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Weekly UpdatesThe development team at Medicins Sans Frontieres/Doctors Without Borders (MSF) examines Lifetime Value before proceeding to ask donors to convert to its sustainer program, one of the organization's most valuable--and cultivable--donor sets.
The focus, according to Jennifer Tierney, director of marketing, is on mid-level donors and below. "It's not that we've had more success converting (mid-level donors to sustainers)," said Tierney, "it's that over the long-term, they're worth more."
Touted for its ability to provide an organization with a constant stream of income, the sustainer program--i.e., monthly giving program--is finding an increasingly receptive audience among nonprofits as the sector becomes more competitive and budgets of both donors and organizations get tighter. The programs are cost-effective because you don't have to mail donors 12 times a year. Sustainer programs are also known for their relative ease of fulfillment, and renewal rates that can reach well above 90 percent.
Saving for a rainy day
The New York City-based MSF launched its monthly giving program, Field Partners, in 1994 to generate income for the unpredictable international emergencies it addresses.
"The issue with being a humanitarian organization is that it's extremely important that we are able to respond at the flick of a switch when a crisis arises," said Tierney, who noted that in the wake of the tsunami in 2004, MSF saw more one-time givers signing up than sustainers. "That's pretty much the case with emergencies."
Field Partners, said Tierney, provides MSF with a predictable and reliable revenue stream. "Having a monthly giving program allows us to have a secure amount of money that we know is coming in every month. We don't do emergency earmarked fundraising appeals for those types of things because we really feel as though we need to have the flexibility to respond wherever a crisis arises."
Seeing the growth of Field Partners during the past few years, "it seems to be quite strong," said Tierney, who said MSF hopes to raise $7.5 million this year through its 30,000 Field Partners. "And after looking at our budget mid-year, we were on par with what we had budgeted, and perhaps going to reach a bit above."
Tierney attributed much of the steady growth of the sustainer program--about 3,000 to 5,000 new donors each year--to the focus on converting multi-year donors, those who have given to a nonprofit multiple times. But it's the enhanced focus on Lifetime Value (LTV) as an indicator that has proven most effective, said Tierney.
"We actually are finding that donors who are under a certain threshold of giving have a better Lifetime Value (as monthly givers) than donors in the higher echelons," she said, estimating that the $250 to $300 range "is when you start to see questionable results in LTV." According to Tierney, for those donors who give above that $250 mark for a one-time gift, as monthly givers they tend to downgrade.
For instance, if a nonprofit recruits a donor who makes a one-year flat gift of $250 to a $20 monthly program, that donor's annual giving totals $240--and the organization loses $10 a year. Conversely, with that donor you might receive $250 one year--with no guarantee of renewal. Above that $250 threshold, however, the results tend to fall.
There is one roadblock to sustainer programs unique to the United States branch of MSF, said Tierney: the fact that electronic funds transfer (EFT) hasn't caught on here as fast as it has in Canada and in Europe.
While the U.S. chapter of MSF enjoys a strong monthly giving program, a majority of its European counterparts are enjoying even greater results, said Tierney. "A lot of that has to do with the banking system in each of those different countries and how easy it is for you to set up a monthly withdrawal from your bank account," she explained.
With retention rates for sustainer programs known to hit well above 90 percent using EFT, Tierney is looking to grow both the number of Field Partners and the number of current and future Field Partners who opt for EFT payments. Donors using credit cards renew at about 85 percent, while those who pay via monthly bill renew at about 60 percent industry wide.
MSF's 12-year-old Field Partners program "has sort of reached maturity," she added. That's led Tierney to recruit the expertise of marketing consultants to come up with a three- to five-year strategic plan "for exactly how many new donors and what percentage of our donors we want to convert." The goal is to broaden the reach of Field Partners, and possibly close the gap with those MSF sustainer programs overseas.
"I think being smart about your segmenting strategies with your donors is really important," said Tierney, who added that despite the Field Partners program's steady growth, "we'll still continue to test the other groups and use different ask approaches."
One final disclaimer, Tierney advised non-profits keep in mind that a sustainer program will affect their immediate income. But she would hardly call it a disadvantage. Over time, a sustainer can be more cultivable than a donor who makes a flat contribution, thus it's more a matter of budgeting your cash flow.
Competition, mergers, acquisitions, oh my
TelecomPioneers changed its status from a 501(c)(10) to a 501(c)(3) about three years ago. The membership organization raises approximately $600,000 in dues annually from its more than 200,000 active (of 620,000 overall) members, while also generating hinds through affinity partnerships. But with less money available within the telecom industry due to competition and mergers, the nonprofit is now looking to be a self-sustaining volunteer organization.
Similar to MSF's, the Denver-based organization's yet-to-be-named monthly giving program, to kick off in early 2007, is not intended to reach all of TelecomPioneers' donors. "I wouldn't go after someone who makes three $250 flat gifts," said the organization's vice president of development, NancyJo Houk. "I've got probably a couple of thousand people who are making large gifts and I would definitely suppress them from a sustainer program."
So when Houk initiated a direct marketing program during 2005 to collect data around which to brainstorm and develop fundraising programs, she had a good idea that the target audience would be more recent (typically those donors who gave less than six months prior) and mid-level donors. But to her surprise--and delight--two other factors stood out.
Houk found that a majority of her donors give more than one gift annually. In fact, for those donors acquired in the fourth quarter of 2005, gifts-per-donor was already at 1.3 gifts by the end of Q1 for 2006. Another significant finding, said Houk, was the number of members on payroll deduction.
According to Houk, the most obvious way to capitalize on the frequency with which the organization's donors give--and on their apparent affinity for EFT--was a sustainer program. "And the sustainer program is a great tool to build your planned giving program," she said.
Membership organizations like TelecomPioneers can take a good first step toward a sustainer program by utilizing payroll deductions for membership dues. Houk attributed her optimism to EFT: "If we gained a couple thousand monthly givers, that would be fabulous. I think that's a very achievable goal, because of the payroll deduction."
About a third of their member file--roughly 200,000 people--are on payroll deduction. "So, they're already of the mindset of having something taken out of their paycheck monthly or twice a month," said Houk. "We get a lot of requests actually from people to make monthly donations."
Payroll deductions can be "great conditioning for people to start thinking about giving monthly," added Houk. "If there were some overlay where you could identify people who are already doing payroll deduction through workplace giving ... that would be a great place to start."
Another benefit of sustainer programs is cost effectiveness, since the nonprofit doesn't have to mail donors a dozen or more times a year. "You still want to mail them occasionally and you certainly would like to continue the communication with them that's not necessarily fundraising-driven," said Houk, who said when the program launches, much emphasis will be on fostering donor relationships through communication.
Most experts agree monthly pledges of $5 to $25 work best. "We'll ask for somewhere between $15 and $20," said Houk, who set a ceiling of $360,000 raised in the first year. Accounting for the months that will be spent promoting the program, Houk said a more realistic number is around half that.
Added Houk, "I think there are a lot of people out there who would give on a regular basis if you would just ask them."
In this case, less is more
For Catholic Relief Services, said Jean Simmons, director of direct response fundraising, the how and the when proved somewhat more difficult than the who.
"Many organizations, like CRS, have a donor base that is very comfortable giving their donation (one-time gift or monthly) via check," said Simmons."I think the hard part for most nonprofits is figuring out what is the appropriate time in their donor life cycle to introduce the idea of monthly donations. Once they figure that out, what is the best vehicle to introduce monthly giving?"
The best vehicle for now proved to be "Footsteps in Faith," the flagship monthly giving program for CRS after the Baltimore, Md.-based charity consolidated four of its sustainer programs during 2005.
Originally, CRS had an online child sponsor program, a low-end and high-end sustainer, and a general sustainer--in addition to "Footsteps" and "Lifeline," a monthly sustainer that funds a microfinance program. After much planning--which included consulting with donors--the nonprofit folded four programs into "Footsteps" and kept "Lifeline."
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