According to the 2015 M&R Benchmarks Study, online monthly giving grew by 32 percent in 2014, compared to just 9 percent for one-time giving.
If you’ve ever wanted to build a predictable monthly revenue stream and create donor loyalty for your organization ... If you’re looking to lower your fundraising costs while simultaneously reducing donor attrition ...
Monthly giving is your answer.
A longtime staple of fundraising programs throughout the world, monthly giving finally is gaining traction in the U.S. Nonprofits are realizing that it’s a potential gold mine, especially for smaller organizations.
Since I've been so focused on launching my latest “Basics and More” course, and have monthly giving on my mind, I thought I’d share my interview, recorded back in 2010, with Harvey McKinnon, author of the classic monthly giving primer, “Hidden Gold.” In it, McKinnon shares why, for even the smallest nonprofit organization, beginning a monthly donor program makes all the sense in the world.
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The majority of my members, course participants and subscribers are from the roughly 55 percent of U.S. nonprofit organizations with annual budgets of less than $1 million. That said, they’re usually one-person marketing and development shops. Given their limited resources, how can they best introduce monthly giving to the mix? Can we start with your seven great reasons—I love this part of your book—to start a monthly giving program now?
Harvey McKinnon: Absolutely. Well, the best reason I think is you’ll dramatically increase your annual income. Since “Hidden Gold” came out, we’ve analyzed probably hundreds of files and looked at how much donors were giving before they became monthly donors and how much they were giving afterward. And, generally speaking, on an annual basis, each person [who] converts to monthly giving gives two to three times more money, some of them even more.
So even in an annual program, you will see from the people who will give more money, because it’s just easier to give $20 a month than two checks of $120 a year. You also build better relationship[s] with your donors because every interaction isn’t just asking them for money. You’re usually reporting back on how their gifts have made a real difference to the program and the mission of the organization.
One of the most important things is that donors will stay with your organization longer. When people collect monthly gifts, either by credit card or what’s called electronic funds transfer (EFT), where the money’s automatically transferred from [the donor's] bank account into the charity’s bank account, they tend to go on forever and ever, and it depends on the channel that recruits them whether it’s the person-to-person solicitation or monthly giving. But, generally speaking, once someone signs up on the program, they will stay on your donor base and give you money every year or at least three times on average longer than the person who is giving you single gifts currently. And that’s pretty magical, because that coupled with the fact that people upgrade their income[s] each year means that you are going to get more income, usually eight to 10 times more income.
We just did analyses for one of our clients from Marmot Recovery Foundation, a small charity. The Vancouver Island marmot is the most endangered animal in North America, or was till we raised a lot of money to build breeding centers. They’re still threatened, but [the breeding centers have] made a huge difference. But we were analyzing [the foundation’s] file and discovered that people who became monthly donors gave six times more on average in a given year, and you can imagine that, because [its] attrition rate—meaning people who drop out from monthly giving—is only about 8 to 10 percent a year, compared to anybody who was in the donor file. This is probably up in the 20-to-30-times-more-valuable range over time.
Another great reason is that it’s predictable. So for many small organizations especially, you know that your money comes in when you contact your donors. Occasionally there will be a big grant, whatever. But if you can depend on X-thousands of dollars coming in every month, whether it’s a summer month or a month where everybody’s on vacation, that’s incredibly helpful cash flow, and it helps predict what’s going to come in the following year. We can usually predict within 1 or 2 percent for every one of our clients—and these include some really large clients—how much [donors] will give for monthly giving, because there’s so little attrition on these files, especially if they’re direct-mail-recruited monthly donors. Easy to predict, and even if you’re recruiting from television or face-to-face, you can usually predict with a fair degree of accuracy what the attrition rates are. You’ll also lower your fundraising costs.
Once you mail six times a year to your donor’s solicitation, [he or she] become[s] a monthly donor, you don’t have to contact [that person] nearly as often. If [the individual] start[s] giving electronically, [he or she] will still give, and that’s pretty important. So once you build up a large file that means you can actually save a fair bit of money. Again your income can also grow over time because, in addition to the fact that people stay longer and give more each year, it’s easier to upgrade donors. So if you have somebody giving you $15 a month, and … say 10, 11, 12 months after they [have] been on a program, you send them an appeal or make a phone call saying, “Could you increase your gift by just $3 a month? That’s just 10 cents a day. Would that be possible?” Well a lot of people do that. For many of our clients, the average is somewhere around $5 for upgrading. And even if only 10 percent of the people do it each year, that’s a phenomenal number of extra dollars over the course of the donor’s lifetime. In addition to that, the upgrades often make up for all the money lost by anybody dropping out of the program.
And, lastly, the seventh reason is convenience. It’s easier for charities to manage these programs, and it’s also easier for the donor. And the donors like the fact that it’s easy for them. No organization will get 100 percent of the donors signing up monthly. But if you have 1,000 donors, and 10 percent of them sign up … and you know that they’re going to give you three to six times more money per year, that’s the equivalent of getting lots of new donors.
You mentioned “easy to run,” but just how easy is it for an organization to run a monthly giving program? Because most of them, I think, don’t seem to understand that part of it.
HM: Right. Well, it’s the most common form of fundraising in the rest of the world. The U.S. tends to be behind in this. The banking laws in the states were behind the times compared to other nations. But that did change in 1979 when EFTs [were] allowed, and I guarantee you there’s probably millions of people in the U.S. [who] are on these programs but not necessarily for charities. What they’re doing is they’re paying their membership[s] to health club[s]. They’re paying their tax bill[s]. There are all sorts of interactions that people are doing on a monthly basis on their credit cards that are in fact exactly the same thing.
So what we’re saying to nonprofits is: People for the most part are already on monthly schedules. They frequently get paid on a monthly basis. They almost certainly pay many bills. They get deposits from Social Security on a monthly basis, etc. So it’s something that people are actually familiar with, and when you can tell stories in your newsletters about somebody like the other donors who have done this, and it’s easy, and they like giving this way ... that’s the way to inspire other people to think, “Well I can do that, too.”
The simplest way for smaller groups is to use credit cards. So EFT, most of the companies—and there’s a bunch of companies that do the processing for quite cheaply—they’re probably not interested in having an organization as a client that can only process 50 checks a month, because from a business perspective, they’re going to lose a ton of money on that. But for credit cards, that’s a very easy thing to do.
And once you do that, you just pay the percentage to the credit card company, and donors are quite familiar with doing it on a credit card. All things being equal, an organization that is listing that has enough of a donor base that [it] believe[s] that [it] can get a lot of people on EFT, I would recommend that as the best of the two electronic options, primarily because people who give electronically will actually will have more value over time.
Sometimes, for some organizations, the credit card donors might even give on average 8 to 10 percent per month. But because cards expire, people lose their cards, change their cards to get frequent flier points for an airline, etc.—there’s more activity around that. People tend to keep their bank accounts much longer than [they keep] their credit cards active. So EFT will in the long run likely make you more money. If somebody’s listening that’s already in the program, I would work hard to get credit card people onto EFT.
My next question—do you think that monthly giving should be introduced to a select group of the most loyal donors in the database or to the entire list?
HM: Monthly giving should be introduced to the entire list. Even with our clients who are doing prospecting to acquire new donors through the mail, we always invite them subtlety to become monthly donors. And it could be a line in the letter saying, “And by the way, one of the best ways to support this cause would be to become a monthly donor. [Our] club is called ‘Friends For Life,’ and there’s information on your reply form.” It’s not a hard sell. Most people won’t pick it up, but we usually got at least half of 1 percent of new donors signing up. Now if you’re mailing a million pieces, and you get a 2 percent response rate, that’s actually a lot of people. If you’re only mailing 1,000 pieces, it is not many people, but it adds up over time.
If an organization is adding, converting 1 to 2 percent of [its] file a year, by the end of a decade [it will have] up around 10 to 20 percent of [its] donors on a monthly giving program. … The only organizations that get a lot of people, build a file really quickly, are those organizations that are either doing direct-response television—which is unbelievably expensive; you have to have a big brand name—or by going face to face.
So, if you’re in any European city, or most Canadian cities, and some American cities will have people on street corners and high-traffic areas asking you to sign up as a monthly donor to Greenpeace or Amnesty International or UNICEF. It works really well with big brand names, much more difficult with other organizations. That’s the way to get volume. But for most of the organizations I suspect will be listening to this, they have smaller budgets and smaller donor bases. I think you just mentioned it, an integrated American perspective, so you talk about it in your newsletters. When you’re having special events you mention it. You have a brochure that you can give to people in thank you letters, etc.
Oh, exactly. I love your ideas, including the stories of the monthly donors in your newsletter, in your emails.
HM: I think it works really well because people do understand, “Hey, that person’s like me, they found it easy. I can do the same thing.”
Exactly. And this is one of the biggest questions that I’ve received and it has to do with acknowledgment, and I’m sure you’ve heard it a million times, too. How and how often should monthly supporters be acknowledged? Do they need a thank-you letter every month? Should you recognize your monthly donors in your annual report or newsletters? Well, we’ve just covered that.
HM: Well you definitely don’t want to thank them every month, because people will just become irritated by that. I was analyzing a really large file the other day. It had half a million donors and a lot of monthly donors, and [the company doesn’t] communicate with [its] monthly donors all that often. They’ll get a couple of newsletters. They’ll get an upgrade letter, one calendar and that’s about it. And the thank-you letter is the can “thanks for the upgrade” letter. Now [its] attrition rate is only 8 percent a year—8 percent for any filing that they’d like. Most charities have a lot of older donors really, but that is the people dying, going into seniors homes, moving out of the country, etc. It’s virtually 100 percent of the people [who] can continue giving are continuing to give with getting only one thank you a year.
And you can very well easily thank them subtly in a newsletter saying we want to recognize our monthly donors and thank them. Some organizations put their names in, others won’t. My general feeling on [it], if you’re going to acknowledge [people] in a newsletter, you should just ask permission because they may not want their spouse[s] to know, or other people to know or other people to know about their giving to a particular cause. This is out of respect, so …
Can I ask you what would be your absolutely best advice for the small nonprofit getting ready to start a monthly giving program?
HM: Look at organizations like Greenpeace, Amnesty International, World Vision, Oxfam, big brand names. They’re doing it not only in the U.S., but they’re doing it globally, and they’re really successful. … I was doing some workshops for UNICEF in Europe for all the different UNICEFs globally, and then [in] 18 months came back and did another two-day workshop with them in Paris luckily.
That would be nice.
HM: That’s a great thing to do. And in that 18-month period, because [the organization is] working in so many different countries, [it] locked in about an extra $175 million in long-term value from the monthly donors [it] recruited. So what [it was] doing as [it] held these things skill share, [it was] sharing ideas. ... [The book "Switch" has] got a great segment in there on bright spots, and you look at what’s working and you do more of that, and that’s what [it was] doing in these workshops. I’d say [of] the big brand names … World Vision has probably globally a couple million monthly donors. Certainly Amnesty [International] has half a million. Greenpeace has well over a million monthly donors. [It is] doing a lot of things right. So people can go to these websites, they can join these monthly donor programs, find out how they’re doing. And it’s a great way to learn likely proven-tested techniques. People who are doing monthly giving programs have a million monthly donors. They’re testing things all the time, finding out what’s working. And you can adapt what they are doing to your particular cause and make a lot of money and recruit monthly donors.
And again, if you’ve only got 1,000 donors, you’re not going to have 800 on a monthly giving program. But for every 1,000 donors, you should be able to easily have [50] to 100 people without too much work, and, in some ways, small organizations have a huge advantage. I have gone around and asked friends to be monthly donors as opposed to making a single gift to sponsor me for something, and what that means is I only have to ask them once and the gift just keeps on giving. And do you have time for a short story?
Oh, absolutely.
HM: OK. How I really caught on to this, and I hate to say this, way back in 1979 I was sitting in my office one night working, writing a fundraising letter for Oxfam, and got a call from some friends. They happened to be across the street in a Greek restaurant, saw the light was on in my office building [and] called me. They invited me over because they didn’t have enough money to pay for the tip and coffee. So I paid for their coffee[s] and tip, but I brought three forms along with me for the Oxfam’s monthly donor program, and I had filled out their names and addresses. All they had to do was check off the box that said either $15, $25 or $40. And this is in 1979 dollars, so that would be at least the equivalent of $30, $50 and $80 today, probably more. Every one of them signed up, and 31 years later two of them are still giving. The $15 person is now giving $40. The person who dropped off gave for about eight years, then he went off to a sabbatical in Europe, and I don’t know, I need to check with him to see if he’s still giving or giving again. But really, in that time they’ve given about $15,000.
And all I had to do [was] take, you know, three minutes of my time to fill out their addresses and say, “I’d like you to sign these.” And they did, and the money will keep going on virtually forever. When you are giving every month for 31 years, you’re just not going to stop that program. And I’ve been on the program for 30 years. Even if I get irritated with the organization every now and then, I’m not going the stop the program. Inertia ... great, great thing.
And the people who are giving, one of them owns two houses in Vancouver, which is one of the most expensive real-estate markets in North America. He and his spouse, who also has a high income, have no children, so they’re literally worth, minimal, a few million dollars. They will have to make a decision some day [as to] where they’re going to give this money. Since they have no children, there’s a really good chance they’ll look up the charities that they give to—and the charity that they’ve given to for 31 years and likely will continue to give for another, hopefully, 20, 30 years is an organization that almost certainly will get a piece of their estate.
So monthly givers—whether it’s self-selecting your best donors during your monthly giving program, [who] are more likely to give a legacy, or because you have a better relationship and work with them over time [that] they decided to become legacy donors. Monthly donors are the greatest bequest donors. And for most files, we’ve analyzed on a per capita basis they’re as good as volunteers, and that’s pretty good. So my feeling is that ... the people who are in that file can then be cultivated to make that all important bequest.
That is a fabulous story, thanks so much for sharing. I just think this is a total no-brainer, that everybody should be doing it.
HM: Everyone should be doing it.
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Pamela Grow is the publisher of The Grow Report, the author of Simple Development Systems and the founder of Simple Development Systems: The Membership Program and Basics & More fundraising fundamentals e-courses. She has been helping small nonprofits raise dramatically more money for over 15 years, and was named one of the 50 Most Influential Fundraisers by Civil Society magazine, and one of the 40 Most Effective Fundraising Consultants by The Michael Chatman Giving Show.