January 9, 2009

Donors And Revenue Continue Steep Nose Dive

In statistics that will be of little surprise to charity executives, the number of donors who give to charities via direct response techniques such as mail and online declined during the third quarter of 2008 and their revenue went with them. Donors who continued to donate did give more but could not stem the decline.

That’s the result of the Target Analytics Index of National Fundraising Performance. For the 12 months ending in the third quarter of 2008, Target Analytics evaluated transactions from 74 organizations, including more than 37 million donors and more than 68 million gifts totaling over $2 billion in revenue.

Overall revenue in the nonprofit sector, when adjusted for inflation has fallen by 8.1 percent during the past three years, according to the Cambridge, Mass. firm. The Target Index reports on direct marketing giving only. Direct mail is the dominant revenue source for most organizations but Web, telemarketing, canvassing, and other gifts considered to be direct marketing are also included. Individual payments greater than $5,000, soft credits, and matching gift payments are excluded.

Revenue of the index charities declined a median 1.1 percent from the first three quarters of 2007 to the first three quarters of 2008. This continues a pattern of decline that began in the last edition of the index in Q2 2008, when revenue declined 2.4 percent from the first half of 2007 to the first half of 2008.

Before 2008, the last time that current-dollar revenue declined in the index was in the aftermath of the U.S. Gulf Coast hurricanes in the fall of 2005. Revenue declines were not universal across the index, however; 44% of the organizations in the index did have positive revenue growth from third quarter year-to-date 2007 to the same period of 2008.

The number of donors of index charities dropped a median 2 percent from the first three quarters of 2007 to the first three quarters of 2008. Donors have been declining consistently for the past three years for index charities. The indexed groups, collectively, has not seen positive donor growth since the 2005 hurricanes, according to Target Analytics

On the bright side, 43 percent of the organizations in the index had positive donor growth during the period.

Those who continue to give are upping their gifts. Revenue per donor has been steadily increasing for the past three years. Revenue per donor increased 2.2 percent from the third quarter year-to-date 2007 to third quarter year-to-date 2008, after 3.8 percent growth during the same period one year before. Almost three-quarters (72 percent) of indexed organizations had increases in revenue per donor.

Until 2008, increases in revenue per donor compensated for donor declines, allowing overall revenue to continue to grow. In 2008, however, continued revenue per donor growth has so far no longer made up for the donor decrease and overall revenue has declined.

For most organizations, donor decline was caused by drops in new donor acquisition. New donors declined a median 6.2 percent from third quarter year-to-date 2007 to third quarter year-to-date 2008. What makes the bad number worse is they come after a 4.3 decline compared to the same period one year before. However, 45 percent of the indexed organizations in had positive new donor growth during the first three quarters of 2008.

A lack of new donor growth is not the only cause for the donor declines, however. Falling retention and reactivation rates continue to be a problem. Retention rates dropped a median 0.7 percent. Roughly 42 percent of the indexed organizations had retention rate growth during the first three quarters of 2008.

According to Target, the greatest decrease in retention was in first-year donor retention, which declined 3.2 percent in third quarter year-to-date 2008 compared to the same period one year before. Reactivation rates of lapsed donors declined 5 percent during the period.

Organizations tracked by Target Analytics include:
Animal Welfare
American Humane Association
ASPCA
Humane Society of the United States
International Fund for Animal Welfare
U.S. Office of PETA
Defenders of Wildlife
Earthjustice
Environmental Defense
Greenpeace U.S.A.
National Parks Conservation Association
National Wildlife Federation
Natural Resources Defense Council
The Nature Conservancy
The Ocean Conservancy
Sierra Club
Trout Unlimited
The Wilderness Society
World Wildlife Fund
ALSAC / St. Jude Children’s Research Hospital
Alzheimer’s Association
American Cancer Society
American Diabetes Association
American Health Assistance Foundation
American Heart Association
American Lung Association
Arthritis Foundation
Children's Cancer Research Fund
Cystic Fibrosis Foundation
Easter Seals
The Foundation for AIDS Research
Juvenile Diabetes Research Foundation
March of Dimes
Mayo Clinic
National Foundation for Cancer Research
National Multiple Sclerosis Society
Special Olympics
America’s Second Harvest
American Indian Relief Council
Cal Farley’s Boys Ranch
Covenant House
Missionary Association of Mary Immaculate
Paralyzed Veterans of America
St. Labre Indian School
International Relief
AmeriCares
CARE
Catholic Relief Services
Doctors Without Borders
Habitat for Humanity International
International Fellowship of Christians and Jews
International Rescue Committee
Mercy Corps
Operation Smile
Project HOPE
Save the Children
U.S. Fund for UNICEF
Societal Benefit
American Association of University Women
American Civil Liberties Union
Amnesty International
Anti-Defamation League
Center for Science in the Public Interest
Common Cause
Human Rights Campaign
NARAL
Nat’l Committee to Preserve Social Security & Medicare
Planned Parenthood
Public Citizen
Southern Poverty Law Center
Colonial Williamsburg Foundation
National Law Enforcement Officers Memorial Fund
National Trust for Historic Preservation
National World War II Museum
The Smithsonian Institution
United States Holocaust Memorial Museum
United States Olympic Committee