Monthly Giving For the Small Shop | Interview With Harvey McKinnon

December 25, 2017

What’s the best thing your nonprofit isn’t doing that it should be doing to slow donor attrition and build sustainable funding?

If you said growing your Facebook likes, or redesigning your website you’d be wrong.  One of the surefire ways to build lifetime donors – and build legacy funding –  is with the creation of a monthly sustainer program.  And who better to explain the secrets to creating a monthly giving program than the man who wrote the book, literally.

In 2010 I interviewed Harvey McKinnon, speaker, trainer and author of Hidden Gold, the quintessential guide to building a monthly giving program.  Harvey shares why, for even the smallest nonprofit organization, beginning a monthly donor program makes good sense.

Reprinted from 2011. Pamela’s Grantwriting Blog.

PAM: The majority of my readers and subscribers are from the roughly 55% of US nonprofit organizations with annual budgets of under $1 million.   That said, they’re usually one-person marketing and development shops.  Given their limited resources how can they best introduce it to the mix? Can we start with your seven great reasons — I love this part of your book — to start a monthly giving program now?

HARVEY: Absolutely. Well the best reason I think is you’ll dramatically increase your annual income. Since Hidden Gold came out, we’ve analyzed probably hundreds of files and looked at how much donors were giving before they became monthly donors and how much they were giving afterward. And generally speaking on an annual basis each person that converts to monthly giving gives two to three times more money, some of them even more.

So even in an annual program you will see from the people who will give more money, because it’s just easier to give $20 a month then two checks of  $120 a year. You also build a better relationship with your donors because every interaction isn’t just asking them for money. You’re usually reporting back on how their gifts have made a real difference to the program and the mission of the organization.

One of the most important things is that donors will stay with your organization longer. When people collect monthly gifts, either by credit card or what’s called electronic funds transfer (EFT), where the money’s automatically transferred from bank account into the charity’s bank account, they tend to go on forever and ever, and it depends on the channel that recruits them whether it’s the person to person solicitation or monthly giving. But generally speaking once someone signs up on the program they will stay on your donor base and give you money every year or at least three times on average longer than the person who is giving you single gifts currently. And that’s pretty magical, because that coupled with the fact that people upgrade their income each year means that you are going to get more income usually eight to 10 times more income.

We just did analyses for one of our clients from Marmot Recovery Foundation, a small charity. The Vancouver Island marmot is the most endangered animal in North America, or was till we raised a lot of money to build breeding centers. They’re still threatened, but they’ve made a huge difference. But we were analyzing their file and discovered that people who became monthly donors gave six times more on average in a given year, and you can imagine that because their attrition rate — meaning people who drop out from monthly giving — is only about 8 to 10% a year, compared to anybody who was in the donor file. This is probably up in the 20 to 30 times more valuable range over time.

Another great reason is that it’s predictable. So for many small organizations especially you know that your money comes in when you contact your donors. Occasionally there will be a big grant, whatever. But if you can depend on X-thousands of dollars coming in every month, whether it’s a summer month or a month where everybody’s on vacation, that’s incredibly helpful cash flow and it helps predict what’s going to come in the following year. We can usually predict within 1 or 2% for every one of our clients — and these include some really large clients — how much they will give for monthly giving, because there’s so little attrition on these files, especially if they’re direct mail recruited monthly donors. Easy to predict, and even if you’re recruiting from television or face to face you can usually predict with a fair degree of accuracy what the attrition rates are. You’ll also lower your fund raising costs.

Once you mail six times a year to your donors solicitation, they become a monthly donor, you don’t have to contact them nearly as often. If they’re start giving electronically, they will still give, and that’s pretty important. So once you build up a large file that means you can actually save a fair bit of money. Again your income can also grow over time because in addition to the fact that people stay longer and give more each year, it’s easier to upgrade donors. So if you have somebody giving you $15 a month, and you after say 10, 11, 12 months after they been on a program you send them an appeal or make a phone call saying: “Could you increase your gift by just $3 a month? That’s just 10 cents a day. Would that be possible?” Well a lot of people do that. For many of our clients the average is somewhere around $5 for upgrading. And even if only 10% of the people do it each year, that’s a phenomenal number of extra dollars over the course of the donor’s lifetime. In addition to that, the upgrades often make up for all the money lost by anybody dropping out of the program.

And lastly the seventh reason is convenience. It’s easier for charities to manage these programs and it’s also easier for the donor. And the donors like the fact that it’s easy for them. No organization will get 100% of the donors signing up monthly. But if you have a thousand donors, and 10% of them sign up on monthly, or 100 people, and you know that they’re going to give you three to six times more money per year, that’s the equivalent of getting lots of new donors.

PAM: You mentioned “easy to run,” but just how easy is it for an organization to run a monthly giving program? Because most of them I think don’t seem to understand that part of it.

HARVEY: Right. Well it’s the most common form of fund raising in the rest of the world. The U.S. tends to be behind in this. The banking laws in the states were behind the times compared to other nations. But that did change in 1979 when electronic funds transfers was allowed, and I guarantee you there’s probably  millions of people in the United States that are on these programs but not necessarily for charities. What they’re doing is they’re paying their membership to a health club. They’re paying their tax bill. There are all sorts of interactions that are people doing on a monthly basis on their credit cards that are in fact exactly the same thing.

So what we’re saying to nonprofits is: people for the most part are already on monthly schedules. They frequently get paid on a monthly basis. They almost certainly pay many bills. They get deposits from Social Security on a monthly basis, et cetera. So it’s something that people are actually familiar with, and when you can tell stories in your newsletters about somebody like the other donors who have done this, and it’s easy, and they like giving this way… that’s the way to inspire other people to think: “Well I can do that, too.”

The simplest way for smaller groups is to use credit cards. So electronic funds transfer, most of the companies — and there’s a bunch of companies that do the processing for quite cheaply — they’re probably not interested in having an organization as a client that can only process 50 checks a month, because from a business prospective they’re going to loose a ton of money on that. But for credit cards, that’s a very easy thing to do.

And once you do that you just pay the percentage to the credit card company, and donors are quite familiar with doing it on a credit card. All things being equal an organization that is listing that has enough of a donor base that they believe that can get a lot of people on EFT, I would recommend that as the best of the two electronic options, primarily because people who give electronically will actually will have more value over time.

Sometimes for some organizations the credit card donors might even give on average 8 to 10% per month. But because cards expire, people lose their cards, change their cards to get frequent flier points for an airline, et cetera, there’s more activity around that. People tend to keep their bank accounts much longer than their credit cards active. So EFT will in the long run likely make you more money. If somebody’s listening that’s already in the program, I would work hard to get credit card people onto electronic funds transfer.

PAM: My next question — do you think that monthly giving should be introduced to a select group of the most loyal donors in the database, or to the entire list?

HARVEY: Monthly giving should be introduced to the entire list. Even with our clients who are doing prospecting to acquire new donors through the mail, we always invite them subtlety to become monthly donors. And it could be a line in the letter saying: “And by the way one of the best ways to support this cause would be to become a monthly donor called, our club is called Friends For Life, and there’s information on your reply form.” It’s not a hard sell. Most people won’t pick it up, but we usually got at least half of 1% of new donors signing up. Now if you’re mailing a million pieces, and you get a 2% response rate, that’s actually a lot of people. If you’re only mailing a thousand pieces it is not many people, but it adds up over time.

If an organization is adding, converting 1 to 2% of their file a year, by the end of a decade they’re be up around 10 to 20% of their donors on a monthly giving program. It’s not a… The only organizations that get a lot of people, build a file really quickly are those organizations that are either doing direct response television… which is unbelievably expensive; you have to have a big brand name… or by going face to face.

So, if you’re in any European city, or most Canadian cities, and some American cities will have people on street corners and high traffic areas asking you to sign up as a monthly donor to Greenpeace, or Amnesty International, or UNICEF. It works really well with big brand names, much more difficult with other organizations. That’s the way to get volume. But for most of the organizations I suspect will be listening to this, they have smaller budgets, and smaller donor bases. I think you just mentioned it, an integrated American perspective, so you talk about it in your newsletters. When you’re having special events you mention it. You have a brochure that you can give to people in thank you letters, et cetera.

PAM: Oh, exactly. I love your ideas including the stories of the monthly donors in your newsletter, in your emails.

HARVEY: I think it works really well because people do understand, hey, that person’s like me, they found it easy. I can do the same thing.

PAM: Exactly. And this is one of the biggest questions that I’ve received and it has to do with acknowledgment, and I’m sure you’ve heard it a million times too. How and how often should monthly supporters be acknowledged? Do they need a thank you letter every month? Should you recognize your monthly donors in your annual report or newsletters? Well, we’ve just covered that.

HARVEY: Well you definitely don’t want to thank them every month, because people will just become irritated by that. I was analyzing a really large file the other day. It had half a million donors, and a lot of monthly donors and they don’t communicate with their monthly donors all that often. They’ll get a couple of newsletters. They’ll get an upgrade letter, one calendar, and that’s about it. And the thank you letter is the can thanks for the upgrade letter. Now their attrition rate is only 8% a year. 8% for any filing that they’d like, most charities have a lot of older donors really, but that is the people dying, going into seniors home, moving out of the country, et cetera. It’s virtually 100% of the people that can continue giving are continuing to give with getting only one thank you a year.

And you can very well easily thank them subtly in a newsletter saying we want to recognize our monthly donors and thank them. Some organizations put their names in, others won’t. My general feeling on, if you’re going to acknowledge somebody in a newsletter, you should just ask permission because they may not want their spouse to know, or other people to know or other people to know about their giving to a particular cause. This is out of respect, so…

PAM:  Can I ask you what would be your absolutely best advice for the small nonprofit getting ready to start a monthly giving program?

HARVEY: Look at organizations like Green Peace, Amnesty International, World Vision, Oxfam, big brand names, they’re doing it not only in the United States, but they’re doing it globally, and they’re really successful. I went to, I was doing some workshops for UNICEF in Europe for all the different UNICEF’s globally, and then 18 months came back and did another 2 day workshop with them in Paris luckily.

PAM: That would be nice.

HARVEY: That’s a great thing to do. And in that 18 month period, because they’re working in so many different countries, they locked in about an extra $175 m in long term value from the monthly donors they recruited. So what they were doing as they held these things skill share, they were sharing ideas, looking at the bright spots (inaudible) new book Switch (PH). They’ve got a great segment in there on bright spots, and you look at what’s working and you do more of that, and that’s what they were doing in these work shops. I’d say the big brand names that have; World Vision has probably globally a couple million monthly donors. Certainly Amnesty has half a million. Greenpeace has well over a million monthly donors. They’re doing a lot of things right. So people can go to these websites, they can join these monthly donor programs; find out how they’re doing. And it’s a great way to learn likely proven tested techniques. People who are doing monthly giving programs have a million monthly donors. They’re testing things all the time, finding out what’s working. And you can adapt what they are doing to your particular cause and make a lot of money and recruit monthly donors.

And again, if you’ve only got a thousand donors, you’re not going to have 800 on a monthly giving program. But for every thousand donors you should be able to easily have 500 to 100 people without too much work and in some ways small organizations have a huge advantage. I have gone around and asked friends to be monthly donors as opposed to making a single gift to sponsor me for something, and what that means is I only have to ask them once and the gift just keeps on giving. And do you have time for a short story?

PAM: Oh, absolutely.

HARVEY: Okay. How I really caught on to this, and I hate to say this, way back in 1979 I was sitting in my office one night working writing a fund raising letter for Oxfam, and got a call from some friends and they happened to be across the street in a Greek restaurant, saw the light was on in my office building, called me. They invited me over because they didn’t have enough money to pay for the tip and coffee. So I paid for their coffee and tip, and but I brought three forms along with me for the Oxfam’s monthly donor program, and I had filled out their names and addresses. All they had to do was check off the box that said either $15, $25, or $40. And this is in 1979 dollars, so that would be at least the equivalent of $30, $50, and $80 today, probably more. Every one of them signed up and 31 years later two of them are still giving. The $15 person is now giving $40. The person who dropped off gave for about eight years, then he went off to a sabbatical in Europe, and I don’t know, I need to check with him to see if he’s still giving or giving again. But really in that time they’ve given about $15,000.

And all I had to do is take you know three minutes of my time to fill out their addresses and say: “I’d like you to sign these.” And they did, and the money will keep going on virtually forever. When you are giving every month for 31 years, you’re just not going to stop that program. And I’ve been on the program for 30 years. Even if I get irritated with the organization every now and then, I’m not going the stop the program. Inertia… great, great thing.

And the people that who are giving, one of them owns two houses in Vancouver, which is one of the most expensive real estate markets in North America. He and his spouse who also has a high income have no children, so they’re literally worth minimal a few million dollars. They will have to make a decision some day where they’re going to give this money. Since they have no children there’s a really good change they’ll look up the charities that they give to and the charity that they’ve given to for 31 years and likely will continue to give for another hopefully 20, 30 years is an organization that almost certainly will get a piece of their estate.

So monthly givers, whether it’s self selecting your best donors during your monthly giving program, and are more likely to give a legacy, or because you have a better relationship and work with them over time they decided to become legacy donors. Monthly donors are the greatest bequest donors. And for most files we’ve analyzed on a per capita basis they’re as good as volunteers, and that’s pretty good. So my feeling is that even if you weren’t dramatically increasing your income for the donors (inaudible) program — and you should — the people who are in that file can then be cultivated to make that all important bequest.

PAM: That is a fabulous story, thanks so much for sharing. I just think this is a total no-brainer, that everybody should be doing it.

HARVEY: Everyone should be doing it.

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