Americans opened their wallets last year — real and digital – boosting giving 10.6% during the world’s worst pandemic since 1918. Sector leaders were concerned that the COVID-19 pandemic would depress giving but the overall number of donors grew by 7.3%, according to new data from the Fundraising Effectiveness Project’s 2020 Fourth Quarter Report.
Leaders are pointing to the potential that the universal charitable deduction boosted giving at the last minute, literally Dec. 31.
Significant increases were seen at all levels of giving, with smaller gifts (less than $250) leading the way, growing by 15.3% compared to 2019. Larger gifts ($1,000 or more) increased by 10.4%, while mid-level gifts ($250 to $999) improved by 8%, according to the data.
At the same time, donor retention, an important benchmark that tracks the percentage of donors who gave to a charity in 2019 and then gave to the same charity in 2020, dropped by 4.1%.
The Fundraising Effectiveness Project (FEP) is a collaboration among fundraising data providers, researchers, analysts, associations and consultants to empower the sector to track and evaluate trends in giving. The FEP releases quarterly findings on those giving trends, released both via downloadable reports at www.afpfep.org and in a free online dashboard at https://bit.ly/38vXVpu
The data includes giving details from 2,496 nonprofits based in the U.S. as a subset of the FEP. The FEP’s database of organizations is made up of organizations that raise between $100,000 and $10 million, so the data is not representative of larger charities such as hospitals and universities.
Organizations that did not have a minimum of 25 donors and $5,000 in donations in each of the previous five years were removed from the study. From the remaining organizations, the FEP randomly sampled organizations from each of the four organization sizes based on 2019 annual donations: $100,001 – $250,000; $250,001 – $1,000,000; $1,000,001 – $5,000,000; and $5,000,001 – $10,000,000, so that there was a balanced stratification reflective of filers with the Internal Revenue Service (IRS).
“American generosity remains incredibly strong,” said Mike Geiger, MBA, CPA, president and CEO of the Association of Fundraising Professionals (AFP). “After the first quarter of the year, when giving dropped 6% and the impact of COVID-19 was just beginning, many of us were very fearful about how giving would fare throughout 2020 — especially as events like natural disasters can often lead to dips in overall giving for charities not involved in relief efforts. However, 2020 giving has outpaced 2019 contributions ever since and ended very strongly, led by huge increases in smaller-level gifts,” he said.
“One factor that may have helped the increase in smaller gifts was the universal charitable deduction,” said Jon Biedermann, chair of the Fundraising Effectiveness Project and president and CEO of The Biedermann Group.
“It’s striking that on December 31, there was a 28% increase of $300 gifts, which is exactly the maximum amount a donor can take using the universal charitable deduction, plus small-level gifts of $250 or more increased by more than 15% throughout the year,” said Biedermann. “Obviously, there’s a lot to unpack, and the impact of COVID-relief efforts can’t be understated, but we’ll continue to examine the relationship between small gifts and the universal charitable deduction.”
Need Inspires New Donors
While giving benchmarks increased across the board, donor data was very mixed, reflecting how the pandemic and pandemic relief efforts changed how traditional donors gave and the number of new donors who felt inspired to contribute.
The 7.3% increase in the number of donors overall was led primarily by an 18.5% increase in new donors and a strong 13.7% increase in recaptured donors (those persons who had given previously to the charity before 2019, did not give in 2019, and then gave in 2020), according to the data.
“These latest figures show the desire of everyday people to respond to the needs of their communities in a variety of extraordinary ways,” said Woodrow Rosenbaum, chief data officer of GivingTuesday. “The events of 2020 inspired new levels of grassroots giving. We saw an increase in people giving to organizations they hadn’t given to before, which is a great opportunity for organizations to continue to engage these new supporters,” he said.
“It’s telling that repeat retained donors experienced such a small drop, as these are the most loyal supporters to any charity,” said Doug Schoenberg, CEO for DonorPerfect Fundraising Software. “Donors who have a consistent history of giving to a charity will, generally speaking, continue to give to that same charity no matter what else may happen — natural disasters, pandemic or other events — and probably gave to both the charity and disaster relief. It will be very curious to see what happens in 2021 and if all of these new donors continue to give, or if other donors shift their giving back to their traditional causes.”
Falling Donor Retention
While one donor retention benchmark did see an increase, other donor retention levels dropped, foreshadowing potential long-term challenges for most charities.
The overall 2020 donor retention rate was 43.6%, a 4.1% drop from the 2019 rate of 45.4%. The chief factor in the decrease was a 9.2% drop in the new donor retention rate (the percentage of donors who gave in 2019 to a charity but didn’t give to the same charity in 2020). The 2020 new donor retention was 19.2%, meaning that less than one in five donors who gave for the first time in 2019 to a charity didn’t give to the same charity last year.
Jay Love, chief relationship officer and co-founder at Bloomerang, noted that keeping and retaining donors is, on average for most charities, much less expensive than finding new ones. “So, 2020 gives us an opportunity. We have all these new donors, as well as recaptured donors who have come back to previously supported causes to give again. Nonprofits have the chance to see continued giving that could increase year over year. They now need to have a clear plan to follow up and build strong relationships with these donors.”