Saturday, April 25, 2009

Cash is King: but is it really?

Cash in King.

Well that's what our Finance Director keeps telling me. And I guess when running an agency, he is dead right.

But let's face it, when it comes to generating new charitable direct response donors, cash really doesn't stack up anymore.

Consider this: when we look at the balance of cash versus monthly givers recruited through the benchmarking we undertake at Pareto Fundraising invariably we find the balance stacked heavily towards more cash donors recruited.

Often up to five times as many cash donors are recruited in a period than ongoing, monthly donors.

Yet when you compare the retention rates, even those channels delivering the lowest retention rates (typically street/door recruited donors, followed by DRTV) still retain around 75%-80% of monthly donors per year.

Contrast this with cash recruitment. When we recently looked at this the average 2nd gift rate (I.e. those donors who gave a cash gift and then gave a subsequent cash gift) it was as low as 30%. In other words, around 70% never gave again.

Of course the obvious rebuttal is that monthly donors are much harder to recruit and the cost per acquisition is higher, but the pay off long term is a no brainer.

In other words, you might pay more for a monthly donor upfront, and it may be bloody hard work finding them, but when you do, it's difficult to find a case for recruiting onetime cash donors through your direct response program.

So cash might be king when balancing the books, but it ain't when finding your next group of donors.



Ted Grigg said...

Well said.

Monthly donors show greater commitment in the cause and will remain on the books much longer than single gift donors.

In commercial business, a good example is the importance cell phone companies place on two year contract customers.

They strenuously attempt to lure expired contract customers who pay from month to month to new contracts by offering free phones.

The greater the commitment, the higher the retention rate.

Jonathon Grapsas said...

Spot on Ted.

Unfortunately many org's look at the wrong measures and focus too heavily on cost per acquisition and ignore long term value.