The first nine months of 2006 proved sobering for the nonprofits – but it wasn’t unexpected. Coming off a year of unprecedented disaster-related support, last year’s donor counts were down a median 2.4 percent when compared to the same period the year prior, according to a new study.
But, the average gift per donor increased 2.4 percent over the same period, resulting in a year-to-date revenue that remained essentially flat, at a median decline of 0.6 percent from 2005, according to the study.
The Quarterly Index of National Fundraising Performance, a study completed by Cambridge, Mass.-based Target Analysis Group, showed that donor counts for the first three quarters of 2006 were down in all five nonprofit sectors analyzed in the index, including international relief, animal welfare, health, advocacy and environmental. The study indicated three primary culprits: declining acquisition of new donors, declining retention and declining reactivation rates.
Beginning with the 2004 Asian tsunami and hitting an all-time high with the U.S. Gulf Coast hurricanes in the fall of 2005, nonprofits in the United States benefited from $7.37 billion in disaster-related giving during 2005, according to an annual Giving USA, which is unrelated to the Target study. The Giving USA study found individuals accounted for almost eight of every 10 disaster-related dollars donated that year.
Fundraisers knew it would be particularly challenging to renew many of the new donors they acquired as a result of disaster relief efforts, according to the Target Analysis results, and that first-year donor retention rates would be a key measure to track during 2006. Relief and animal welfare organizations, which acquired the most disaster-related new donors during 2005, experienced significant declines in first-year donor retention rates, down 29.2 percent and 18.7 percent, respectively.
The Target study found that environmental organizations, which had a 16.9 percent increase in new donors during 2005, also had a 0.8 percent increase in first-year retention during 2006 year-to-date. “This is an indication that…they were still able to retain those newly-acquired donors at relatively typical rates,” according to the study’s authors. Health organizations experienced the greatest increase in retention, up 2.4 percent. Advocacy organizations, on the other hand, had a 7.7 percent decline in first-year retention in 2006 year-to-date.
It should be noted that none of the industry sectors in the index had significant growth in multi-year retention from Q3 2005 to Q3 2006. Every sector was flat, according to the study, with the greatest declines in animal welfare (-5.1 percent) and relief organizations (-10.8 percent).
The study also looked at median rolling 12-month revenue growth for each quarter. Using this approach, which offers a long-term picture, the study found that in Q3 2006 the correction began toward estimated growth at the historical average rate, which excludes disasters. From Q4 2001 to Q3 2006, the index has seen a cumulative rolling 12-month median revenue change of 14.2 percent, 0.9 percent when adjusted for inflation.
The Q3 2006 year-to-date growth rates for the relief organization sector are down in almost every key measure when compared to the same period in 2005. Donor counts are down a median 32.9 percent, revenue is down 42.6 percent, and new donor acquisition is down 64.2 percent.
But according to the study, “these declines are expected, since current Q3 year-to-date results are being compared to record levels of disaster giving in 2005.”
The median rolling twelve-month revenue change from Q4 2003 to Q3 2006 provides a better sense of the state of the relief sector. It showed relief organizations had a cumulative growth rate of 46.7 percent, while the index as a whole had a cumulative 9.0 percent growth over the same time period. “Relief organizations have been able to retain a good proportion of the donors that they acquired, retained and reactivated as a result of the tsunami disaster,” the study reads.
Other changes from Q3 2005 to Q3 2006 include:
- The animal welfare sector in the index experienced declines in almost all key measures, including donor counts (-17.7 percent), revenue (-24.4 percent), acquisition (-42.9 percent), retention (-11.3 percent) and revenue per donor (-8.2 percent). (Note: only four animal welfare organizations are included in the index, so median rates may be somewhat less representative than the norm.)
- The advocacy, environmental and health sectors had revenue growth, at a median 0.5 percent, 4.0 percent and 2.3 percent increase, respectively, due to their strong increases in revenue per donor, since donor numbers were down for all three sectors.
- Advocacy groups saw the largest declines in new donor acquisition of any sector not directly affected by disaster giving, at -16.0 percent. Environmental groups saw a decline of 4.3 percent, while for health organizations new donor acquisition continued to drop, at a median 9.3 percent decrease.
- Membership organizations generally saw lower donor numbers and increasing donor value, for a net result of flat revenue growth.
- Donor-based organizations experienced a decline in donor numbers (-3.4 percent), new donors (-10.3 percent), retention (-3.1 percent), and revenue (-2.8 percent). Revenue per donor was flat (-0.9 percent). (Note: Almost all of the relief and animal welfare groups in the index are donor-based organizations.)
- Organizations with premium-based acquisition programs saw increases in revenue (1.2 percent), donor numbers (1.0 percent), and retention (1.1 percent). New donor acquisition dropped by a median 5.2 percent. Organizations with hybrid or tradition programs saw donor acquisition fall by 9.3 percent and 18.4 percent, respectively.