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 and that’s 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 the list keeps growing.

There’s one prophet out there in the trenches, however, who believes with a real fervour 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 donor’s 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.” It’s 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 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. It’s almost impossible not to make money from these programs,” and your income will grow steadily over time.

If that weren’t already enough, he adds, monthly giving is more personal and generates better relationships with your donors. In addition, it’s 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. “They’re 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 didn’t work. “It works with any charity,” says McKinnon. There is no reason, he argues, why any charity can’t 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 charity’s work.”
2. It won’t work with our donor base. Perhaps, allows McKinnon, but not likely.
3. It’s too much work. It is actually far less work than most other types of fundraising programs.
4. It’s a small amount of money. Each month, for each donor 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 don’t know how to do it. Read Hidden Gold, McKinnon says. “It’s all there, and anyone can do it. “
6. Our donors are too old. It could be that they are very conservative, but it’s 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 aren’t 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

1. You need a donor base. For each 1000 donors, if 3% convert, you have 30 new donors giving say $10 per month. You won’t 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. Children’s, animals’ 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 Children’s 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 doesn’t, 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 won’t 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. It’s 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. It’s crucial, says McKinnon to work with organizations such as MoneyStream that can automate this process and reduce the glitches to a minimum.
5. An integrated marketing strategy. Use mail, telephone, volunteers, door-to-door canvassers and 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 can’t 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 donors’ giving patterns. Discover why they give to your nonprofit. This is crucial information, and you’ll 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. Don’t just evaluate your overall program. Work at building the effectiveness of your effort.

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
$288,100
Source: Hidden Gold, by Harvey McKinnon, Bonus Books, 1999.

 

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
$651,100
Source: Hidden Gold, by Harvey McKinnon, Bonus Books, 1999.

 

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.