Fundraising Effectiveness Project: Giving Increases Significantly in 2020, Even as Donor Retention Rates Shrink
The Fundraising Effectiveness Project Highlights Good News Short Term, But Retention Losses May Pose Long-Term Challenges for Many Charities
Despite concerns that the COVID-19 pandemic would depress donations to nonprofits, giving in the U.S. in 2020 increased from 2019 by 10.6%, with the overall number of donors growing by 7.3%, according to the Fundraising Effectiveness Project’s 2020 Fourth Quarter Report.
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 8.0%.
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%.
“American generosity remains incredibly strong,” said Mike Geiger, MBA, CPA, President and CEO of the Association of Fundraising Professionals. “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.”
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 available at http://data.givingtuesday.org/fep-report.
“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. 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.”
Increased Need Inspires New Donors to Give
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 extraordinary 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).
“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.”
“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 Percentages
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.
“While these drops may not look relatively all that big, especially compared to the big percentage gains we saw in giving and donors, these figures show a giving trend that continues to be exacerbated,” said Tim Sarrantonio, Head of Partnerships and Business Development at Neon One. “Even with the growth in lower-level gifts—which I’m very excited about—2020 still saw the lowest donor retention rate since the FEP started tracking this data. And we know that major gifts account for a high percentage of all giving. So even if we still saw a lot of shifting of donors and giving because of the pandemic, dropping retention rates mean charities are in for difficult funding problems in the future unless they have consistent major donors. And that’s not a tenable situation for most charities.”
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.”
The Fundraising Effectiveness Project offers tools and resources for charities to determine their own data for each of these charitable giving benchmarks and then use the data to analyze which groups of donors they need to focus on, communicate with and solicit.
About the Report
The data analysis includes giving details from 2,496 nonprofit organizations based in the U.S. as a subset of the Fundraising Effectiveness Project. 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.
From the Growth in Giving database, 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 IRS filers.
The Fundraising Effectiveness Project
The Fundraising Effectiveness Project publishes quarterly and annual reports that examine key fundraising metrics, serving as a benchmark for nonprofit executives, development staff and researchers. The Fundraising Effectiveness Project and the Growth in Giving database are both administered by the Association of Fundraising Professionals in collaboration with GivingTuesday.
The Growth in Giving database is the world’s largest public record of donation activity, with more than 204 million donation transactions, and is continuously updated by leading fundraising software thought leaders (in alphabetical order) Bloomerang, DonorPerfect, and NeonCRM. Additional partners include the 7th Day Adventists, The Biedermann Group, DataLake Nonprofit Research, and DonorTrends (a division of EveryAction). For more information and how you or your fundraising software provider can participate, please visit www.afpfep.org.