Much has been written in the nonprofit community about the value of recurring donors and the importance of recurring donor acquisition, not least on this very blog. But what actually happens once you’ve got the recurring donor through the metaphorical door? It seems that comparatively little ink has been spilled about the idea of maximizing the value of these recurring donations.
To answer this question, I headed into my natural habitat and dug into some data. I looked at a sample of nine nonprofit and advocacy clients across a range of sectors to search for patterns in the behavior of individuals who cancel their recurring gifts. These organizations typically see 2%-3% of recurring donors dropping off every month. If you’re seeing a similar pattern, then you’re losing 25%-44% of your recurring donors every year! So what strategies might help you keep more of these donors giving for longer?
There are two ways in which the majority of cancellations take place:
- Automatic cancellations — most likely because the credit card has been declined.
- Manual cancellations — in which the donor makes a conscious decision to cancel the gift.
Both manners of cancellation offer opportunities to significantly improve retention.
Diving back into my spreadsheets, I discovered that around two-thirds of cancellations take place automatically. That’s a huge amount of revenue being lost without any conscious decision on the part of the donor!
Fortunately, there are a few simple steps that could potentially make a big impact. Last year, we announced an update to the partnership between the BSD Tools and the Stripe payment gateway, which means that we are able to automatically update the credit card details for most MasterCard, Discover, and Visa cards when a new card is issued by a bank (even if the card number has changed). If you use Stripe, check your settings to ensure that this functionality is enabled for you — and if you’re on the BSD Tools then please contact firstname.lastname@example.org and a member of our team will happily assist with turning on this integration.
If this fails, call the donor up! A two-minute phone call to update their card details could provide years’ worth of future revenue. Simple fixes like these can dramatically reduce the number of automatically canceled recurring gifts, providing a corresponding lift in the lifetime value of your recurring donors.
However, what about that 32% of manual cancellations? To dig into this more, I returned to my number crunching one final time to figure out when recurring donors tend to cancel their gifts. The numbers are quite striking: 43% of manual cancellations take place in the five days after their last gift.
This is the point in which we need to take a breather from the numbers and think strategically. It seems likely that this skew is, at least in part, caused by the recurring donors receiving monthly donation receipts — giving them a monthly reminder that they have just donated. However, this risky moment could be turned into a significant opportunity!
These receipt emails tend to be highly transactional — typically a record of the transaction for tax purposes, along with a brief note of thanks. I’d like to propose an alternative. A large proportion of nonprofits send out monthly newsletters to their recurring donors as part of their stewardship program. These emails are a great way of demonstrating the impact of the program and maintaining the personal relationship between the donor and the organization.
If you are sending monthly receipts (as opposed to annual), why not simply turn the donation receipt into the monthly newsletter, or invest in adding impact language? At the start of every month, replace the top of the donation receipt with the content that makes the recurring donors feel they are part of something wonderful. This way, every donation receipt comes with a reminder of the tremendous impact of the donor’s gift, rather than a simple reminder that the donor has given away some of their hard-earned cash. We’re beginning to pilot this approach with a few clients and will update this post when we have results.
Too often we’re so focused on the acquisition of recurring donors at the expense of improving retention. So what can we as fundraisers do to minimize that scary churn rate? There are some low-lift opportunities that could make a big impact on the lifetime value of your recurring donations. Here’s a quick recap:
- Understand what proportion of your sustainers are manually canceling their gift
- Make sure your payment gateway updates credit card details automatically
- If a recurring donation is automatically canceled, or before cards reach their expiration date, give the donor a call
- Reduce the spike in manual cancellations by demonstrating impact versus purely transactional emails
- Ideally, share new impact-oriented content monthly
If you need any help with any of these steps, including acquisition, get in touch with us – we’d love to talk about it.