An Alarming Trend in the UK Charity Sector

One of the main trends we are seeing in UK fundraising right now is an alarming lack of donor value sitting on charity donorbases. By this we mean many charities are not upgrading, retaining and growing their donors. Too many are sitting at the bottom of the value pile.

One large UK charity we recently reviewed, with over 100k donors on the database did not even have enough donors to keep 1 full-time major gift officer employed.

There seems to be a race to the bottom. There is no correlation between the numbers of donors recruited and income. In fact, you can sit in on seminars about “How we recruited 250,00 new lead generation donors” from charities whose income is in decline.

Although I don’t claim to have the all-seeing eye on every charity and every fundraiser in the country, we are doing a lot of auditing on large and small charity donorbases [with our ‘HealthCheck analysis] and there are some emerging and common patterns.

How do you define value?

Typically, what we are seeing is that when you reach the £250+ cumulative amount – which is basically something like a £20 monthly direct debit – after that point, you see the donor numbers fall away very quickly. And I mean dramatically, in percentage terms.

There is something wrong with the very high volumes of low value donors that are being recruited which is not translating into higher value donors further up the value tree. We used to talk about the donor pyramid – and I still can’t think of a better universal metaphor – and moving donors ‘up’ the pyramid. That is not happening.

There are few exceptions that we have seen to this bunching of low value donors – lots of them! – at the low end of the pyramid. Then, we get to £250+ cume value and there is tumbleweed rolling through town.

What do you think is causing this? And is it a ‘new thing’?

There are a number of things creating this. I think the main cause is that new donor acquisition has become challenging. With the move towards online lead generation, and especially channels like face-to-face, the focus has been on getting the numbers through the door…

..the problem is that an increase in donor numbers do not always mean an increase in money!

Exactly! One of the reviews we did showed that donor numbers were going up and income going down! And what were the fundraising team doing about it? Trying to recruit even more donors because they believed that they hadn’t reached a tipping point.

A hamster wheel. Eventually the hamster is going to spin off the wheel and get hurt.

One charity we recently reviewed had an 80% attrition of 1st year regular donors – that means only 20 out of 100 were still giving in their 2nd year. They had no idea. Have they changed their strategy? Nope. Oh dear.

In the UK we have had years of low level recruitment and a focus on building large donor files of low value monthly donors. That’s been ok as long as the tap has been turned on, but as soon as it stops, or even starts to flow less, then there are problems. In other words, this model hides what is an underlying potential disaster. Imagine trying to make this work with ROIs of 1.2 and 1.4. It just about works while new donors are coming through in sufficient numbers.

The chickens, as they say, are coming home to roost.

What’s the answer?

A return to a value-driven fundraising landscape.

So, maybe recruit fewer donors – but make sure that they are cause-driven, engaged and welcomed into the charity. Then spend a lot of time and effort in stewarding those people with a view to moving them to become middle donors, major donors and legacy donors.

That should be the goal for every new donor coming in to your organisation.

The idea of recruiting fewer donors, and spending more on each donor you recruit, requires a fundamental shift of mind-set, both in the charity as well as in the sector. But we will end up with a healthier fundraising sector. And more profitable.

And what we do know is that a donor’s first gift amount is the best key to how they are going to perform long-term.

Right. We are developing a £100 monthly giving product for one of our clients to speak to that very issue. We have started testing with current donors, but why not go out in a targeted way to new donors?

“As a Fundraising Director, I would rather have 100 of those people than 1,000 on £4 per month any day of the week.”

And for me the challenge is how to change the mindsets of fundraisers to think like that fundraiser? I guess it needs to start with just one or two large charities. They need to wake up one morning and say “hey, we are not going to recruit 100k people this year on £3 per month, we are going to recruit 10k on £20 per month” …or whatever.

Actually it doesn’t need to be an ‘either / or’. Why not introduce a higher value programme alongside your existing acquisition and stewardship activity?

The eventual destination of every newly acquired donor should be middle, major or legacy status.

I think another factor is that many organisations do not have integrated programmes – still, after years of talking about it. There are silos. The direct marketing team don’t “hand-up” their best donors at the end of the year for fear of losing income. It can be political and parochial in many organisations.

This is how sad this is. One of the UK’s largest charities (top 10) said to me “we don’t have a middle donor programme or any intention of introducing one because it would be a problem to know if it sits in the dm team or the major donor team.” What?!

Is anyone doing a good job in this whole area?

Interestingly, I think a few of the medium-sized charities are (by which I mean £10m+). And I think they have an advantage. One of our clients has 2 middle donor fundraisers and they are in the same open plan office as the dm team and the major donor team. So that makes passing donors ‘around’ and seamlessly much easier.

The other factor in that office is they have buy-in from the CEO who has changed the culture and changed the KPIs away from just being focused on how much income each team brings in. It’s about the charity’s success not the individual or the ‘department’s’ success.

Let me know what you think.

Stephen Butler