Preliminary Report on Charitable Direct Mail Contribution Volume in 2016

As I have for four consecutive years, I’m starting 2017 off with a report on last year’s charitable giving volume. The analysis is based on 17 million individual direct mail contributions received in 2016 by more than 60 national nonprofit organizations. It encompasses six primary charitable sectors served by Merkle’s Response Management Group.

Initial data indicates that the total number of individual direct mail contributions received by American charities in 2016 fell by less than one percent; marking it the fourth straight year in which individual contributions declined year over year. On the positive side, the decline was much lower than the 4.5 percent and 5.5 percent declines experienced in 2014 and 2015, respectively.

Despite the overall decline in contribution across the industry, there were some sectors that experienced year-over-year growth—most notably political/advocacy (up 11 percent) and conservation groups (up 5 percent). It’s not surprising to see contributions to political organizations rise considering 2016 was a presidential election year.

Individual gifts made to animal protection groups and international and domestic relief organizations declined slightly in 2016, down less than one percent from 2015. The news was not as good for national health charities, whose struggles continued in 2016, as year-over-year individual contributions dropped 10 percent.

In total, organizations included in this study received nearly two million (10 percent) fewer direct mail contributions in 2016 than in 2013. Using conservative estimates for the average contribution amount, it’s likely that the decline in annual revenue could exceed $50 million. The vast majority of this decline (70 percent) came within the national health sector. In contrast, the conservation sector experienced a five percent growth in direct mail contributions over the same four years.

2016 was a year of ups and downs for most nonprofits. The year got off to a rough start as the January contribution volume declined 36 percent year over year. Over the next several months, the number of direct mail donations rebounded and ended the first half of the year down only three percent compared to the prior year. Individual direct mail contributions made during the second half of the year increased two percent, as volume increased in four of the six remaining months. There were 15 percent and 12 percent more donations received in October and November this year, which more than offset the 17 percent decline in September.

Of course there are many reasons why the volume of direct mail contributions will vary from month-to-month and from year-to-year, and it’s impossible to know those through this global lens of total contributions made. It’s also difficult to understand why national health charities appear to be suffering more than organizations in other sectors. Among the various possibilities, the most likely scenarios will include one or all of the following:

• The migration of direct mail donors to online channels is ongoing, of which the degree varies greatly by sector.
• Direct mail budgets are continuing to be slashed (primarily in new donor acquisition programs), resulting in less overall prospect mail volume. Remaining budgets are being optimized, so only the best prospects are being targeted, leading to an oversaturation of the best prospects. Inevitably, when you mail lower volumes that are more saturated, the result will be significantly fewer newly acquired donors.
• Response rates continue to decline as fewer donors are responding to donor appeals and new donor prospecting campaigns. It’s estimated that during the first half of 2016, acquisition response rates declined 25 percent to 40 percent compared to the previous year.
• Active donor retention rates were reportedly lower in 2016, as was the overall frequency of giving (although to a lesser degree).

There are reports in the market that suggest Americans are less charitable today than ever before, and there are fewer people actually donating to charity. There are others who believe people are as benevolent as ever, yet are choosing to support fewer charities, which may explain the rise in an organization’s overall revenue per donor.

The bottom line is that individual support of charitable organizations is being impacted by a number of factors (internal and external), and it’s up to those of us in the industry to better understand the shifting dynamics taking place within our marketplace. Without a doubt, direct mail is and will continue to be a viable medium and channel for fundraising, and it’s up to us to find ways to fully maximize its revenue potential.

If the industry is able to reverse the trend of declining annual contribution volume, we need to evolve beyond past experiences and embrace a future of uncertainty. We need to help our organizations create more compelling solutions and to become more competitive in a narrowing market. We need to give donors what they want—a more satisfactory and rewarding giving experience.

While this study was specific to direct mail contributions, it’s becoming increasingly important that direct mail and online media and channels work more effectively together. Evidence demonstrates significant benefits to integrating offline and online media and channels toward a common strategic plan. The result is a measurable lift in overall donor conversion, performance and efficiency.

Of course, numbers don’t tell the entire story, and this analysis represents only a small subset of the overall industry. But it does suggest that, while national health charities face the greatest overall challenge, no charitable sector is immune from ongoing threats that compromise the long-term stability of the fundraising industry.