Fundraising is all about donors. That seems obvious. And yet, for the longest time executives at charities and the fundraising profession didn’t have basic information about some of the most obvious and fundamental aspects of fundraising.
How well do we retain donors? How much should organizations focus on acquiring donors versus retaining them? What are the impacts on giving of acquiring, retaining or losing a donor?
Finding answers to those questions and others were the goals of the Fundraising Effectiveness Project (FEP), a joint initiative between the Association of Fundraising Professionals (AFP), the Center on Nonprofits and Philanthropy at the Urban Institute and several nonprofit software providers. When Wilson “Bill” Levis, an affiliated scholar at the Urban Institute and Dr. Cathy Williams from AFP started the FEP in 2006, no one could have imagined that it would evolve into one of the largest philanthropic research studies in the world. It now includes a number of programs under the Growth In Giving initiative (GiG).
Using “Big Data”
The GiG initiative is helping nonprofit sector leaders understand patterns and processes related to gift giving in the United States, and soon in Canada, through the use of “Big Data.” The idea for the new GiG Database was developed by Jon Biedermann from DonorPerfect and Levis in 2012, and has expanded with the additional support of Abila, Bloomerang, Neon CRM and others.
The GiG database, now containing more than 100 million transactions, tracks gift date and gift amount and utilizes both an encrypted donor ID and encrypted nonprofit ID number to track how a donor gives to charity over time. By analyzing these key metrics we can evaluate hundreds of data points to see and understand how donors are giving to their charities of choice, which will help organizations with donor retention and acquisition.
We’ve learned a lot already through the FEP and the GiG database. Unfortunately, what we’ve learned hasn’t always been positive. For example, nonprofits have a lot of work to do when it comes to retention. The overall retention level for organizations in the FEP has averaged just 46 percent. The retention level was 65 percent for repeat donors, but for new donors, retention averaged just 25 percent.
These are troubling figures because it is much more expensive to acquire new donors than retain older ones. With the ratio of new to recaptured donors at 2.8 — meaning that for every recaptured donor, nearly three new donors were needed to maintain file size — significantly more is being spent acquiring new donors than if there had been more focus on retaining current supporters.
Of course, all of this data is irrelevant if you do not even know your donor retention in the first place. If you fall into this category though, you are not alone. Understanding donor retention is hard, and the FEP is trying to change that, too.
There’s also good news. Through the GiG database, new research shows that $250 is an important tipping point in the donor retention question. Donors giving that amount or more are far more likely to remain loyal to your organization than other contributors. The researchers at the FEP also have come up with a formula for determining the value of retaining a donor (and conversely, the cost of losing one), based on your own organizational data.
That’s the real benefit of the FEP. It’s the tools organizations can use to focus on their own unique donor performance.
The FEP looks at growth in giving as the sum of gains (from new donors, recaptured donors who hadn’t given the year before, and increases from existing donors) versus losses (decreases in gift amounts by downgraded donors and lost gifts from lapsed new and lapsed repeat donors). Growth in giving is increased both by maximizing gains and minimizing losses.
Using the Free Tools
What the FEP and GIG provide are tools that allow your executives to look at gains and losses from various donors (new, lapsed, recaptured, etc.) and determine the best places to focus resources to improve giving and retention.
Nonprofits can start with a free “Fundraising Fitness Test (FFT)” to measure and evaluate their fundraising programs against a set of more than 100 performance indicators by five donor-giving levels. The performance reports can be generated for each year as far back as your gift transactions history goes.
The core Growth-in-Giving Report is a second separate Excel-based template that provides a concise, yet informative picture of fundraising gains and losses — growth in giving and attrition — in a simple, reader-friendly format that executive staff and board members can understand. If you’re still scratching your head about what all this means, here’s what a couple of organizations have done with the FEP.
The YMCA of the USA is working with a number of local Ys around the country experimenting with using the FFT to improve fundraising. Ryan Johnson, CFRE, is the director of the Y pilot project that is one of many separate but inter-related projects committed to improving fundraising performance through the FEP.
“The Fitness Test is helping our participating local organizations critically analyze their fundraising operations and begin to ask the right questions, creating conversations that haven’t always been possible,” said Johnson.
Philanthropic Service to Institutions (PSI), a department of the Seventh-day Adventist Church’s North American Division completed a case study of the Fundraising Fitness Tool use with the Hope Channel media ministry. Based on this success, PSI is implementing a pilot project with a network of Adventist hospitals. “With the success that we have seen in our work with Hope Channel and several educational institutions within our own networks, we see tremendous opportunity to broaden and deepen our impact with this incredible tool,” said Randy Fox, business manager for the PSI.
While Fox emphasized that the Fundraising Fitness Test is designed as a self-assessment tool, there is an ability to compare individual institution FFT numbers against those of an aggregate of thousands of nonprofits that completed the FEP survey. “This gives any nonprofit the ability to compare itself to others. The information gained offers insights as to how your organization is doing relative to others in the sector and more importantly learn from what others might be doing differently or better,” said Fox.
We Still Need More Data
To make the data in the GiG database even more accurate and precise, we encourage you to ask your donor software company to participate. Similar to “same-store-retail-sales” transactions that are reported within the for-profit sector, the summary and detail transactions contained in the GiG database are all scrubbed of any identifiable information before submitted to the database and as a further protection, encrypted by the Urban Institute. What this means is that while donors and nonprofits can never be identified, users can still know and understand aggregate donor behavior for different types of nonprofits, donation size, and even geographic region by State.
Giving will be an emotional decision for most donors, and fundraisers should always understand that. Fundraising work should be driven by the best possible data about donor behavior, needs and priorities. And that’s exactly what the FEP and GIG can provide — and most importantly, data about your own organization’s donors.
To learn more about the FEP, go to www.afpfep.org and download and use the tools that can help to retain more donors, raise more money and enhance your capacity to fulfill your mission and change the world.
Erik J. Daubert, MBA, ACFRE is an affiliated scholar with the Center on Nonprofits and Philanthropy at the Urban Institute and chair of the Growth in Giving Initiative. His email is firstname.lastname@example.org. Jon Biedermann is vice president, DonorPerfect Fundraising Software, and co-chair of the Donor Software Group, Association of Fundraising Professionals. His email is email@example.com
Ready to learn more? Check out this upcoming Flash Class:
Is Your Organization an A+ or an F?: With Eric Daubert, MBA, ACFRE, Chair of the Growth in Giving Initiative
The Fundraising Effectiveness Project (FEP) Fitness Test is a fast, easy way to measure your organization’s performance. Does your report card put your nonprofit at the top of the class? Learn how to use these free tools to do an even better job of fundraising.