April 16, 2009

It’s Official -- 2008 Stunk

Here’s a surprise -- 2008 was a disappointing year in direct response fundraising for many national nonprofits. You’re not surprised? Really?

How bad was it? They sky didn’t fall but the median decline was 3.3 percent.

For its Index of National Fundraising Performance, Target Analytics evaluated transactions from 75 organizations, which included more than 36 million donors and more than 68 million gifts totaling over $2 billion ending in the fourth quarter of 2008.

The Target Index reports only on direct response marketing giving. 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 in the count. Individual payments greater than $5,000, soft credits, and matching gift payments are excluded from the study.

The declines were evident across almost all industry sectors, according to the study. Only animal welfare and international relief organizations tracked by the study reported revenue and donor growth.

Index organizations also experienced declines in most other key measures of fundraising health, such as retention rates, reactivation rates, and new donor acquisition. Revenue per donor increased, as it has for most of the past three years.

Index revenue trends generally follow the performance of the U.S. economy, according to the study. Index revenue declines deepened throughout 2008, as economic conditions grew weaker, with the largest revenue declines being experienced in the fourth quarter of the year.

The index has been tracking declining donor numbers since the U.S. gulf coast hurricanes of 2005. So it is likely that there would have been donor declines in 2008 as a continuation of this longer-term trend, regardless of the state of the economy, according to the study. But the increased magnitudes of the declines in 2008 suggest that the current recession might have accelerated the rate of decrease.

This is particularly the case with new donor acquisition; rates of new donor acquisition were significantly lower in 2008 than they were in 2006 and 2007.

Index revenue declined a median 3.3 percent from 2007 to 2008. Before this period, 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 entirely universal across the index. Some 37 percent of the organizations in the index did have positive revenue growth from 2007 to 2008.

Donor numbers in the index fell a median 3 percent from 2007 to 2008. Donors have been declining consistently for the past three years. Donor declines are due primarily to declines in new donors, which fell 6.9 percent from 2007 to 2008, after a drop of 4.4 percent from the previous year.

Declining new donor acquisition was not the only reason for the decline in overall donor populations. Retention rates also fell in 2008 by a median 1.4 percent from the previous year, and reactivation rates fell a median 6 percent during the same period.

Revenue per donor has increased for the past three years, although the rate of growth slowed in 2008. Revenue per donor grew 1.2 percent from 2007 to 2008, after 4.3 percent growth the previous year. Just more than half (56 percent) of the organizations in the index had revenue per donor increases in 2008.

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 no longer made up for the donor decreases and overall revenue declined.

For the complete study, go to www.blackbaud.com/targetanalytics

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This article is from NPT Instant Fundraising, a publication of The NonProfit Times.

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