"Almost impossible not to make money from these programs"
By Harvey McKinnon
Canadian FundRaiser: March 21, 2001
The tally of new challenges that nonprofits are facing make a formidable
list: increased costs and competition, rising postal rates, lower average
gifts, a shrinking or aging donor base in some instances, increasing public
scrutiny and more donors who are lapsing permanently õ and thatØs just a beginning.
Staff reductions, declining income, declining direct mail response rates,
and a growing number of donors who renew only after a dozen solicitations
ª the list keeps growing.
ThereØs one prophet out there in the trenches, however, who believes ª with
a real fervour ª that things are not as bad as it sounds. Vancouver-based
consultant and Canadian FundRaiser contributor Harvey McKinnon
says that the vast majority of charities could solve their financial problems
with a well-thought-out and properly executed monthly giving program.
The author of a book on the subject, Hidden Gold, McKinnon says that
your organizational priorities should be to develop a relationship with your
donors, and above all, think long term. A $100 dollar giver may well grow
over time, or leave you a substantial estate. Serve your donorØs needs, he
argues. "People have choices, so listen to your donors, and work at satisfying
them."
McKinnon is leading a series of one-day workshops on monthly giving programs
that are sponsored by MoneyStream, a Calgary-based organization that
provides charities with pre-authorized contribution processing services. In
a recent Toronto seminar, he pointed out that fundraising staff have attitudes
to their donors that range all the way from repulsion and contempt through
pity, neglect and tolerance, to appreciation and loyalty.
Treat your donors with respect
Simple donor neglect is the norm in many organizations, he says, but the key
to success, he stresses, is to treat them with respect and respond enthusiastically
to their every need. "This will reflect itself," McKinnon argues, "in the number
of people that respond to your appeals, and how long they stick with you." ItØs
extremely important, he adds, that your staff have a positive attitude to their
donors. Otherwise, it will show. If, for example, your staff who are responsible
for the back-end processing are unhappy or over-worked, "it will be reflected
in a lowered quality of your donor relations."
McKinnon breaks charitable giving into three general streams: spontaneous, which
almost never happens; prompted, when you remind someone in a variety of ways;
and planned giving, which occurs in a variety of special ways õ including monthly
giving.
What makes monthly giving so special?
Firstly, says McKinnon, it increases your income. "This program always works,
because the attrition rate is so low. The average person who joins one of these
programs gives two to three times more money, and stay two to three times as
long. ItØs almost impossible not to make money from these programs," and your
income will grow steadily over time.
If that werenØt already enough, he adds, monthly giving is more personal and
generates better relationships with your donors. In addition, itØs more predictable,
and tends to be much less expensive than other types of fundraising programs,
among other reasons because you need to send less mail. "TheyØre even more effective
with smaller organizations, where your relationships with your donors tend to
be more personal."
Monthly giving is also more convenient for both you and the donor, McKinnon
adds. The ideal approach is a pre-authorized contribution system, which is less
cumbersome and vulnerable to contributor inertia and error than a series of
personal cheques. Both systems, however, are an improvement over payroll deduction
systems because, he points out, when people move or change jobs they are much
more likely to continue their giving even though their new organizations may
not have workplace giving programs.
Monthly giving options
Pre authorized chequing (PAC) is a very simple process, and, says McKinnon,
where you have a choice, the best route for the charity. Credit cards work
well except that they get stolen and lost, people switch cards (without telling
you) for a variety of reasons, and you have to deal with expiry dates. Cheques
are not as administratively simple and straightforward as PAC, but work well.
In the USA, where people are more nervous about giving out their banking information,
70% of the charities still work with cheques.
In spite of the obvious attractions of a monthly donor program, many charities
have yet to give the concept serious consideration. Their reasons vary widely.
1. We tested it and it didnØt work
"It works with any charity," says McKinnon. There is no reason, he argues,
why any charity canØt set up a monthly giving program. You simply need good
copy and a good offer. "Some charities," he adds, "set up different groups
for different types of donors, who may be interested in different aspects
of the charityØs work."
2. It wonØt work with our donor base
Perhaps, allows McKinnon, but not likely.
3. ItØs too much work
It is actually far less work than most other types of fundraising programs.
4. ItØs a small amount of money
Each month, for each donor õ of course. In fact, McKinnon points out, "that,
and the ease with which the administrative aspects of the system can be automated
with the help of an organization such as MoneyStream, are the keys to its
success." Take a number of members over a number of years, he says, "and it
adds up to a phenomenal amount of money over time."
5. We donØt know how to do it
Read Hidden Gold, McKinnon says. "ItØs all there, and anyone can do
it. "
6. Our donors are too old
It could be that they are very conservative, but itØs still worth a try.
One Canadian charity with an average donor age of about 75 years has recruited
monthly donors quite successfully. There are a number of very logical reasons,
beginning with their interest in budgeting their expenses carefully, why older
donors are attracted to monthly giving.
7. Our donors arenØt committed enough
Perhaps, McKinnon responds. But the payoff is so huge, that at the very least
a test of the program should be justified.
Seven essential components for a program
| Attrition of 1000 Direct Mail-Acquired Single-Gift
Donors |
| Year |
Renewal Rate |
No of Donors Remaining |
Value @ $100 /year |
| 1 |
50% |
1,000 |
$100,000 |
| 2 |
70% |
500 |
$50,000 |
| 3 |
70% |
350 |
$35,000 |
| 4 |
70% |
245 |
$24,500 |
| 5 |
80% |
196 |
$19,600 |
| 6 |
80% |
157 |
$15,700 |
| 7 |
80% |
126 |
$12,600 |
| 8 |
90% |
113 |
$11,300 |
| 9 |
90% |
102 |
$10,200 |
| 10 |
90% |
92 |
$9,200 |
|
Total Ten-Year Value
|
$288,100 |
| Source: Hidden Gold, by Harvey McKinnon, Bonus Books,
1999. |
1. You need a donor base.
For each 1000 donors, if 3% convert, you have 30 new donors giving say $10
per month õ You wonØt likely do any worse than this, says McKinnon.
2. You need an appealing mission
This is likely not a problem in most cases, but you need to present your cause
to your donors and prospects in an appealing way. ChildrenØs, animalsØ and
religious causes have been doing this successfully for many years, as have
emergency relief and international charities. It works very well for other
charities, too. Sick ChildrenØs Hospital in Toronto, for example, has
over 10% of its donor base on a monthly giving program after only a few years.
Assess your appeal: your niche, competition, skills to implement or expand
a program, and your ability to tie a monthly dollar amount to an appealing
area. This will give your case verisimilitude, and help establish your price
point. "Give a bible a month." "Give a child sight." But be sure, McKinnon
concludes, that the program is real, and will last.
3. An ability to communicate your message
You should invest in good copy and design. Work with communications experts
that know the rules and what works and doesnØt õ not just what will look good.
Use a wide range of tested media. Remember, warns McKinnon, self-serving pro
bono marketing programs designed primarily to win creative awards may well
do just that, and only that. Experienced fundraisers know that gloss and flash
wonØt necessarily bring in the donors you want and need.
4. An effective processing system
The back end is where the payments get processed and credited to the correct
accounts, the addresses corrected, the NSF cheques and complaints dealt with
in a professional manner, the receipts issued ª on time, the Thank you letters
sent out, and the myriad other details dealt with smoothly. ItØs also not
very exciting and as such, it often becomes the weak link in the chain, the
spot where donors are offended ª and lost ª willy nilly, if inadvertently,
through a benign neglect. ItØs crucial, says McKinnon to work with organizations
such as MoneyStream that can automate this process and reduce the glitches
to a minimum.
| Attrition of 1000 Direct Mail-Acquired Monthly-Gift
Donors |
| Year |
Renewal Rate |
No of Donors Remaining |
Value @ $100 /year |
| 1 |
90% |
1,000 |
$100,000 |
| 2 |
90% |
900 |
$90,000 |
| 3 |
90% |
810 |
$81,000 |
| 4 |
90% |
729 |
$72,900 |
| 5 |
90% |
656 |
$65,600 |
| 6 |
90% |
590 |
$59,000 |
| 7 |
90% |
531 |
$53,100 |
| 8 |
90% |
478 |
$47,800 |
| 9 |
90% |
430 |
$43,000 |
| 10 |
90% |
387 |
$38,700 |
|
Total Ten-Year Value
|
$651,100 |
| Source: Hidden Gold, by Harvey McKinnon, Bonus Books,
1999. |
5. An integrated marketing strategy
Use mail, telephone, volunteers, door-to-door canvassers õ keep testing and
go with what works. Get rid of your pre-conceptions, McKinnon insists, about
how your donor base will respond to a monthly giving opportunity. Present
them with a straightforward opportunity, and include it in all of your materials:
your newsletters, annual reports, donation receipts and acknowledgement packages,
brochures, and direct mail. Use repetition to get the message across in all
of the communications media you use.
6. A focus on thanking and answering donor concerns
Operate on the basis that you simply canØt fool your donors for very long,
says McKinnon. They will very quickly establish whether or not they are anything
other than a cipher to you. Take the time to spell their names correctly.
Find out how they wish to be addressed, and follow their instructions. Give
them the opportunity to become more involved in your work. Strive to develop
systems that respond to their expressed concerns.
7. Donor research and analysis
Invest an effort of time, and if necessary money in understanding your
donorsØ giving patterns. Discover why they give to your nonprofit. This is
crucial information, and youØll often be surprised to find out that their
motivations and hot buttons are not at all what you thought they would be.
Establish which list sources product the most monthly donors. Some do much
better than others. DonØt just evaluate your overall program. Work at building
the effectiveness of your effort.
Harvey McKinnon is internationally recognized as an expert in building
monthly donor programs. He has helped hundreds of US and Canadian nonprofits
successfully launch and expand monthly giving programs. For more information,
contact him at harvey@harveymckinnon.com. Copies of "Hidden Gold" may be obtained
from the publisher, Bonus Books, Inc, telephone (312) 467-0580, or email bb@bonus-books.com.
