Why recurring donations are so crucial in strategic fundraising
This in an excerpt of our new eBook, “Your All-Purpose Fundraising Guide to Recurring Donations.” Get your free copy of the eBook here!
Every dollar raised matters. Your organization should be proud every time somebody is urged to put aside their own needs for a moment and contribute to something selfless.
It’s also true that different causes often see support in different ways. Some nonprofits may see a large portion of their revenues coming from major gifts, while others may benefit more individual contributions in peer-to-peer campaigns.
So what’s all this talk about recurring donations? Why are more and more nonprofits leaning on them to drive their development?
Recurring donations matter because they expand the possibilities for nonprofits. For so many organizations, there is an ongoing battle between the opportunities that exist to achieve its mission and the struggle to raise the funds needed to act. By securing more reliable revenues, nonprofits are able to change the equation. Recurring donors also become great candidates for further engagement, from attending events to planned giving.
Recurring donations expand the donor pool
Psychologically, it is clear that pride plays a big role in donor motivation. Individuals feel good about themselves when they give to a cause, and often, the larger the gift compared to the others, the prouder they are. That’s why live auctions are so successful at fundraising events and why peer-to-peer online campaigns so often feature a leaderboard.
The drawback to this is that it discourages those who aren’t in a position to give as much. Sometimes, prospective donors who can’t give a considerable amount at once decide to not give at all instead.
Recurring donations help find the middle ground. Someone who doesn’t have the means to make a large donation this month can commit to giving a smaller, regular amount over a long period of time. They can feel great about their support of your cause, even if they don’t have the means to take from their needs at the moment. The branding of your recurring giving program can go a long way to making these donors feel crucial. For a nonprofit, this means new supporter demographics to target and new ways to make asks.
Recurring donations expand your revenues
The Nonprofit Technology Enterprise Network (NTEN) reports that the average one-time online donation is $68. While that varies by the type of cause, most fundraisers would accept that number as a good target for their online campaigns.
Meanwhile, a recent Association for Fundraising Professionals (AFP) study suggests that charities saw donors are retained year-to-year just 41% of the time, on average. Combining the two figures, that means that the average donor acquired is worth $95.88 to a charity over two years.
It’s easy, then, to see how recurring donations, with pre-determined automatic gifts, can be very beneficial to a charity’s bottom line. When a recurring donation is made, individuals are much more likely to leave them in place, vastly reducing or even eliminating donor loss year-to-year. Looking at that same two year cycle, the average donor would have to contribute just $4 per month – roughly the cost of one drink at Starbucks – to match the revenue generated from acquiring a one-time gift. Factor in the expectation that those donors will continue contributing beyond two years, the larger donor pool, and the fact that when looking at a monthly fee, many will be willing to contribute far beyond $4, and the increase in revenues continues to grow.
Recurring donations expand your projects
Of course, your team doesn’t just work at strategic fundraising to reach big numbers: the end goal is always about achieving impact on very important missions. Dollars raised by an organization translate into projects they can take on to make a difference.
That’s why predictable revenue is so important. It helps a nonprofit plan big, long-term activities in advance, without having to try and raise the funds at each step to make it possible.
If an organization receives a large portion of its contributions from individual gifts, predictability is difficult. Let’s look again at the AFP report: an average nonprofit sees just 41% of its one-time donors return. In other words, in order to just match its totals from the previous year, fundraisers have to go out and seek to replace 59% of its donors!
That kind of effort is challenging, inefficient, and most of all, risky. That kind of uncertainty can limit the possibilities in front of your nonprofit, much in the same way it does in our individual lives. For example, a bank is much more comfortable giving a mortgage to someone with a stable, reliable yearly salary than it is someone whose income varies a ton year-to-year.
Your nonprofit has visions of incredible, long-term, difference-making projects, which is why it’s crucial that you take the initiative to grow your recurring giving programs.