% increase in new donors
  • A whopping 16% increase in recaptured donors
  • A broadening of philanthropy with a 19% increase in sub-$250 gifts

These are all measures that have been going down for years.  So it’s great to see them turn around.

But I’m the type of person who looks for the good news in the bad and vice versa.  And there are three things within this report that give pause.*

The first one is minor — there’s a 16% increase in recaptured donors… but a two percent decrease in the recapture rate.  The reason we are getting more donors back isn’t that we’ve gotten better about recapturing them; it is that we have more donors who are lapsed.

Secondly, there’s some continued weakness in retention.  In the first half of the year, we’ve only retained 11.5% of the donors we acquired last year — a six percent decrease year-over-year.  Our new retained donors are down nine percent.

Second-gift retention (and second-year retention) is the critical time for donors.  Your likelihood of getting a gift has jumped up significantly from your acquisition efforts — you know the person was interested in engaging with you at least once and, hopefully, had a great experience.  But they aren’t over the hump — once you get two gifts in the door, your donors should be more likely than not to stay with you.  Not so with the single-gift donor.

At this critical juncture, then, is your greatest moment of leverage.  If you can increase second-gift retention, you have a boost that is difficult to later squander.  Conversely, if you have a dip in second-gift retention, you have dug yourself a hole that is difficult to escape.

That’s why this drop in second-gift retention is concerning even in a time of direct fundraising plenty — it is the engine for future growth.

Third, there is an open question about how much of giving in Q2 was new gifts and how much were gifts that would have been given later in the year brought forward.  We have a few reasons for optimism here:

  • The increase in new donors — new donors by definition don’t have a gift planned for later in the year to bring forward.
  • From our caging reports, Q3 has been just as good as Q2, which would tend to indicate these are new gifts rather than temporally misplaced ones.
  • Giving and disbursements through donor-advised funds has already well outpaced 2019 and the growth projections for this year in a normal year.  There could be not a single additional gift given and it would still be a substantial increase.  (Not that I’m advocating for this.)

That said, the direct marketing juggernaut will likely slow — our expectations are that this is not the new normal.  What we must do is prepare for that slow down by making sure we are ready to retain the new donors coming on this year.  We’ve done a white paper on the topic here

We also recommend that you look at your COVID-19 donors in modeling to see how they compare with your current donors and what their likely retention path will be.  We are working on a report on this topic and so far what I can tell you is there is significant variance from organization to organization, so you may want to do your own analysis (or have your agency do it for you).

* Four, if you count that this is largely a response to a global pandemic that has robbed 210,000 and counting of our fellow citizens of their lives, created economic and/or physical hardship for millions more, and fundamentally altered the way we live our lives and relate to each other.

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