Nonprofit Monthly Sustainers, Part 1: Financial Stability in Any Economy

The percentage of Americans giving to charities has dropped to a historic new low, as reported by a Gallup survey conducted in April during the COVID-19 pandemic. Just 73% of Americans donated money in the past year; the prior low was 79% during the Great Recession of 2008-2009.

Given this drop in donations — and, for many nonprofits, an increased demand for services — a majority of nonprofits are worried the pandemic will endanger their long-term viability as a philanthropic presence in their communities.

According to a survey conducted by the Nonprofit Finance Fund in March, 60% of nonprofits reported experiencing “destabilizing conditions that threaten long-term financial stability.”

This lines up with what we’re hearing from our own clients right now. Their top concerns are losing funding for vital programs and services, not being able to support staff with regular paychecks and safe working conditions, and shrinking donations from individual donors and corporate/foundation funders — i.e. financial stability.

These concerns are not new in the COVID-19 era, though. In one survey of 353 nonprofit executives conducted by Oracle NetSuite prior to the pandemic, financial stability led the list of top concerns within nonprofit organizations. It’s easy to see why….

With a shrinking middle class, major donors are more often carrying nonprofit organizations in recent years. The reality for many nonprofits — especially those with very tight budgets — is that the loss of even a single major donor can threaten day-to-day operations.

Add to this a shift in donor behavior that has driven overall donor retention rates as low as 45.5%, with new donor retention rates as low as 23%.

Donors today are much more particular with their philanthropic spending. With literally thousands of worthy causes at their fingertips, it’s a giver’s market. Donors are quick to defect if they perceive a better opportunity to make an impact with their gifts.

Now, for many nonprofits, COVID-19 seems to be making an already bad situation even worse.

While it will still be some time before we know the full effects of the pandemic on nonprofits, one strategy can help mitigate the impact, provide some predictability to revenue, and keep donors engaged and loyal: a monthly sustainer program.

Donors Are Ready for Monthly Giving

Recent trends in technology have primed donors for a transition to monthly sustainer giving. Netflix, Hulu, Spotify, Disney+, Amazon Prime, and other monthly subscription services have conditioned us to pay for the things we value on a regular schedule. Not surprisingly, monthly giving online was up 22% in 2019 (while single-gift donor revenue saw an increase of just 8%).

Millennials especially are being trained to be monthly contributors. In the Millennial Impact survey by Achieve, more than half of millennials said they would be interested in trying monthly giving. Considering that average monthly giving across all age groups accounted for just 17% of online revenue in 2019, the potential to engage a whopping 50% of this younger generation of donors is irresistible.

The Value of a Monthly Giving Program

Still not convinced of the importance of a strong monthly giving sustainer program? Consider these four points:

1. Monthly sustainers mitigate disruptions

Experiential giving is driving modern philanthropic engagement, which means “one and done” is much more prevalent than it used to be. Whether it’s a hurricane, a presidential election, or the COVID-19 pandemic, predictable and unpredictable events can take all of the oxygen out of the room and disrupt your nonprofit’s ability to consistently engage target audiences. A strong monthly giving program can soften the effects of these disruptions and provide a more reliable source of revenue no matter what is going on in the fundraising environment.

2. The annual value of monthly donors is almost 3x the value of single-gift donors.

According to 2020 M+R Benchmarks Study, the average monthly recurring gift in 2019 was $25, or $300 over a year; the average single-gift contribution for that same year was $111. Assuming monthly donors stick around longer than four months (which most do — see the next point below), they’ll give more than one-time donors. Assuming they stay for a full year, that increase in value climbs to 270% annually.

3. Monthly donors are more loyal and have a higher lifetime value.

According to the Nonprofit Recurring Giving Benchmark Study, nonprofits retain monthly donors at an 85-95% rate (compared to a 45.5% retention rate for all annual donors). Increasing your donor retention rate by just a few percentage points can mean tens of thousands of dollars annually; imagine what a 40% boost would do for your nonprofit.

Combine this with the previous statistic showing the increased annual value of monthly donors, and you can see that an effective monthly giving program will also increase the lifetime value of your donors.

4. Monthly donors cost less.

For most nonprofits, the “digital revolution” in fundraising did not end the need for direct mail appeals. Direct mail remains the gold standard for effective donor engagement and acquisition, despite the costs of printing and postage. But once you’ve enrolled an individual donor into your monthly giving program, you can cut back on the frequency of sending direct mail appeals to them.

We still recommend frequent stewardship outreach (newsletters, thank you messages, annual reports) but that can be achieved by transitioning some or even most messaging to digital — especially if that donor subscribed online in the first place.

Second only to longtime leadership and major gift donors, monthly sustaining donors are often the most valuable supporters a nonprofit can have. That’s why it’s vital for your organization to have a successful monthly giving program. In Part 2, we’ll examine 8 strategies to engage supporters and enroll them as loyal monthly donors.