carol rhine principal fundraising analyst, target analytics...rev / donor new donors retention...

11/04/2014 Footer 1

THE STATE OF NONPROFIT FUNDRAISING

Carol Rhine Principal Fundraising Analyst, Target Analytics

11/04/2014 Blackbaud Confidential 2

• To provide insight into - What’s happening in the fundraising market today,

- What the future holds,

- Where we go from here

- And, a lesson in macro-economics,

- And, the sustainer revolution.

SESSION GOALS

11/04/2014 Blackbaud Confidential 3 11/04/2014 3

Fundraising is collecting on a public good. Our organizations provide services and create good for our communities. It is our job as fundraisers to collect on that good.


Worldview.gallup.com 2013

The U.S. five year average rank is #1. Followed by Australia, New Zealand, Ireland, and Canada.


T HE NUM BE R OF 5 0 1 ( C ) ( 3 ) ORGANIZ AT IONS , 2 0 0 3 -2 0 1 3


TOTAL G IV ING AS A P E RCE NTAGE OF GROS S DOM E S T IC P RODUCT, 1 9 7 3 -2 0 1 3 )


2 0 1 3 CONT RIBUT IONS : $ 3 3 5 .1 7 B IL L ION BY S OURCE OF CONT RIBUT IONS


SOURCES OF CONTRIBUTIONS, 2013

Total giving = $335.17 billion. Increase of 4.4 percent (3% adjusted for inflation) Individuals remain the single most important source. Individuals + charitable bequests = 80 percent of total. Foundation grantmaking = 15 percent of the total.

About half of independent foundation giving is from family foundations.

Individual + Bequest + Family Foundations = 88 percent. Corporate giving is an estimated 5 percent of the total.


2 0 1 3 CONT RIBUT IONS : $ 3 3 5 .1 7 B IL L ION BY T Y P E OF RE CIP IE NT ORGANIZ AT ION

5% of the total


TOTAL G IV ING, 1 9 7 3 -2 0 1 3 ( IN B IL L IONS OF DOL L ARS )


TOTAL GIVING, 1973–2013

Giving grows more slowly—or declines adjusted for inflation— in recession years.

In 2008, total giving fell 9.5 percent adjusted for inflation.

This is the worst result on record; 2009 follows with a decline in total giving of 3.9 percent, adjusted for inflation.

The average rate of change in total giving in current dollars since 1973 is

6.7 percent. Total giving last reached that rate of change in 2012, when it rose 7.5 percent from 2011.


GIV ING TO ART S , CULT URE , AND HUM ANIT IE S , 1 9 7 3 -2 0 1 3


GIVING TO ARTS, CULTURE AND HUMANITIES

Arts, culture, and humanities = $16.66 billion in 2013 • Increase of 7.8 percent (6.3 percent, adjusted for inflation) • 5 percent of total estimated giving in 2013 Giving to arts, culture, and humanities organizations has realized strong growth since the end of the Great Recession in 2009. Giving to these organizations rose 21.9 percent in inflation-adjusted dollars between 2009 and 2013. This is compared with growth in overall giving of 12.3 percent in inflation-adjusted dollars over the same period.


G I V I N G B Y T Y P E O F R E C I P I E N T: P E R C E N TA G E O F T H E TO TA L I N F I V E - Y E A R S PA N S , 1 9 7 4 - 2 0 1 3


WHERE ARE WE IN 2014? – THE FUNDRAISING LANDSCAPE IN THE LAST 12 MONTHS

Target Analytics donorCentrics Index of National Fundraising Performance

77 national non-profit organizations

Organizations have 100,000+ active (0-12 month) donors

Direct marketing giving (mail, telemarketing, web, canvassing – not events)

High dollar gifts excluded – gift cap of $10,000

Robust data set

35 million donors and more than 77 million gifts totaling over $2.4 billion

in revenue


• Revenue per donor increases continue to compensate for donor declines.

• Index donors declined a median 4.7%. • Revenue for the index remained essentially flat, declining 0.3%.

• Declining reactivation rates are contributing to overall donor

declines. • Following years of lower new donor acquisition reactivation

rates declined a median 5.7%. • Fewer donors were reactivated from a smaller overall available

population of lapsed donors to reactivate, furthering the decline in overall donor numbers.

Q2 2014 RESULTS


• The societal benefit and health sectors had the steepest declines in both donors and overall revenue. They also, however, had the largest increases in revenue per donor.

• The environmental and human services sectors generally matched index medians.

• The arts and culture sector had the greatest overall revenue growth, but also had the second-largest decline in new donor acquisition.

• The animal welfare sector, always a strong performer, had the smallest donor declines and the greatest increases in new donor acquisition of any sector in the index

• International relief and religious organizations experienced essentially flat performance in overall revenue, overall donors, and new donor acquisition.

Q2 2014 RESULTS


Q2 2014 NATIONAL INDEX

0.0%

-3.1%

3.0%

-6.4%

0.6%

0.1%

0.0%

-1.3%

-0.3%

-4.7%

3.7%

-3.4%

-0.5%

0.3%

-1.0%

-5.7%

Revenue

Donors

Rev / Donor

New Donors

Retention

First-Year Retention

Multi-Year Retention

Reactivation

Fig. 1: Overall Index Medians

Q2 YTD 2012 to Q2 YTD 2013

Q2 YTD 2013 to Q2 YTD 2014

Year-over-Year Changein Key Measures

50%

35%

78%

35%

55%

50%

51%

47%

49%

32%

80%

45%

47%

50%

39%

35%

% of Organizations with Positive Change


Q2 PERFORMANCE

Fig. 2: Median Single-Quarter Year-to-Year Change

Q1 2013 to Q1 2014

Q2 2013 to Q2 2014

Revenue 0.3% -2.3%Donors -2.4% -4.6%New Donors -8.4% -2.4%

% of Orgs With Positive Revenue Change 51% 46%% of Orgs With Positive Donor Change 35% 34%% of Orgs With Positive New Donor Change 43% 43%

The second quarter of 2014 was somewhat harder on organizations than the first quarter, with overall revenue moving from flat growth to a slight decline and overall donor numbers declining at double the rate in Q2 than they had in Q1.


Q2 2014 RESULTS

Index Revenue14.1%

Index Donors-12.0%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Q2

2004

Q3

2004

Q4

2004

Q1

2005

Q2

2005

Q3

2005

Q4

2005

Q1

2006

Q2

2006

Q3

2006

Q4

2006

Q1

2007

Q2

2007

Q3

2007

Q4

2007

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Fig. 7: Ten-Year Overall Index Revenue and Donor TrendsCumulative Rolling 12-Month Median Change from Q2 2004

HaitiEarthquake

End ofRecession

JapanEarthquake

Hurricane Sandy

Start ofRecession

Hurricane Katrina

IndianOcean

Tsunami

Burma Cyclone / China Earthquake

Government Shutdown &

Typhoon Haiyan


Q2 2014 RESULTS

New Donors-30.1%

All Donors-12.0%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

Q2

2004

Q3

2004

Q4

2004

Q1

2005

Q2

2005

Q3

2005

Q4

2005

Q1

2006

Q2

2006

Q3

2006

Q4

2006

Q1

2007

Q2

2007

Q3

2007

Q4

2007

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Fig. 8: Ten-Year Overall Index Donor and New Donor TrendsCumulative Rolling 12-Month Median Change from Q2 2004

HaitiEarthquakeEnd of

Recession

JapanEarthquake

Hurricane Sandy

Start ofRecession

Hurricane Katrina

IndianOcean

Tsunami

Burma Cyclone / China Earthquake

Government Shutdown &

Typhoon Haiyan


Q2 2014 RESULTS

0.0%

5.3%

1.4%

1.1%

-2.9%

2.7%

4.3%

2.6%

-5.3%

-0.3%

2.0%

3.4%

0.7%

-3.0%

-0.8%

1.2%

0.8%

-3.6%

Overall Index

Animal Welfare

Arts & Culture

Environmental

Health

Human Svc

Relief

Religion

Soc Benefit

Fig. 9: Revenue Change by Sector

Q2 YTD 2012 to Q2 YTD 2013

Q2 YTD 2013 to Q2 YTD 2014

-3.1%

-3.0%

-0.9%

-1.8%

-4.4%

-3.4%

-1.2%

0.9%

-9.3%

-4.7%

-0.2%

-4.8%

-2.3%

-8.2%

-5.3%

-2.1%

-0.7%

-8.2%

Overall Index

Animal Welfare

Arts & Culture

Environmental

Health

Human Svc

Relief

Religion

Soc Benefit

Fig. 10: Donor Change by Sector

Q2 YTD 2012 to Q2 YTD 2013

Q2 YTD 2013 to Q2 YTD 2014


Q2 2014 RESULTS

-6.4%

-6.4%

-18.3%

-13.6%

-10.9%

-2.7%

-0.5%

0.9%

-23.5%

-3.4%

12.4%

-10.3%

5.1%

-5.8%

6.3%

-1.1%

-0.2%

-29.6%

Overall Index

Animal Welfare

Arts & Culture

Environmental

Health

Human Svc

Relief

Religion

Soc Benefit

Fig. 11: New Donor Change by Sector

Q2 YTD 2012 to Q2 YTD 2013

Q2 YTD 2013 to Q2 YTD 2014

4.8%

14.5%

6.0%

11.2%

4.8%

0.8%

7.9%

3.2%

-2.4%

4.1%

-2.5%

-2.3%

2.1%

4.6%

5.4%

10.5%

8.1%

7.4%

Overall Index

Animal Welfare

Arts & Culture

Environmental

Health

Human Svc

Relief

Religion

Soc Benefit

Fig. 12: Revenue per New Donor Chg by Sector

Q2 YTD 2012 to Q2 YTD 2013

Q2 YTD 2013 to Q2 YTD 2014


Q2 2014 RESULTS 5 organizations

1.4%

-0.9%

2.5%

-18.3%

0.1%

4.7%

0.0%

3.1%

3.4%

-4.8%

2.3%

-10.3%

-3.0%

-4.5%

-2.0%

-4.6%

Revenue

Donors

Rev / Donor

New Donors

Retention

First-Year Retention

Multi-Year Retention

Reactivation

Fig. 13: Arts & Culture Sector MediansYear-to-Date Change in Key Measures

Q2 YTD 2012 to Q2 YTD 2013

Q2 YTD 2013 to Q2 YTD 2014

Arts & Culture Sector7.1%

Entire Index-0.5%

-12%-10%-8%-6%-4%-2%0%2%4%6%8%

10%

Q2

'09

Q3

'09

Q4

'09

Q1

'10

Q2

'10

Q3

'10

Q4

'10

Q1

'11

Q2

'11

Q3

'11

Q4

'11

Q1

'12

Q2

'12

Q3

'12

Q4

'12

Q1

'13

Q2

'13

Q3

'13

Q4

'13

Q1

'14

Q2

'14

Fig. 14: Five-Year Arts & Culture Revenue Trends 12-Month Quarter-End Median Change from Q2 2009

Each data point is the median change in revenue for the 12 months ending in that quarter from the 12 months ending in Q2 2009.

Hurricane SandyEnd of

Recession

Arts & Culture Sector5.5%

Entire Index-9.8%

-12%-10%-8%-6%-4%-2%0%2%4%6%8%

10%

Q2

'09

Q3

'09

Q4

'09

Q1

'10

Q2

'10

Q3

'10

Q4

'10

Q1

'11

Q2

'11

Q3

'11

Q4

'11

Q1

'12

Q2

'12

Q3

'12

Q4

'12

Q1

'13

Q2

'13

Q3

'13

Q4

'13

Q1

'14

Q2

'14

Fig. 15: Five-Year Arts & Culture Donor Trends12-Month Quarter-End Median Change from Q2 2009

Each data point is the median change in donors for the 12 months ending in that quarter from the 12 months ending in Q2 2009.

Hurricane SandyEnd of

Recession


Since the end of the recession in 2009 • 3 Sectors are above 2007 levels adjusted for inflation

- Animal Welfare - International Relief - Societal Benefit

• 3 Sectors are back to 2007 adjusted for inflation - Arts & Culture - Environment - Human Services

• 2 Sectors are below 2007 adjusted for inflation - Health - Religion

Q2 2014 RESULTS


MACROECONOMICS OF FUNDRAISING


G I V I N G B Y I N D I V I D U A L S , 1 9 7 3 - 2 0 1 3 ( I N B I L L I O N S O F D O L L A R S )


IND IV IDUAL G IV ING AS A P E RCE NTAGE OF D IS P OS ABL E P E RS ONAL INCOM E , 1 9 7 3 -2 0 1 3


0.0

1.0

2.0

3.0

4.0

5.0

6.0

Jan

2004

Jun

2004

Nov 2

004

Apr 2

005

Sep

2005

Feb 2

006

Jul 2

006

Dec 2

006

May

2007

Oct

2007

Mar

2008

Aug

2008

Jan

2009

Jun

2009

Nov 2

009

Apr 2

010

Sep

2010

Feb 2

011

Jul 2

011

Dec 2

011

May

2012

Oct

2012

Mar

2013

Aug

2013

Five-Year Treasury Rates

2007-2009Recession

Source: Monthly nominal market yield on U.S. Treasury securities at 5-year constant maturity, quoted on investment basis, http://www.federalreserve.gov/. Retrieved December 9, 2013.

Lower interest rates mean lower returns on savings vehicles such as treasury bills, certificates of deposit, and mutual funds. This disproportionately hurts older people, who are more likely to be retired and reliant on these more conservative, interest-bearing investments.

INTEREST INCOME


2.8%

2.0%

0.5%

-0.8%

-2.0%

-6.0%

< 35

35-44

45-54

55-64

65-74

≥ 75

Annual Net Interest Impact for Average HouseholdChange in Available Income 2007-2012

Source: US Federal Reserve Survey of Consumer Finances and Flow of Funds; Bankrate; Federal DepositInsurance Corporation; US Treasury Department; Bloomberg; McKinsey Global Institute analysis.Taken from QE and Ultra-Low Interest Rates: Distributional Effects and Risks, by Richard Dobbs, Susan Lund, Tim Koller, and Ari Shwayder, McKinsey Global Institute, November 2013, www.mckinsey.com/mgi.

$1,500

$1,700

$500

-$900

-$1,900

-$2,700

$ Change inAnnualIncome

Age ofHead of

Household

% Change inAnnualIncome

According to a McKinsey Global Initiative study published in November 2013, donor-aged adults in the United States lost $2,000 or more compared with their 2007 income. Anecdotally, in our donorCentrics benchmarking groups, we have already started to see high-value older donors giving smaller gifts; if this continues, it could have a large negative effect on charitable giving in the U.S.

DONOR INCOME


Start ofRecession

ParticipationRate

63.2%

IndexDonors

2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

61%

62%

63%

64%

65%

66%

67%

Q3

2003

Q4

2003

Q1

2004

Q2

2004

Q3

2004

Q4

2004

Q1

2005

Q2

2005

Q3

2005

Q4

2005

Q1

2006

Q2

2006

Q3

2006

Q4

2006

Q1

2007

Q2

2007

Q3

2007

Q4

2007

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Inde

x O

vera

ll Don

or G

rowt

h

Labo

r For

ce P

artic

ipat

ion

Rat

e

donorCentrics Index Overall Revenue Change vs. Labor Force Participation Rate(2003-2013)

HaitiEarthquake

End ofRecession

Source for Index Donors: Target Analytics donorCentrics Index of Direct Marketing Fundraising, 2013 Third Calendar Quarter Results, January 2014.Cumulative Rolling 12-Month Median Change in Total Donors from Q3 2003. Source for Participation Rate: Seasonally adjusted quarter end Labor Force Participation Rate,U.S. Department of Labor Bureau of Labor Statistics, http://www.bls.gov/. Retrieved December 18, 2013.

Hurricane Katrina

Indian Ocean

Tsunami

Hurricane SandyJapan

Earthquake

Horn of Africa

Famine

Gulf Oil Spill

The labor force participation rate has been steadily declining, along with index donor numbers, for the past five years. As of September 2013, it reached a 35-year low of 63.2%.

LABOR FORCE


In our donorCentrics Index, donor counts last peaked in 2005. Part of the reason for that peak was the extraordinary giving in response to the Gulf Hurricanes and the Indian Ocean Tsunami, but it also happened at the time when the population of US-born people turning 50 was at its peak.

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

2032

2034

2036

2038

2040

2042

2044

2046

2048

2050

US-born population aged 50

leading boomers

POTENTIAL NEW DONORS


$19.

37

$20.

53

$21.

60

$23.

53

$26.

32

$29.

55

$32.

10

$36.

59

$40.

71

$45.

99

$47.

63

$52.

06

$56.

46

$57.

39

$67.

09

$64.

53

$69.

98

$79.

45

$79.

00

$81.

93

$87.

20

$91.

72

$92.

28

$94.

78

$107

.35

$123

.67

$137

.68

$154

.63

$174

.09

$173

.06

$173

.79

$181

.47

$201

.96

$220

.82

$224

.76

$233

.05

$213

.76

$200

.37

$213

.30

$220

.26

$228

.93

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Giving by Individuals (1972-2012)

Giving is in billions of current dollars. Lighter bars identify years with at least one month of recession. Source: Giving USA Foundation, Giving USA 2013.

Tax Reform Actof 1986

Takes Effect

The Pease Limitation essentially limits the total amount of most otherwise allowable itemized deductions, including the charitable deduction, for many upper-income taxpayers. Limiting the deductibility of charitable gifts and thereby reducing the incentive for high-net-worth individuals to give, potentially puts a very large amount of charitable revenue in jeopardy.

TAX DEDUCTIBILITY


SUTAINERS


THE SUSTAINERS ADVANTAGE

• Sustainers are one of the most valuable segments in a fundraising program because of the compound effect of their giving

• Twelve gifts of $10 or $15 or $25 given in one year is more annual revenue than the majority of single gift donors (those who give individual, one-off gifts) will give in that same period

• Sustainers out-perform other donors on the two drivers of long-term value - Lifetime revenue per donor – due to their substantially higher

lifetime frequency of donations - Retention year after year and for many years they continue to

give

• They are consistently worth 2, 3, or 4 times as much as single gift donors over five years.

35 #bbcon


MEDIAN DISTRIBUTION OF SUSTAINERS BY AGE

The distribution of active donors by gift type and

age indicates a relatively younger donor profile is

giving recurring gifts. Single gift donors skew

older.

*NOTE: Data applies to a subset of the 25 organizations, and is for illustration only


DONOR VALUE IS SIGNIFICANTLY HIGHER FOR SUSTAINERS (25 ORGANIZATIONS IN BENCHMARKING)

Single Gift Only Donors in 2013 - Average gift median $54 - Median gifts per donor (includes new donors) is 1.5 - Revenue per donor median is $84

Sustainer Only Donors in 2013 - Average gift median is $21 - Median gifts per donor (includes new donors) is 9.5 - Revenue per donor median is $187

Donors Who Gave Both Sustainer and Single Gifts in 2013 - Average gift median is $24 - Median gifts per donor (includes new donors) is 9.6 - Revenue per donor median is $243


REVENUE RETENTION

38 #bbcon

the Holy Grail of Fundraising?


+ High Donor Retention (Less Attrition) + Higher Retention of Most Valuable Donors + More Upgrades than Downgrades

= Higher Revenue Retention

FORMULA FOR HIGHER REVENUE RETENTION

39 #bbcon


REVENUE RETENTION

26% 27% 30%

43%

47% 48%

31% 31% 29%

Q2 YTD2012

Q2 YTD2013

Q2 YTD2014

Q2 YTD2012

Q2 YTD2013

Q2 YTD2014

Q2 YTD2012

Q2 YTD2013

Q2 YTD2014

First-Year Donors Multi-Year Donors All Donors

Median Donor Retention Rates


REVENUE RETENTION

22% 22% 22%

34% 34% 33% 32% 32% 31%

Q2 YTD2012

Q2 YTD2013

Q2 YTD2014

Q2 YTD2012

Q2 YTD2013

Q2 YTD2014

Q2 YTD2012

Q2 YTD2013

Q2 YTD2014

First-Year Donors Multi-Year Donors All Donors

Median Revenue Retention Rates


REVENUE RETENTION

Animal Welfare, 36% Arts & Culture, 36%

Environmental, 33%

Health, 29% Human Services, 30%

International Relief, 28% Religion, 27%

Societal Benefit, 34%

20%

22%

24%

26%

28%

30%

32%

34%

36%

38%

40%

Q2 YTD 2012 Q2 YTD 2013 Q2 YTD 2014

Revenue Retention Rate Trends Medians by Sector for All Donors


REVENUE RETENTION

34% 35% 36% 37% 36% 36%

34% 34% 33%

29% 29% 29%

32% 30% 30%

27%

31%

28% 29% 29%

27%

39%

34% 34%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Q2YTD2012

Q2YTD2013

Q2YTD2014

Q2YTD2012

Q2YTD2013

Q2YTD2014

Q2YTD2012

Q2YTD2013

Q2YTD2014

Q2YTD2012

Q2YTD2013

Q2YTD2014

Q2YTD2012

Q2YTD2013

Q2YTD2014

Q2YTD2012

Q2YTD2013

Q2YTD2014

Q2YTD2012

Q2YTD2013

Q2YTD2014

Q2YTD2012

Q2YTD2013

Q2YTD2014

Animal Welfare Arts & Culture Environmental Health Human Services InternationalRelief

Religion Societal Benefit

Revenue Retention Rate Trends Medians by Sector


DONOR AND REVENUE RETENTION

• Museum Benchmarking Medians 5 organizations

- Membership Only • Donor Retention 47% • Revenue Retention 61%

- Appeals Only • Donor Retention 46% • Revenue Retention 83%

- Both Membership & Appeals • Donor Retention 76% • Revenue Retention 73%


Is Sustainer Giving the Philosopher’s Stone of Fundraising?

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=WSObPWTOAymk-M&tbnid=JQr4d_REGasxkM:&ved=0CAUQjRw&url=http://www.deviantart.com/morelikethis/169188058&ei=fEfZU-_qIdXroATgiYLoAQ&bvm=bv.71778758,d.b2U&psig=AFQjCNE7KOxUctyGTrvzLUZtZP18PpixHQ&ust=1406834925455762


REVENUE RETENTION: ACTUAL PERFORMANCE REVENUE RETENTION: ACTUAL PERFORMANCE


CAROL RHINE c a r o l . r h i n e @ b l a c k b a u d . c o m

carol rhine principal fundraising analyst, target analytics...rev / donor new donors retention...

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