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Watch: How Recurring Giving Really Works for Nonprofits
How Recurring Giving Really Works For Nonprofits from American Nonprofit Academy on Vimeo.
Transcript:
The Nonprofit Show 0:22
Well, let's dive into this because I remember you know, talking to you about this conversation, but let's get down to the very granular level.
What is recurring donations, and then how do recurring donations work?
Miraj Patel 0:39
Absolutely. You know, when we first started these conversations three years ago, in the midst of the pandemic, I wanted to really nail the fact that recurring giving is not anything but a solution. So to really understand recurring giving, you have to understand the problem that it solves. And so many nonprofits and many organizations that we work with continue to tell us, you know, having this confidence in these revenue streams having sustainable revenue streams, not having to worry about the pressures of what's happening in the macro environment, right. The market state of the market today is having a bunch of folks worried about how is how are these things going to impact our bottom line and our ability to fundraise over the course of the year as consumers and the American population continues to get hit by all these external factors. So the problem is, is that we need to have dependable recurring strong revenue streams that help take the pressure off of us in hitting our number, whatever number that may be. It's different from every organization, that annual goal, each and every year, if we can figure out a way to not come into every year with $0, than it inevitably helps us to grow because if you've got, let's just say 100 donors giving you $50 A month you're coming into every year with $60,000 and not starting at zero but starting at, you know, a place where you can grow that number and continue to do all these different things to help you boost that number up. So recurring giving is not a program folks tend to say, hey, we have a monthly giving program. We've checked that box. It's much more than that. It's a mindset shift. It's it's you and your team taking the initiative to say hey, we're not going to be a transactional fundraising shop anymore. We're not going to be in this perpetual cycle of spending time and dollars conducting these one off campaigns to satisfy our short term goals. Rather, we're going to move our mindset to a relationship based approach and focus on the donors post conversion experience, if we know that this donation is going to come in, and it's going to come in in an automated fashion, and we can count on it month after month. There's a powerful shift that happens. It's no longer about how do we drive this donation, but now that we have it how do we create such a great experience from our donors that their value over time, their donor lifetime value will continue to increase? So it's a subtle change, but it's a powerful one.
The Nonprofit Show 3:06
Okay. Well, I want to stop really quickly. And I would ask you, if, if those folks that engage in this, it seems to me and I'm not just talking about your product harness giving, it seems to me like this is the foray into an automated system. Are you seeing that that a lot of a lot of organizations have not really embraced the digital side of what can be, and this is how they're getting into it or am I off on that?
Miraj Patel 3:38
No, I think that's that's a big part of it. And thankfully, the industry and and it goes way beyond just harness but all of these different platforms that that the organizations are using and we use every day. These technologies are starting to become table stakes. So the idea that the technology is holding us back is no longer valid. And so from an automation manner from a recurring donation standpoint, recurring payments standpoint, this is table stakes, your platform, whatever CRM you're working with whatever fundraising platform you're working on, these are things that they've built in with intent and with purpose. So that the, the hardest parts what used to be a junior, we're just talking about recurring giving is to be going to a breakfast once a quarter and making sure everyone filled out the donation form with their credit card number, and then the back office management of typing that number in Word for betta card fails or last card and you've lost that donation. Well, technology has helped to bridge that gap. So that's no longer something to fall back on. There are technologies available technologies available at different price points. So any organization no matter the size can really embrace a new platform to help them to achieve these goals.
The Nonprofit Show 4:51
You know, yesterday's episode Miraj was with your part time controller le que and we talked about grant writing and how, you know, really the myth in the nonprofit sector is well you just get funded through grants and really how dangerous that could be, you know, and so looking at this individual giving, looking at recurring donations diversifying or funding models with their relationship and that return on relationship from these individual recurring donations as you said, that is actually a lot more for castable. If that's even a proper word. Then these grants you know that we we submit, we pray and hope that they're funded. They're never truly guaranteed year over year. So you're still starting at the baseline of zero, but recurring donations you do not. And so having that steady, you know, lifeblood is so critical. So let's talk about you mentioned the value of these donors and the value of their investment. Can you help us learn how we can establish the donor value and the value gap that you talk about?
Miraj Patel 6:10
Absolutely. And I think again, to try to understand why some of these things matter. You have to take a look at the macro level. First of all, consumers, we just happen to call them donors in the nonprofit space and consumers are being conditioned to behave in certain ways throughout the entire for profit space. So whereas we have this term donor fatigue, I tend to believe that now with all of the different marketing appeals that are being made, not just the nonprofit sector, but the for profit sector, every time the share of your eyeballs as a consumer is fatiguing you in all different areas in all different ways. And what for profits have done so well is there's a clear value proposition for every dollar you spend on a product or service, right? You go to a car dealership you looking for a car, you trade your money for a car, you go to a fast food restaurant, you get the value meal, you know you're going to trade five bucks for a burger fries and a drink. You go to a salon and you pay you know, 100 bucks for a shampoo and a haircut. Go hire $100 I don't know what the going rate is today. But you get the point that I know as a consumer, how what value I'm being driven in return for my incremental dollar that I spend with a vendor with a service provider or with a different business. And as a you know, as that value is is is communicated clearly the for profits have things by way of leverage that they're able to run say promotions this this month at the salon we're going to, you know for $250 we're not only going to shampoo you and cat Yeah, but we're also going to color your hair for you. And you hear a consumer say that's such a great deal. And before you know it, all of those appointments are booked out and the salon is having a great day. When's the last time you heard a donor respond to an appeal saying that's such a great deal?
The Nonprofit Show 8:05
Yeah, yeah, I've heard. I know, Miraj. I want part of your brain put into my head. You are right. I would say the only time is a matching gift, you know, pressure but and that's it.
Miraj Patel 8:19
That's a great example. And that is explaining value in a different way. And so that's that's a phenomenal example that I even I hadn't thought of but matching gift is is is is wonderful in the way that it gets people to move and this is proven out right so why do matching gifts work? Why do you get the the buy in from your donor base? Because they see the value? If I put $1 in this organization is going to get $2 out this makes sense to me. And so if you're continuing to run donation appeals without trying to explain the value and you're not bridging this value gap, then that's where the issue comes in. And I'll go more than just philosophical so folks say well, what is the value? Well, you've got tangible value, that intangible intangible is connecting your dollar to the the mission that it drove right so your dollars created X amount of return for our services or our mission. And that's something that we are doing. Many organizations are starting to grasp and understand the power of stewardship. But where organizations are still dropping the ball is there's also a lot of tangible value. And it goes from the basics like people love T shirts. Tell me how much it costs you to print a t shirt 10 bucks, you sell them for 25 bucks, people love T shirts, that is a tangible piece of value. All of these organizations were all throwing events from you know, happy hours to small bowling tournaments and play shooting golf all the way through these big dollars. Well just chart this out on your whiteboard. How much is the cost to us to provide a dinner at the gala for each individual guest say it's 25 bucks. Well, that is value that you have as an organization. And if you start to chart all these things out where you're going to see is you actually have a lot of products and services from a nonprofit standpoint that you can offer your donor. So if I map all this out, and I say hey, my cost of goods sold all these tickets and everything like that, that I pay for out of pocket is $100. Well, I can take that cost of goods sold. I can assign that ROI that I want from it. So I want to make 5x So my cost of fundraising is no more than 20%. So now I've got a $500 package that I can offer a donor chop that in 12 This is a $40 a month ask and included in your subscription to my nonprofit. I am never going to a solicit you by email again. Everything is going to be stewardship. And all those events that I used to ask you to pay to attend. I'm going to send you a ticket because you should be there. You deserve to be there and we're going to celebrate you. And what I'm doing here now is now anytime I receive a piece of communication from the organization I'm so passionate about I don't have that underlying fear that the ask is about to come. Everything is all about now stewarding me I've already paid my dues I've already paid for this, this value. And that shift in a donor mindset is super powerful. Now I'm coming to this event super pumped because I'm celebrating you know me and how I was able to push this is mission four. Does that make sense?
The Nonprofit Show 11:27
It makes a lot of sense. And it also drives into you know, the whole psychology of fundraising and going back to that match gift. You know, why does that work? Well, it's it's the value proposition. It is the psychology of fundraising. And I think when we talk about the psychology of fundraising, you know, when we look at this and just putting a value on people putting a value on basic human needs, right like many of us come from a place of privilege where we are very grateful to have food, clothing and shelter, right? We all deserve that. So when you talk about the value of providing food, clothing and shelter to someone else, wow, what a great value that is right like so we could get really deep on this matter Miraj and I know that we we literally could and I think that's fantastic. It makes so much sense. And I don't see nonprofits doing implementing this or if they do they're like barely doing it. You know, they're really they don't go all in and they just they think, well, we'll try it, but then they don't commit to that value conversation.
Miraj Patel 12:46
I agree and let's be empathetic for a second. None of this stuff is easy, per se right. Why do they tend towards grants because oh we can pay a grant writer to produce these grants. It's easy, like just get for it. So I'm truly empathetic towards the fact that this stuff is not easy, but the hard things are beautiful in the sense that if we can take the right steps towards them the outcomes become so valuable that it was totally worth it in the first place. So yes, I hear organizations all the time talk about what are you telling me about this value gap, but I don't have any, what value can I provide? Well, you're already doing these things. It's just about mapping out these magic moments. That's what we call them internally for donors. So hey, you're you're signing up to be part of this cohort of donors that we label as our champion donors. It's $40 a month, we're gonna send you a t shirt on month one, month two, you're gonna get the update of exactly how your dollars move the needle. Right? This is something we spoke about a few years ago of nonprofits have a ability to drip dopamine, right? Like this is crazy. It's the chemical reaction that happens in a person's brain when they understand that they've helped somebody else or helped move a different mission forward. And you're just talking about this jarred of it makes you feel so good, if you can provide the basic human necessities for another living person and animal, a child their health, education, whatever the category is, you have the innate ability, if you can nail that that communication to drip that that that dopamine, right so now you got a t shirt for month one, you reinforced your donation by getting an update month two. Now month three is our first voters event. I'm getting a ticket to this thing. They're asking you to buy a ticket. They're saying hey, you are a part of our cohort of monthly donors. Here is your ticket. We look forward to coming out and celebrating you and sharing with even more of the work you've done. Right? And you do that 12 times over the course of a year. And all of a sudden you've got a donor that in year two, why would I leave? Why would I stop my gift? If I'm part of this mission now?
The Nonprofit Show 14:56
Yes. And so let me ask you this. It's it's so logical, and it's some theoretical, but on the other side of that communication, you're looking at a donor who might not have ever experienced this type of structure. How do they get thrown off? Or, or are they like, wow, this organization isn't doing it right, because nobody else is. Do you see what I'm saying? Like, how are donors in this new structure? or new approach, I should say, responding?
Miraj Patel 15:33
Yeah, so I think again, you have to give a nod to Who are these donors? These donors are people and anytime they do business with a any other entity other than a nonprofit, they are labeled a consumer. And all of these consumers are being conditioned already the for profits are spending the dollars and spending the time and effort to condition these consumers to embrace these new experiences, right recurring payment models and subscription business models have evolved over the past decade. So the consumers have heightened expectations and the way we nail this is you don't have to be tacky about it. You don't have to, you know, address every dollar to an outcome. But if you can provide enough of these magic moments, and surprise your donor with these really cool hey, we're not asking you to buy something. We're just asking you to come out and support and have a great meal on us and we're gonna do all the same things you already do. We don't have to change much. It's just how we're asking for the payment. We're not asking you for 10 Different payments over the course of the year. Hey, take part in our crowdfunding campaign. Hey, text to give, hey, buy a ticket to our event, instead of asking you in fatiguing you dozens of times a year for donation asks, we're just asking you to commit one time, commit one time and now me and my co workers and my team can go away from asking you for money and tip toeing that line and just giving you a fantastic experience. And that is the key differentiator of the two models is I don't need to ask you the payment is there now it's automatic, we can expect it. So now I don't that I don't need to spend my time tiptoeing and trying to frame a new ask and a new creative way. Every single quarter every single month. All that time and energy goes to making sure you're having a great experience, and most importantly, that our dollars are actually moving the mission forward. Let's not forget about the fact that on top of the fundraising layer, we actually have programs and services that we need to drive forward and that's where the majority of our time should be spent.
The Nonprofit Show 17:39
So the entire time the entire year, you just continue to roll out the red carpet for this person, right and having these experiences and exchanges. One of the things we've talked about a lot over the last two years in particular is ROR or return-on-relationships. And when I talk about you know, rolling out the red carpet that's focused on that relationship, just just like you've said, I'm gonna switch gears just a little bit because I have a question that I want to throw out at you here. Recurring donors is different than a pledge. Commitment. Correct. And are you able to talk a little bit about that because pledges are done multiple times, right kind of different depending on what that looks like. But from my understanding, a recurring donor and a pledge commitment are accounted for differently. Can you speak to that Miraj?
Miraj Patel 18:39
Yeah. And so I'd like to preface with the fact that these definitions do skew organization to organization. Okay. So, I would argue that a pledge actually would fall into the recurring donation umbrella, as long as the pledge has an element of recurring to it. So we're collecting pledge cards when we're, you know, going and soliciting or having these breakfasts or having these events, we're collecting the pledge cards, well, how are those assets being construed right? Are they one time Hey, make a make a pledge for this year only is it make a pledge over the next three to five years? Because again, if you make a $25,000 pledge over a five year term, that's a recurring gift. It's a 5k Our annual recurring gift and and you can boil that down and and what that means is this revenue is guaranteed over the course of X amount of term. And from that lens in from the true definition of what a recurring gift entails. I would totally count that. And now again, what you've done internally is you've taken a prospect off the board. They're now a customer, they're now a donor. And now you just focus on providing them with a great experience rather than continuing to put them in the same segment of net new dollars.
The Nonprofit Show 19:57
Yes, fantastic. Well, we want everyone including ourselves, so this time is going to go by really fast. One of the things that I'd love for us to wrap up here is some of these best practices and you've shared a few in each of these conversations are ready. For those of you that might have joined us earlier, this is Miraj fourth appearance on the nonprofit show. So if you like what you're hearing, make sure that you do check out our archives and find the previous episodes, but finishes up here Miraj, when like what are some best practices just give us something that we know we can sink our teeth into and say, "Okay, I'm drinking from the Kool Aid. I'm all on board. What do I need to do?"
Miraj Patel 20:41
Absolutely. One of my favorite trends, that's, you know, it's happened historically, but it's I'm seeing it more and more now is ways in which we can extend perceived value to our donors. So one of these ways that I've seen and folks are really starting to run with it more and more as first of all, let's start with the macro. I love starting with the macro because everything we do should have a rhyme and a reason attached to it. Macro level. We live in a purpose driven economy. Everything across the board, especially over the past few years with everything humanity has gone through has led us to become people that want more than just a paycheck, want more from making purchases and doing business with folks than just hey, a good or service in return. I want to make sure that everything I do aligns with a larger purpose. So humanity is experiencing this thing. People are being conditioned understand what purposes our B Corp is a thing. These are all leading indicators that something has happened in the MakerSpace. Well, how do you capitalize on that? Well, you create perceived value opportunities. One of those things is I've seen a lot more of these young leader councils, these organization roundtables. And really, this is brilliant, because what you're doing is you're taking 100 people out of your database and you're saying, we have tapped you to be a part of this new group of thought leaders, industry leaders, young professionals that are being invited to help on help us on this journey to extending XYZ mission. So now what you've done is you've taken 100 people, you've put a label on them that they can now add to their LinkedIn they can add to their social medias. Oh, I am a a young, you know, entrepreneur, Council Member or I'm a young you know, Ronald McDonald house calls this their red shoe Council you don't matter if there's a brand to this group or not. You can create your own. And what you've done is you've taken 100 people, you slap the label on them, you've made them feel good, like Oh, I'm a thought leader now and I can really help come to the table and help move these missions across. And you're actually getting this new group together that you can maximize the value on by making them recurring donors, etc, etc. So from from a management standpoint, I really like that. I think it's brilliant. I think it checks all the boxes for what's in it for me from someone that you tap into be a part of that. And then secondly, what really cost is associated with that. It's a cost of time, cost of having a quarterly meeting where you bring these people to the table. Now they're they're inviting their peers to events, they're participating in all these other campaigns as well. So I love that. And then from a technological perspective, I know we spoke about that earlier as well. These basic payment options and things like that are table stakes across all platforms. And one of the things that I hear a lot is again, likening recurring giving to just a program, it's not just a monthly giving program, recurring giving is an embodiment of this new spirit of the way we do business. So one of those things that we hear a lot is oh, we really like your text to give capabilities. Sometimes that irks me a little bit because why are we with constituents that have already given us a donation in one form or another in the past? Why is our default to say hey, we're going to use a new communication mechanism like text. Why is the default we should use text to get more dollars? Why can't the default be we should use text to be able to extend this mission, extend that value extend the the stewardship, right to firm up that relationship. We should use these new technologies in ways that we're thinking above and beyond just driving the next incremental dollar. I want to use text to give not I want to use text not to get new dollars. I want to use text to make sure that I'm stewarding my donors that on their random Wednesday morning or Thursday morning. They're getting a message from me saying hey, while you slept last night, your dollars helped us to accomplish this. That's going to make me have a fantastic day no matter what that message looks like. Right?
The Nonprofit Show 24:44
So attitude of gratitude goes such a long way and still speaks to rolling out that red carpet time after time after time. Much of this can be automated much of this you know as you've said throughout this conversation, Miraj is really something that imagine imagine removing that fear of when is the next Ask coming right and so really focusing on Attitude of Gratitude constantly, you know, over and over as they walk this experience with you on the red carpet and fantastic wow. Wow. Have we missed you our friend so great to have you back Miraj Patel co founder harness giving harness giving.com Please check out this company this man fantastic, wonderful wisdom. I love you know how you dive deep into this conversation and into the space Miraj because you really are disrupting in a really fun, juicy way. So thank you for that.
Miraj Patel 25:51
Thank you guys. I appreciate you inviting me back. And one shameless plug that I will mention is Instagram harness underscore giving. Our Instagram is dedicated to being very empathetic towards the struggles that we as fundraisers go through on a day to day basis. And I'm confident that if you join us and follow us, we will help to brighten your day by way of sharing some of those, those frustrating moments and bringing angle of of of, you know, comedy to the so check it out. You'll you'll immediately see what I'm talking about and
The Nonprofit Show 26:22
You're the levity in your Instagram posts they do brighten my day. It's like getting that Wednesday morning texts while you slept. This is what happens. You know a lot of tongue in cheek which is fantastic to see. So thank you for that shameless plug.
Hey, you know Jared and I are so grateful that we have these moments. Um, this is one of those times it's really confirmed because we met this young man, when we were all trying to figure out what was going to be happening with the world with our own businesses with all of these things we've talked about and it's so cool to see you have really moved through it to be successful. I would say Jared and I have moved through it and we've you know, embrace what has come our way. And so we just want to say thank you. Thank you so much.
Wow. Okay. You have like harnessed my passion for this industry. My friend Miraj, Patel, thank you so much.