Making a monthly pledge program work for you
by Harvey McKinnon
December 17, 1997; Canadian FundRaiser
An increasing number of charities have tested monthly pledge programs and proven them effective. If the nature of your organization fits the monthly pledge program concept - and most can - there are at least seven great reasons to act immediately:
- It's convenient. It's easy for you and it's easy for the donor.
- You will increase your income dramatically. Donors generally give at least 100% more money once they sign up on a monthly donor program, and in many cases their annual giving is dramatically higher.
- You build a better relationship with the donor. Monthly donor programs can help draw donors closer. They become among the best people to approach for special events, and are the most likely people to leave your organization money in their will.
- Donors will stay with your organization longer. Long-term value studies show that monthly donors, especially those on pre-authorized chequing will be with you for 5 to 10 years. Many will give until they die.
A $15 monthly donor will give $180 a year or $1,260 over a seven year period, and upgrading will increase this amount. A recent mailing for one charity resulted in 33% of the file upgrading at an average of $5 per month or $60 a year. That's $60 a year extra for every donor!
- Predictability. You are guaranteed income every month. This money will cover monthly overhead costs and help cash flow. This can be especially helpful for smaller non-profits.
- Savings. You don't have to, and should not, send monthly donors all your direct mail packages. Every organization we've worked with has lowered their administrative costs and increased their income through a monthly donor program. Your monthly donors will be one of the most profitable parts of your fundraising program, especially if you can use pre-authorized payment (PAP). The maintenance level is low compared to the potential income. One charity we know has just one staff person who manages a program of 6,500 monthly PAP donors who give $2 million a year. Non-profits that mail monthly reminders have much higher administration costs.
- You are fighting for scarce resources. It's important to lose no time in implementing your program, and to act quickly before your competition recruits your donors to their monthly program. This is not like direct mail where people regularly support many causes, but rather a program in which you elevate your donors to a mid-level giving range, where they will have less money for other charities. The alternative could be that your competitors will upgrade a donor's giving to them, leaving the donor with less money for your cause, and perhaps none.
Payment options for your monthly donors
- Electronic Fund Transfer - This is without a doubt the best option. Through PAP, a donor's monthly gift is automatically transferred from his/her bank account to the non-profit's account. Your service bureau or bank sends you a monthly statement of the amount transferred, client numbers, etc.
To establish a PAP arrangement, a donor fills out a simple form indicating they will pre-authorize the monthly transfer of their money to you. They specify the monthly gift amount, sign the form, and include a sample cheque marked "VOID".
- Credit Cards - A number of non-profits report the average credit card monthly donor gives more money than the PAP supporter. However, there are drawbacks. Firstly, it can take more time to process gifts. Secondly, the charge card company will take at least 2.4% to 5% of the donation, even with special charity rates. And finally, the donor has to renew their commitment when their card expires. Since this makes it easier for them to stop giving, they have a higher drop off rate than PAP donors.
- Monthly Reminder Pledge Plan - You send donors a monthly reminder that their monthly gift cheque is due. You always enclose a reply form and envelope and a "mini-message". Some organizations include one- or two-page letters, and occasionally a brochure. The fulfillment average ranges between seven and 11 gifts per year.
- Postdated Cheques - You ask donors for 12 or more post-dated cheques when they pledge. Few cheques will bounce but you have to renew the donor when the cheques run out.
- Monthly Envelopes - Send donors 12 envelopes, along with reply forms, and perhaps stickers to place on their calendars, to remind them to send their cheques.
How can you sign up monthly donors?
- Television. Very expensive and successfully done by religious broadcasters, international aid and environmental agencies.
- Telemarketing. Also expensive but can work well depending on your donor base. Some groups use this as their main method of recruitment. Others find letters more cost-effective.
- Canvassing. It works best for cause-oriented, well-known non-profits, but drop-off rates are higher than for other methods.
- Person-to-Person. There is a high rate of success using motivated solicitors.
- Special Events. Can be used to promote your program. Distribute flyers and use a highly motivating speaker (ideally a member) to pitch the program.
- Space ads and Brochures. Many organizations have recruited significant numbers of donors through these cost-effective methods.
- Direct Mail. The most common and a highly successful way to build a monthly donor base.
What is the Lifetime Value of the typical monthly donor?
The value of a donor will vary depending on various factors. But one major Canadian charity reports that their average PAP donor remains active for seven years.
- A $10 monthly donor will be worth a minimum of $840 over 7 years.
- A $20 monthly donor will be worth a minimum of $1,680 over 7 years.
- A $30 monthly donor will be worth a minimum of $2,520 over 7 years.
Is it easy to upgrade a monthly donor's gift amount?
Yes! Many charities average a monthly donor file upgrade of 16% each a year.
Will monthly donors also give single gifts?
Yes! They are among your most loyal donors. In emergency situations they are especially generous and a strong appeal letter has pulled single gifts from as high as 40% of them.
What are the average monthly gift ranges?
They range from $5 to $1000 but most are $10-$25. This depends on:
- which donor segments you appeal to.
- the strength of your message.
- whether it includes a personal solicitation campaign.
- the Ask.
- the length of time the program has been active. (i.e. an organization with supporters who have been upgraded for a number of years should have a higher average.)
Based on a presentation at the 1997 NSFRE Fund Raising Congress, in Toronto, Ontario, November 14, 1997. Harvey McKinnon & Associates specializes in dirct mail, monthly giving programs, and fundraising audits. For more information, contact Harvey McKinnon, 218-2211 West 4th Ave, Vancouver, BC V6K 4S2. Telephone (604) 732-4351. Fax (604) 732-4877. EMail harveym@direct.ca.
