At Blue State, we work with organizations across a broad range of sectors — nonprofit, corporate, political, health care, higher education — and apply learnings from one sector to another. 

This cross-sector experience is especially valuable in our work to retain organizations’ most valuable people — from a political campaign’s most passionate action-takers to a brand’s most valuable customers. Today let’s focus on recurring donors. These individuals provide the most reliable and sustainable source of income for nonprofits, and therefore can be the most important to recruit, protect, and cultivate.

Industries such as automotive and cosmetics are being shaken up by disruptor brands with a subscription-based business model, in which irregular, one-off transactions are replaced by a reliable, regular stream of transactions. The for-profit world has lots of experience with loyalty programs, but the ubiquity of today’s subscription model represents a shift in the marketplace. Why buy groceries when Blue Apron will deliver ingredients to you every week? Why shop for clothes when you can periodically have a curated selection arrive at your door?

To compete with these entirely subscription-based brands, many established brands are building out subscription models alongside their traditional offerings, such as Amazon Subscribe & Save, Uber Ride Pass, PLAY! By Sephora, and Access by BMW. The subscription-based revenue model bears a lot of resemblance to charities’ recurring donor programs, which means there is a huge amount that the nonprofit sector can teach brands following this for-profit trend.

1. Clarify the proposition

With any monthly program, the organization’s first step should be to establish the value proposition: not just why people should choose your organization, but why they should specifically make a regular payment. What benefits does your subscription provide to the customer? Is it more cost-efficient, convenient, flexible? What incentives and exclusives are available? 

Developing a distinct brand for the recurring donor / subscription program can help drive membership. In the nonprofit world, the relationship between the master brand and sub-brand can range from highly differentiated (such as charity: water’s The Spring) to very similar (e.g. UNICEF USA’s Guardian Circle), to somewhere in between (like Partner in Health’s Paul’s Partners).

Recommendation: Develop a value proposition for the recurring program and, potentially, new branding for the program that is distinct from the master brand.

2. Understand your existing audience 

Understanding where your most valuable audiences come from will help you identify new acquisition opportunities. Analysts should therefore dig into their data to answer:

  • Are subscription purchasers new to the organization, or were they previous customers who have been upsold?
  • What campaigns or moments have been most effective at driving these purchases?
  • What channels have seen the most success in converting existing customers?

This analysis can then be combined with a qualitative and quantitative survey to current customers to understand what motivated them to become a subscriber.

Recommendation: Build up a full data-driven picture of where the most valuable customers have come from and what motivated them to make a regular purchase.

3. Create a consistent consumer journey

The most common time for an individual to cancel their monthly payment is just after their first transaction. Make sure you welcome new members appropriately: We recommend creating a triggered cadence of personalized communications designed to welcome the individual to the program. These messages should provide a story that is consistent with the value proposition: for nonprofits, you emphasize the huge impact of their regular gift; for brands, you could focus on all the benefits offered by their new subscription.

Subsequent communications should highlight the recipient’s membership to an exclusive club, containing specific branding and custom content that references their special status, and makes them feel closer to the organization and its purpose.

Recommendation: Craft a communication program distinct to the recurring audience, e.g. a triggered onboarding series and ongoing, personalized messages.

4. Prevent lapse

As I’ve discussed on this blog before, 43% of cancellations take place in the five days after their most recent gift. Identifying when customers are most likely to disengage allows for organizations to develop a contingency plan to address these root causes of lapse and keep your audiences happy and engaged.  

As with recurring donors, think about ways you can prevent both automatic and manual cancellations through innovative messaging and keeping your data up to date.

Recommendation: Identify the top moments audiences are likely to lapse and develop tailored communications for each.

5. Take the long view 

One of the challenges in building out a subscription revenue model is that there will always be a short-term opportunity cost. Comparing the cost/benefit of running a campaign promoting regular donations rather than one-off gifts will always favor the one-off revenue — unless the expected lifetime value of the recurring donor is fully taken into account.

A recent study conducted by Blue State across a number of nonprofits with monthly giving programs found that within the space of just 12 months, every new recurring donor is worth the same as 2.5–3.7 one-off donors (and that ratio only increases as time goes on). 

This is as true for brands as it is for nonprofits: Without a full data-driven picture of the lifetime value of customers, we cannot make objective decisions about which programs to invest in. Our natural biases will therefore favor the approach that maximizes short-term revenue (to reach our immediate targets) rather than the approach that provides the most benefit in the long term. 

Recommendation: Reflect the anticipated lifetime value of new customers in all dashboards, reports, and test result calculations to ensure that decisions are made based on the most appropriate long-term perspective.

More alike than not

While it may appear that corporations and nonprofits are worlds apart, in reality the parallels between the two can be striking. While subscriptions may feel like new territory to brands, nonprofits have been at this for years. As long as you make it worth your audience’s while, both donors and customers will stick around.

Is your business evolving to meet today’s challenges? Let’s talk about it..