Sustainer Case Studies

Two clients — Colorado Public Radio and Friends of Arizona Public Radio in Phoenix — offer excellent opportunity for examining what comes of well-managed sustaining donor programs. In Phoenix, KJZZ (primarily news and information) had grown its sustainer support to 41% of the file at June 30 and K-BACH (primarily guess what?) had grown is sustainers to 32% of the file. Colorado Public Radio (three full-time formats: news/information, classical and new music) had grown its sustainers to 24% of their donor base, restricting sustainer giving to electronic funds transfer.

After the close of their fiscal years, we undertook Donor Base Trend Analyses of the three donor bases (separating the two Phoenix files) to produce the array of 6-year trend reports DBTAs provide, 11-year file census reports, and most recent year’s cross-tab reports. In all categories, wherever gift frequency is assessed, sustainers are broken out as an asset class.

Finally, for the recent year — FY2013 — cross tab reports, we also included reports quantifying ranges of cumulative giving, loyalty, and giving frequency (with sustainers broken out) by Target Analytics’ Loyalty Insights groups.

So there’s a lot of data, and there is a lot more studying to do. But we can summarize the major findings of our first analyses and enumerate the hypotheses we want to pursue with further study and time.

One hypothesis we posited decades ago when we and our colleagues at Craver, Mathews, Smith & Company first built huge sustainer programs for Southern Poverty Law Center and Greenpeace…in days long before public use of the internet and ubiquitous credit cards. That hypothesis stands as demonstrated: Sustainer programs work best and are of highest value when they are backed by a case for sustaining support. Public radio, and especially news and information public radio, makes such a case all day every day of the year.

Major Findings for the Two Clients

  • Sustaining donors are leading performers in terms of loyalty.
  • Sustainers have above average yield (current net support) but not better than multi-gift donors.
  • Their value (potential for future yield) exceeds the norm, principally through high retention but, again, not that of multi-gift/multi-year donors.
  • Sustaining donors cluster among the three most valuable Loyalty Insights groups.

This last finding stood out among the four. We have been able to demonstrate the efficacy of Target’s Loyalty Insights model across a wide variety of donor bases by looking at variances in annual cumulative giving, gift frequency and donor retention by each of the seven Loyalty Insights groups.

These were the first opportunities we had to look at model groups within substantial populations of sustaining donors.

What we found, in summary, was that 89% of Colorado Public Radio’s sustainers clustered in the four high-value Loyalty Insight groups and accounted for 95% of sustainer revenue in their fiscal 2012. For KJZZ, 79% of their sustainers were in those four groups and accounted for 90% of sustainer revenue. And for K-BACH, the four groups accounted for 76% of sustainer donors and 88% of sustainer revenue.

Hypotheses for Further Study

1.  Sustaining donors challenge the efficacy of fundraising programs/organizations they leave behind.

Corollary: They are a rich source of information on the organization and its case.

2.  Sustaining donors are not nor are they like multi-gift donors.

Corollary: they are making a single commitment, not multiple commitments.

3.  The sustainer arm’s length relationship disguises the strength and value of their engagement.

Corollary: The motive is not convenience, nor saving trees, but a way to be more generous than one could otherwise afford.

4.  Designation — even to a sector or aspect of annual operations — will enhance attraction and value development of sustainer donors.

5.  Sustainer programs can be as effectively instituted with high-dollar donors, albeit with refined cases and designations.

Corollary: They should be instituted at both base range and mid-range, preferably with different brands.

6.  Sustaining donors are more likely than average donors to commit to estate gifts.

A Special Report for Estate Gift Fundraisers

For those of your colleagues responsible for current operating and program support, we focus on discretionary income. Estate giving is different. It almost always comes from donors who have been engaged in support of operations and programs, but it doesn’t come from current income. It comes from wealth.

Among the useful data that comes from the Census Bureau are measures of wealth by household characteristics. If you go to www.census.gov/people/wealth/ you can find more data than you’ll ever need or want.  Below is a selection of data excerpted with a planned giving fundraiser’s eye to where the veins of gold lie in one’s donor base.

These are general population data. The chances are any given donor base looks much wealthier, as we have repeatedly seen in research studies. But it’s the profile that is important.

We’ve shown over and over again that the principle demographic factors influencing all giving — current or deferred — are, in order of importance, age, education, household characteristic, and residence ownership and tenure.

By household characteristic is meant whether or not there is a committed couple. The Census — at least for 2010 — used the then-conventional definition of “married couple.” And it provides home ownership without length of community residence. Nonetheless, the distinctions in wealth shown between household with married couples and those headed by singles and between those where the householder owns or rents are telling.

I have indexed the selected data to the base, overall net worth numbers, again to underscore that it is the profile, not the dollar data we should have in view when it comes to transposing this information for donor bases across varying markets and types of organizations.

Table for Aug 29 blog

The largest share of the nation’s wealth — 43% — is held by people over 65, and the next highest — 26% — is held by people 55 to 64.  There’s nothing wrong with having a mature donor file!

 

Fiscal Chasms

For all concerned with piloting nonprofit organizations through the cross-currents immediately ahead of us, the new edition of the Urban Institute Press Nonprofit Almanac 2102 has arrived just in time. It’s been four turbulent years since the last edition, and we are in bad need of new points of reckoning.

The Urban Institute smartly focuses its attention on “reporting public charities,” 501(c)(3) organizations that file 990s with the IRS, not including religious organizations and congregations or those with income less than $50,000 in 2010 ($25,000 in prior years).  These criteria allow us to focus on organizations vying for financial support through service fees or charity.

One thing we looked forward to the new report enabling us to do was checking on donor market competition. Both fundraising performance data and the anecdotal experiences of clients indicate competition has been intensifying. The data show long-term erosion of donor retention rates, and the most troubling anecdotal experience is increasing incidence of donor complaints in response to solicitations which we believe have a lot to do with marketplace din.

The Urban Institute’s data certainly explain these observations. But, more importantly, they call attention to the need to do forward resource development planning beyond the bounds of fundraising strategy. That’s because there is no exception to the observation that the expansion of the nonprofit sector, sub-sector by sub-sector, has been exceeding the expansion of revenue in general, and giving in particular. And while we are these days staring like head-lighted deer at sundry propositions for changing charitable deductions, we need to think about how competition could get worse.

While giving through bequests and from foundations and corporations increased from 2000 to 2010, individual giving — apart from bequests — declined. The overall decline was 4% and the per capita decline was 12%. And while individual giving – again apart from bequests – accounted for 76% of all giving in 2000 and a lesser 73% in 2010, it remains dominant. It is also the most complex and expensive source to develop.

The sub-sectors vary in their appeals to and their calls on the donor marketplace. Of those selected to list below, higher education and disease-specific health organizations depend to far lesser degrees on individual charitable support than do environment and human services organizations. Yet whenever there is pressure on total revenue, it is certain there will be pressure on fundraising. We have heard and read a lot over the past few months, for example, about the tensions in the business models of both private and public universities with expenses outstripping revenue capacities of tuition and fees, government funding of public universities and endowment funding of private universities (to say nothing of athletics where that has become a big business).

The data for animal-related nonprofit organizations offer a preview of what we believe is most likely to befall human services organizations in the years immediately ahead. Community animal welfare has been dominated by a tax-supported business model, as the vast majority of animal welfare organizations have been operating under government contract to conduct what are called animal control services. As municipal budgets have become increasingly strained (they must balance their budgets), that funding has been reduced and the services provided have become increasingly limited. The result has been an explosion in nonprofit organizations such as breed-specific rescue groups to take up the slack.

While the Urban Institute keeps tabs as no other entity does on the nonprofit sector community by community, their Nonprofit Almanacs do not offer data more refined than by states. It is pretty clear, anyway, that the expansion of the nonprofit sector has been predominantly with community-based organizations. This means, in part, that increased competition for income is having greatest impact on organizations that have least opportunity to respond because their markets are limited.

When we take such information into account, as well as what will soon come our way out of successful or failed negotiations in Washington, we can imagine a nonprofit sector at 2020 that looks an awful lot different than what it looked like in 2000 and 2010. When we consider how fast the last ten years flew by and – being honest about it – how few business model changes organizations made, we realize how urgently we must attend to necessary change. We can anticipate:

  • Mergers of organizations within sub-sectors, especially in large metro areas, and by state in rural-dominant areas
  • Regional or national collaborations in program services, financial asset management, and in fundraising and supporting services
  • Increased incidence of national raider organizations consuming the lunches of community organizations, especially through electronic media
  • A mass of organizations in one phase or another of failure