The Individual Donor Problem — Are You Addressing It?
America is a very giving nation, and individual donors are leading the way. Americans gave more in 2020 than in 2019. In fact, a record $471 billion was contributed by a variety of sources in 2020 in the United States, according to Giving USA. About 80% of these donations were from individuals, a subset of giving that rose 2% over 2019 figures. Approximately 71% of individual donations came from living individuals and 9% from wills.
The largest sector for individual giving comes from Baby Boomers, with 72% donating to charitable causes and an average annual donation of $1,212. Causes for giving and ways of donating are shifting though. Religion, environment and human rights causes have seen strong growth. More donors are turning to online giving, and the focus on social media, in particular, is gaining as a medium for charitable giving.
In a Gallup poll taken last year, 73% of U.S. adults said they donated money to a charitable organization — down from 80% in the prior year. The percentage of adults volunteering also declined, but this could be, in part, due to the pandemic. The decline in charitable activity could also be related to the fact more Americans claim the standard tax deduction through tax law changes.
The greatest reduction in giving by individuals has been among those in the middle ($40,000 to $99,999) and lower income (less than $40,000) levels. In this poll that occurred during the height of the coronavirus pandemic, 25% had planned to increase their giving in 2021. Individuals affected by unemployment have pulled back on spending. The state of the economy will certainly affect one’s ability and willingness to give to charity.
The Indiana University’s Lilly Family School of Philanthropy found, for the first time in two decades, that only half of U.S. households donated to a charity. This confirmed the trend that while donations are reaching record highs, giving is being done by a smaller slice of the U.S. population.
The school has been tracking the giving patterns of more than 9,000 households since 2000, when 66% of households donated annually to charity. That figure dropped in 2018 to 49%. This decline is due to a variety of factors, such as giving reductions to religious causes, younger Americans having not developed a habit of giving and declining levels of institutional trust among millennials. There is also a shift in giving based upon income levels, and there could be a lack of communication on the part of charities in telling the right emotional stories of philanthropic impact.
With 20 million Americans deciding between 2000 and 2016 to stop directly giving to charity, there should be great concern for what this means for the nonprofit sector. Evolving attitudes toward a giving focus instead of organizations, plus the growth in ways individuals can participate to feel connected to a cause, are some of the reasons individual giving has changed, according to a Nonprofit Quarterly series on the decline of individual donors. The rise of social giving for group causes is also changing the ways individual donors traditionally thought in respect to giving. Fewer middle- and low-income donors are giving, either because of inability to give or a shifting of giving to alternative approaches. This has especially hurt small and medium sized nonprofits.
While middle- and lower-income levels are contributing less to charity, big donors are giving more. Therefore, the overall giving amount has not been hurt, yet. Suggestions to stimulate individual giving going forward include having foundations attract individual donors by designing campaigns for matching funds to their grantee partners, funding donor-engagement programs and redirecting gifts to community foundations that provide a community of donors with a social experience donors now want around their giving.
The overall attrition rate in 2017 was less than 50%, meaning if donors gave in one year, less than half of them gave in the next year. Many charities focus heavily on acquiring new donors. Most studies state that it costs about 10 times more to bring in a new donor than keep an existing donor.
Charities must create a donor retention plan and strategy. They need to assess their donor attrition and retention metrics. Seek to understand your donors and obtain feedback from them. You should consider surveying your donors to see why they give and what would make them give again. Also, personalize a method of reaching out to lapsed donors. Invest in staff and recruit volunteers to help thank donors.
Nonprofits always strive to retain more donors. Since the average donor retention rate is under 50%, they need to take steps to retain donors. The percentage of donors who give only once is 70%. Nonprofits must seek to retain one-time donors plus all donors.
QGiv provided eight tips as potential donor retention strategies:
- Offer recurring gift options to make donors give on a regular basis.
- Thank donors through mail, email and phone.
- Share impact stories through photos and videos, and keep donors informed.
- Set up donor accounts so donors can track their recurring donations.
- Offer diverse ways to give, including text.
- Offer peer-to-peer fundraising to turn donors into fundraisers, which connects them to your mission.
- Learn from your donor data so you can adjust your fundraising strategies.
- Re-engage year-end donors by showing appreciation immediately and personalizing outreach to them.
While it is wonderful to celebrate the fact that overall national giving continues to increase, true nonprofit giving is local and institutionally based. Study your nonprofit’s fundraising results in every metric category. Seek to increase your donor base every year, through techniques for acquisition and retention strategies. Continue to note there is an individual donor problem. Do you have this problem and, if so, what are you doing about it?
Duke Haddad, Ed.D., CFRE, is currently associate director of development, director of capital campaigns and director of corporate development for The Salvation Army Indiana Division in Indianapolis. He also serves as president of Duke Haddad and Associates LLC and is a freelance instructor for Nonprofit Web Advisor.
He has been a contributing author to NonProfit PRO since 2008.
He received his doctorate degree from West Virginia University with an emphasis on education administration plus a dissertation on donor characteristics. He received a master’s degree from Marshall University with an emphasis on public administration plus a thesis on annual fund analysis. He secured a bachelor’s degree (cum laude) with an emphasis on marketing/management. He has done post graduate work at the University of Louisville.
Duke has received the Fundraising Executive of the Year Award, from the Association of Fundraising Professionals Indiana Chapter. He also was given the Outstanding West Virginian Award, Kentucky Colonel Award and Sagamore of the Wabash Award from the governors of West Virginia, Kentucky and Indiana, respectively, for his many career contributions in the field of philanthropy. He has maintained a Certified Fund Raising Executive (CFRE) designation for three decades.