Fundraising Effectiveness Project: Donor Participation Wanes for Seventh Consecutive Quarter
Nonprofit trends are continuing to show the need for improvement in donor engagement and to avoid relying too heavily on a single donor cohort.
The Fundraising Effectiveness Project (FEP) released its latest results today for the first quarter of 2023, revealing a seventh straight quarter of donor decline. Donors are down 3.8% in the first quarter of 2023 compared to the first quarter of 2022, though dollars are roughly equal.
In a weird turn of events, retention is up 1.3%, even though it’s fallen across all types of donor categories.
Last year’s FEP numbers were promising in some areas until year end, so there is still time for nonprofits to improve results by connecting with disengaged donors and building stronger bonds with loyal donors. Here’s an overview of the FEP data, broken down by donation size, acquisition versus retention and gift frequency.
Donation Size
Though major donors make up a smaller portion of overall donors, they contribute an outsized amount to nonprofits. The same goes for the opposite end of the spectrum. While small-dollar donors may not give a lot individually, when combined, they likely make up a significant portion of your annual fundraising efforts. Here’s a breakdown of the trends by donor size.
Small-Dollar Donors
Micro donors (those giving less than $100) and small donors (those giving $101 to $500) make up more than 88% of donors. And these donors had the most significant drop off in the first quarter of 2023. There were 14% fewer micro donors and 5.7% fewer small donors year over year, though it’s important to point out that the number of donors is lower across the board.
These donors are also contributing less, with micro donors once again seeing the largest decline — 13% in this case — and small donors giving about 6% less. Those two donor cohorts combined to make up about 10% of total contributions in the first quarter.
Mid-Level Donors
Donation size for mid-level donors may vary by organization, but FEP describes donors giving $500 to $5,000 as “midsize.” These donors made up 10% of donors in the first quarter, but gave almost 5% less year over year. When it comes to dollars given, donations from mid-level donors — which make up nearly 17% of total donations — dropped 4.7% more than in the first quarter of 2022.
Major Donors
Donors giving more than $5,000 drove 69% of the increase in donations over the past decade, according to the FEP, but that growth halted abruptly in the final quarter of 2022. And that fourth-quarter decline continued in the first quarter of 2023. The FEP notes that the decline in supersize donations is responsible for more than half of the downfall in donor dollars. Let’s break down the downturn in major donors, who are known to pull back charitable giving during economic instability, particularly amid declines in the stock market.
Major donors, who give approximately $5,001 to $50,000, are about 1.6% of the donor pool, but give 26% of donation dollars to the sector. Meanwhile, supersize donors, those giving more than $50,000, make up only 0.2% of total donors, but contribute 47% of gift dollars. That dependence on big-dollar donors adds up as each category’s dollars declined by 7.1% and 10.9%, respectively.
“The sector’s over-reliance on large donors has hit a critical stage,” Woodrow Rosenbaum, chief data officer of GivingTuesday, said in a statement. “With major donors and donations now declining along with all other giving groups, trends are down across the board. But there is still an opportunity to create positive momentum and growth in 2023. Swift adoption of diversified fundraising strategies and broad engagement of grassroot givers can help ensure sector stability through the rest of the year while creating a stronger base for future cultivation.”
Acquisition Versus Retention
Both acquisition and retention are equally important, but require different approaches. In addition to wealthy donors pulling back on charitable giving, the economy is affecting many Americans' ability to give, so it's difficult to strategize where to spend your time and energy. Here’s how the latest FEP figures break down in terms of donor engagement and who’s staying and leaving your organization.
New and Recaptured Donors
Data showed a steep drop in donor acquisition — there were 19.2% fewer donors, and new donors gave 34.4% less. In terms of total donors, new donors accounted for half of the decrease.
Nonprofits are also struggling with recapturing lapsed donors, failing to re-engage 13.4% of donors and 3.8% of funds. Recaptured donors, which FEP describes as donors to an organization who did not give within the previous year, also had the most diminished retention rate of -18.9%, with only 1% retained in the first quarter of the year.
“However, this group's retention rate was already low last year (1.2%) so the relatively large decrease this year only represented a small absolute decrease of -0.2%,” the report noted.
Retained Donors
Acquisition continued its descent, but retention weakened more — and across all donor categories. Ironically, the overall retention rate spiked 1.3%, which FEP attributed to a “statistical phenomenon.”
“This was mostly due to a change in donor composition: There were relatively less new and small donors, which mechanically drove the overall retention up,” the report noted. “This is a common statistical phenomenon when a general trend suggests a certain direction while smaller segments within that larger trend are pointing towards the opposite direction.”
Nonprofits have kept repeat retained donors, which the report labels as those who gave the prior year but not for the first time, at similar rates. Even though there are 5% fewer long-standing donors, their total giving has remained steady. This is important since these donors account for 52.2% of total donors and 63.2% of donor dollars. This category is still struggling year over year though since the retention rate was 2.1% smaller, with 23.8% retained in the first quarter of this year.
On the other hand, retaining new donors has also proven difficult. FEP describes “new retained donors” as those who were new donors when they gave to the organization last year. Donor participation among that group fell 18.2% in the first quarter of 2023 compared to the same period last year — second to only newly acquired donors — and its retention rate came in at -4.8%.
Although that group is only 9.4% of donors, that donor cohort was responsible for 17% of the total decrease in donors. When it came to measuring dollars this group donated, figures dropped 15.2%.
“These results are a continuation of a troubling trend, but the fundraising community is aware of the challenges and prepared to adapt their strategies to encourage broader engagement with donors at all levels,” Mike Geiger, the president and CEO of the Association of Fundraising Professionals and the AFP Foundation for Philanthropy, said in a statement. “This is an opportunity for our profession to evaluate our current processes and build a more diverse and inclusive donor base, setting our organizations up for future success.”
Gift Frequency: One-Time Versus Recurring
The only silver lining in terms of donor counts is that those who gave seven or more times in the first quarter rose 10.9%. However, those donors make up less than 1% of first quarter donors, while 66.4% of donors were one-time donors, which fell the sharpest — a 13.5% decrease year over year.
Meanwhile, when it comes to dollars, nonprofits experienced monetary growth among donors giving at least three donations. About 26% of donor dollars fall in that category, though more than half of all dollars come from one-time gifts. Funds grew 2.1% for donors contributing three to six gifts and 4.6% for donors giving seven or more times.
The Data
The first quarter, year-over-year comparison data includes two million donors, who gave $1.8 billion to about 8,100 organizations. Organization opt-out for reporting aggregate data for this report continues to rise.
There is a collaborative effort to create the quarterly FEP report via aggregate data compiled from nonprofit software providers, including Bloomerang, Classy, Community Brands, DonorPerfect, Keela and Neon One, alongside analysis from DataLake Nonprofit Research and Bonterra. For the latest quarterly report, Qgiv became an aggregate data provider, the Fundraising Effectiveness Project announced.
“At Qgiv, we understand that data is the backbone of effective decision-making,” Todd Baylis, CEO of Qgiv, said in a statement. “By contributing to the Fundraising Effectiveness Project, we aim to equip nonprofits with the knowledge they need to build more sustainable revenue streams and overcome the negative trends the industry is facing.”
