Seen and Heard: State of the Industry
Recently, my colleague and fellow data analyst Amy Escobar and I had the opportunity to hear Carol Rhine, principal fundraising analyst at Target Analytics, speak at a DMAW breakfast event. She covered the state of the industry right now, drawing on various Target Analytics analyses, and talked about trends to keep an eye on in this volatile climate. Here are our key takeaways from this informative session:
Revenue is growing, but will it last?
- In general, 2017 was full of reactive giving because of the election. This continues into 2018. Advocacy and environmental organizations have benefited from this the most. Sustainers have played a large role in driving this growth.
- Revenue is up across all sectors by 7.5% over 2016 – with the last two months of 2016 as the highest performing. And the number of new donors has increased for the first time since 2007! We will have to see how they perform over time, because, due to the political climate, these new donors may have giving trends similar to disaster response donors, who typically report low second gift and retention rates.
- The GDP and the S&P 500 highly correlated to revenue growth, with almost all metrics increasing over 2016. However, the new tax law can affect mid-major giving and households with income above $400K. As a result, 2018 year-end giving may stall or even reverse recent Q4 revenue growth. Avalon will track this closely.
Sustainer revenue is driving growth.
With median revenue per donor at $320, sustainers remain a critical part of any individual giving program, and in recent years increases in sustainer revenue have outpaced growth in regular giving. Some facts to keep in mind about this critical donor group:
- Since donors tend to become sustaining members of only one or two organizations, you need to sign them up early. You should solicit new donors for sustainer giving shortly after their first gifts.
- Most sustainers used to come from converted donors, but in 2016 this flipped. Now, more sustainers are coming from new donors than from conversions. In fact, sustainers account for 25% of new donors.
- Younger donors – particularly Millennials – are more likely to become sustainers than existing donors, who are less likely to change their behavior.
- Sustainers are most often acquired through digital sources these days, but the mail can effectively increase awareness of sustainer programs. And face-to-face contact is always a good time to explain sustaining giving and recruit donors.
Millennial giving is still a mystery (time to test).
Millennial giving is a nut our industry has to crack. The biggest change in donors by age came from Millennials, so we know we have to start reaching out to engage and retain them. Turns out they’re not only more likely to pay bills online, but also more likely to actually read their mail. The key is to figure out which channel elicits the best response from Millennials, without changing how our existing donors expect to be contacted. No easy answers here – time to test.
Mail still dominates, but multi-channel strategies – and attribution – are essential.
- Mail’s share of the fundraising pie is declining, but it is still the most productive channel.
- Scaling back mail could hurt your program, since frequent contact is associated with upgrading, even when those gifts flow online.
- People who give online use credit cards, and that leads to giving more. Keep testing.
- Attributing gifts is more difficult now, with more online and mail channels, but still critical. In general, the more impressions, the more responsive a donor is – but impressions can be weighted differently.
Donor advised funds merit attention.
Donor advised funds are experiencing huge growth – there is $100 billion in DAFs now. Nonprofits should find ways to ask donors if they have money in these funds, waiting to be spent. Note that it is no longer true that DAF are only for very large gifts; they operate at many gift levels now.
And finally, here is a quick run-down of sector performance:
- Animal welfare has been very strong, with post-hurricane animal rescues and effective TV spots back on after the election. However, this sector has the lowest average gift due to a shifting strategy to focus more on sustainers.
- Arts & culture has experienced steady growth after the recession. This sector has good retention – 57%, with overall industry retention at 52% – because arts donors are motivated to renew their annual benefits.
- Environmental donors continue to be nondiscriminatory, giving to a host of environmental organizations.
- The health sector – consisting mostly of older donors who respond to old-fashioned fundraising – is the worst performing sector and continues to decline. These giant organizations aren’t as nimble as smaller nonprofits, so they aren’t able to pivot messaging and adjust strategies on the fly.
- Human services/societal benefit can only be described as a mixed bag. Local organizations like food banks are doing well – and growing fast with the addition of sustainers. National organizations have had a tougher road, but they benefit from strong existing donor bases that have helped them manage downturns.
- Of course, international relief sector performance fluctuates with disasters. However, even between those events, the overall trend follows the general index – so it’s doing pretty well. The sector has higher than average reactivation rates, due to people coming in and out of relief giving as events occur. And their online revenue is quite high.
There is much to think about here as we move into summer giving and planning for the post-midterm elections and year-end push.