What’s risky?

I’ve heard from a few people recently that they don’t want to make big changes right now: it’s too risky.  I have a different perception of risk; here’s why:

The latest Fundraising Effectiveness Report data are out for first quarter.  They are not good; year-over-year for Q1, organizations were down:

  • Five percent on donors
  • Six percent on revenue
  • Three percent on retention
  • Nine percent on new donors
  • 13 percent on retention of last year’s new donors
  • Two percent on retention of multiyear donors
  • Three percent on donor recapture

It was, in a nutshell, a “where am I going and what am I doing in this handbasket” report.

But, say some, that’s because the pandemic hit in early March.  March was the month where the world had changed and the marketing hadn’t.  We were and socially distanced while watching ads for European river cruises and beer commercials where attractive Millennials get all up in each other’s personal space.

Let’s test that hypothesis.  What was the Q1 report from FEP from 2019?  Turns out organizations were down:

  • Six percent on donors
  • Two percent on revenue
  • One percent on retention
  • 11 percent on new donors
  • Eight percent on retention of last year’s new donors
  • Four percent on retention of multiyear donors
  • Two percent on donor recapture

How about 2018?  Down:

  • Six percent on donors
  • Two percent on revenue
  • Five percent on retention
  • 12 percent on new donors
  • 18 percent on retention of last year’s new donors
  • Three-tenths of a percent on retention of multiyear donors
  • Five percent on donor recapture

That’s right, this year, where March results were down 11% because of a global pandemic, might be the good year.  I threw up in my mouth a tiny bit writing that.

And it’s proven out to be so far in Q2.  From our caging results, April, May, and what we know of June are all up significantly for our clients year-over-year.  Given that there’s a global pandemic on and, as our friend Roger Craver points out, surplus checks aren’t coming again and the economy is volatile at best, we aren’t putting out the parade stand and the bunting.  But up is better than down.

But the long-term trend stinks.  As I put it in my book:

“Winter is coming to nonprofits.  Unnamed, faceless, cold, sparse, biting, relentless, gnawing winter.  And not all will survive.

More nonprofits exist than ever before, with more coming.

The pie of charitable giving is expanding but not as a percentage of GDP.  The pie is also not growing as much as the number of nonprofits is expanding, so the average nonprofit will lose revenues.  What growth there is has slowed, stopped or reversed depending on the study. 

Retention rates (when controlling for lifecycle) are declining.   Getting and keeping donors grow more expensive.…

If our acquisition and retention rates freeze at 2018 levels, we will lose 22% of our donor files over the next decade.  If we continue down the current path with those acquisition and retention rates falling at the current rate, we’ll shed 57% of our donor files.   Venerable organizations could go the way of Sears, Blockbuster, Radio Shack, pay phones, etc.”

You’ve probably heard the one about the way to boil a frog being to slowly turn up the heat; the frog won’t notice the difference until it’s too late.  (Who’s doing this frog boiling, I want to know.  But I digress.)  In this analogy, we are the frog.

So what’s risky?  If your donor acquisition and retention and revenue numbers were all headed downward before the bump in giving that has come as the tiny sliver lining to the giant COVID-19 gray cloud, I’d argue the risk is staying in the pot, thinking the heat will subside any moment now.

It’s time to make the jump.  We would obviously advocate in the direction of knowing more about your donors, showing them this knowledge, increasing customization, building your sustainer files, trying new communications channels like DRTV, and the like, as the evidence seems to be on this side.

But jumping incorrectly no longer seems like the greatest sin; it’s rather not to change at all.

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