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Outlook: When Gifts Come In Like Clockwork
Outlook: When Gifts Come In Like Clockwork

How regular giving leads to extraordinary annual fund results

By John Rux-Burton


Jim Frazier



I have some bad news about your Lybunts and Sybunts—the donors who gave last year or some year but unfortunately not this year. They do not see you as a long-term partner.

The problem is how you're asking: for a single gift—a one-off—each year. Single giving is about responding to a request and a need. But, with regular giving, donors feel like they are contributing members of the family. What's regular giving, you ask?

In the U.K., donors are typically asked to make recurring monthly, quarterly, or yearly charitable gifts that automatically renew for up to three to five years. Some charities even ask for repeat bank debits with no end date. A donor who gives regularly has a different relationship with the institution than one who makes periodic single gifts. Regular giving creates a sense of partnership and ongoing shared purpose.

If you haven't converted your donors into regular givers, you should. Here's why: As a result of committed giving, U.K. institutions are seeing rising participation rates, retaining and upgrading more donors, saving limited resources, and raising more money.

The benefits of regular giving

In addition to raising cash, the annual fund's main aims are to build brand loyalty, identify prospective major donors, and encourage alumni, staff, parents, and friends to give. Regular giving helps annual funds achieve all of that.

If you have to ask someone to give every year, you won't renew as many people as you want. Reaching someone can take up to 20 phone attempts (five to 10 if you have accurate contact information). Not everyone who speaks to you will give. A donor who has given once in the last five years is about 40 percent more likely to give than someone who has never been called, based on an analysis of our client data. The odds are better if you reach someone who's contributed two or more times­—a 60 percent chance.

How does regular giving compare? Our data shows that 90 to 95 percent of regular donors renew their pledge, and 60 percent of alumni upgrade to a higher amount at the end of their commitments. Annual fund programs that follow this model only ring up donors for a gift every few years. What they receive adds up to a higher amount than the average yearly gift. That's because it's less painful for donors, especially young alumni, to give £25 a month than to make a one-time £300 gift.

Because institutions don't make repeated calls, the cost of renewing regular donors is significantly lower than pursuing the one-gift-a-year strategy. Another perk: A solicitation call every three years with a thank you in between makes people less likely to dodge your calls.

A history of habit-forming behavior

Single giving establishes only modest brand loyalty, and renewal rates for annual gifts are weak as donors churn from one cause to another.

Regular giving puts donors on a stable track to major giving. The question is not "Will you give again?" (almost all do) but "At what level?" All of us can track donors who have given small, upped their contributions each year, and, eventually, given big. Lybunts and Sybunts are stalled in this process, a problem that regular giving largely avoids.

Regular giving programs don't have to start from scratch each year, because repeat gifts are already scheduled. That's why some U.K. development offices have quickly climbed the participation ladder. Exeter and Merton colleges at Oxford both had participation rates of less than 1 percent at the start of the new millennium. In 2014, they achieved 45 percent and 33.4 percent respectively—higher than Harvard University's. At the University of St Andrews, where the annual fund is only 15 years old, participation is in the double digits.

Educational fundraising is fairly new in the U.K.—although some institutions were launched with private funds, permanent development offices began opening in the 1980s—so overall alumni giving participation is 2 percent. But the number of graduates who give is growing and increased by 14 percent from 2011 to 2013, according to the Ross-CASE Report 2013–14. In the U.S., the 2014 Voluntary Support of Education report notes that alumni participation dropped from 8.7 percent in 2013 to 8.3 percent in 2014, and solicitation effectiveness (the percentage of solicited alumni who gave) fell from 11.4 to 10.9 percent.

So why hasn't everyone adopted regular giving? As Africana studies scholar John Henrik Clarke said, "History is not everything, but it is a starting point." U.K. income tax law established in 1799 allowed donors to transfer the tax liability on money given to charity through a covenant, or a promise to make regular gifts over a period of time, to the gift recipient. Since charities were tax-exempt, no taxes on these regular donations were paid. The thresholds have been reduced over the years to include single gifts. Now, almost any gift counts. But the habit of steady giving seeped into the woodwork of British charity, and the benefits were clear. The model has been transplanted across Europe, South Africa, and the Asia-Pacific region.

Habitual givers: handle with care

Not everyone will make regular gifts, so you'll still need to negotiate and renew plenty of single gifts. But don't ignore your regular donors; stewardship is vital to keep the renewal rates high. Make a quick thank you call each year, even if you only leave a message.

A potential problem area: if the gift's time frame is expiring and you can't reach the donor to upgrade. We suggest an open-ended commitment with a review after three or five years. That way, if you don't reach them, provided they don't cancel, you can continue to take the gift. Why have a sunset date at all? Well, gifts with no restrictions turn donors off in a way that "until further notice but at least three years" does not. Open-ended regular gifts are hard to upgrade. Donors feel like they're paying for a subscription, not making a gift. It's better to have a reason for discussion after a few years that focuses on continuance, but at a new level.

Regular giving has many financial advantages. Yet the main benefit is that people are no longer just participating. They are saying, "We are in this for the long haul."

About the Author John Rux Burton John Rux-Burton

John Rux-Burton is global managing director and founder of Rux Burton Associates in the U.K.

 

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