A Payment Plan for Charity

Groups seek donors who give in monthly installments

The Massachusetts Society for the Prevention of Cruelty to Animals’ fastest-growing fund-raising effort lies on the electronic frontier of financial transactions. The Boston group has persuaded some 2,800 people to let it automatically withdraw donations from their bank accounts or charge their credit cards a set amount each month. The monthly donations net about $270,000 a year, five times the amount the group earned in 1998 through such transactions.

“People who would give us $20 or $25 a year, now give us $10 a month,” says Bruce Preston, the group’s director of development for annual giving.

Many small and medium-size charities like the Boston animal shelter have started to have some success receiving such contributions. But while monthly giving is not a new fund-raising technique — child-sponsorship groups have asked for monthly payments since the 1950s — the technique has yet to become widespread in the United States. Only recently have a few American organizations started to receive a sizable percentage of their income from monthly contributors. Amnesty International USA, in New York, for example, received $4.2-million, almost 13 percent of its revenue, from monthly donors in 2002.

Amnesty and other charities are enthusiastic about monthly giving because they say donors tend to give more when their contributions are divided up into 12 payments throughout a year instead of being a single gift. Many charities also say monthly giving programs are relatively inexpensive to operate. However, fund raisers also warn of drawbacks. Overseeing monthly gifts can require a large amount of staff time and an aggressive solicitation campaign to recruit participants, they say.

Moreover, many observers predict that most donors will allow only one or two charities to take automatic donations, meaning that only the first charities to offer such programs will attract a significant number of monthly supporters.

Growth Expected

Fund raisers predict that monthly-giving revenue will continue to grow as more Americans start to pay their rent or other expenses through automatic bank-account deductions or credit-card charges. NACHA-the Electronic Payments Association, an organization that monitors use of electronic financial transactions — says the number of households paying bills automatically has doubled in the United States since 1997; today 54 percent of American households pay at least one monthly bill automatically, the organization says.

Eventually, fund raisers say, they hope American charities will mimic the success of European charities, some of which raise more than 50 percent of donations from monthly contributors.

Fiona J. Walsh, marketing officer at Doctors Without Borders-US, in New York, says monthly donors contribute 4 percent of the amount her group earns from private donors, while at Doctors Without Borders-UK, in London, monthly donors provide 40 percent of the group’s income from private sources.

“It really is the one area of fund raising in which the rest of the world is ahead of the States,” says Harvey McKinnon, a fund-raising consultant in Vancouver, British Columbia, and author of Hidden Gold, a how-to book on monthly giving.

While it is unclear how many American charities offer donors the option of giving monthly, Mr. McKinnon estimates the number to be less than 20,000. “There’s a relatively small number of groups who are doing it, and most of them aren’t doing it as well as they could be,” he says. Monthly donors in the United States annually generate about $2-billion for charity, Mr. McKinnon says, a small fraction of the estimated $183.7-billion in charitable giving by individuals in 2002.

Benefits to Charities

Some fund raisers now are working to build on the increased interest in electronic bill payment and use it as a springboard to encourage people to add charities to the list of organizations they make payments to each month.

Benefits from monthly donors include:

• A steady stream of revenue. The reliability of monthly gifts helps Doctors Without Borders-UK act quickly during a humanitarian crisis, says James J. Kliffen, director of fund raising. At the Boston animal society, monthly gifts assist the charity in planning its budget. “It’s regular income we can depend upon,” says Mr. Preston.
• Ease of keeping donors for a long time. “With regular donors, they move, they forget about you, you don’t know how to track them,” says Viki Wilson, executive director of the Marmot Recovery Foundation, in Nanaimo, British Columbia. “But when you’re dealing with bank accounts, donors stay with you through a lot of changes.”
• A reduction in administrative costs, such as gift-processing fees and mailing expenses. At Amnesty International USA, monthly giving is the “most cost-effective program we have,” says Vivianne L. Potter, the group’s director of direct response. She says that for every $1 spent on monthly giving, Amnesty raises $13.

While most charities agree with Ms. Potter’s assessment, some groups complain the fund-raising method can be expensive because it generates a large amount of paperwork that needs to be recorded and filed. Also, charities need to have employees who can respond quickly to phone calls, e-mail messages, and letters from donors who want to change their gift amount, update account information, cancel their payments, or make other changes.

“It certainly is a program that takes a lot of management,” says Carolyn S. Miles, vice president of marketing at Save the Children, in Westport, Conn., which has 82,000 monthly supporters, whose contributions help families in poor countries. “Once you have people who are making that commitment and they are supporting the organization on an ongoing basis, the expectation in terms of servicing and communicating is pretty high.”

Charities — especially smaller organizations — need to account for staff expenses before deciding whether to offer a monthly-giving option, says Harry Lynch, a fund-raising consultant in New York. A monthly-giving program at one charity Mr. Lynch’s company worked with brought in $20,000 and the nonprofit group considered it a success, he says. However, the program required a full-time employee, whose annual salary was $40,000. “Nonprofits sometimes fail to look at the in-house costs,” he says.

Church Offerings

Some churches have started to offer the option of making automatic monthly payments to parishioners, with mixed results. At the Church of St. Pius X, a Roman Catholic church in Rochester, Minn., monthly donors provide $14,000 a month. While the effort has helped the church increase its annual contributions, Denise M. DeRienzo, the church’s administrator, worries that because monthly donors don’t contribute to the offering plate each Sunday, “the children don’t see their parents giving anything and the basket just goes by.” She adds: “They don’t learn there’s an obligation on their part to give.”

Besides, she says, “other people look at you strangely when you don’t put anything in the plate.” To help counter such concerns, the church is considering printing a pamphlet that would say something like, “I faithfully gave my offering electronically,” which monthly donors could bring to church and put into the contributions plate.

Another consideration fund raisers cite is that monthly giving usually requires an aggressive marketing campaign to make it work, charities say.

For example, the American Tinnitus Association, in Portland, Ore., solicited 35,000 people to give monthly, but only 6 people signed up. Cheryl D. McGinnis, the organization’s executive director, blames the lack of interest in automatic donations on the solicitation, which mentioned monthly giving only as part of a broader pitch to support the group. The association plans to advertise the program again with a direct-mail piece that features the monthly-giving program exclusively.

For such a solicitation to successfully recruit monthly donors, it needs to explain how a cause can benefit from receiving gifts each month, says Mr. Kliffen of Doctors Without Borders-UK. “Whatever is motivating people to be interested in what you’re doing, relate that directly to monthly giving and it will work,” he says. “If you say, it helps to plan our expenditure, that sounds suspiciously to me as if that money’s going to go to cover overhead.”

On its Web site, the aid organization emphasizes the connection between monthly donations and its ability “to ensure the freedom to provide humanitarian assistance whenever and wherever it is needed, and to be independent from political, religious, and economic interests.”

While Doctors Without Borders-UK has successfully recruited monthly donors through magazine ads and other print appeals, other fund raisers say the pitch is best made by talking with a person to explain the technique’s complexities and to overcome a potential donor’s reluctance to give out financial information.

Many charities use the telephone to make such a pitch. But at least one organization, Greenpeace USA, has taken to the streets to find contributors.

The environmental group hires young people to recruit monthly donors in public places — outside a subway station, for example. Becky LaBounty, a fund raiser at Greenpeace USA, says the organization expects that by 2005 about 60 percent of its donors will give each month. The group declined to provide additional details about its monthly-donor effort, citing a confidentiality agreement with the organization it pays to run the program.

While Greenpeace is setting its sights on young people, other charities are mixed on what age group is most likely to be interested in making monthly donations. While people in their 20s or younger are generally more comfortable with such payments, they also are less likely to have a stable income, fund raisers say.

Regardless of their age, once monthly donors are recruited, charities need to treat them differently from other donors, no matter how modest their annual contributions, says Amnesty’s Ms. Potter. “The idea of treating your monthly givers as special people instead of just another direct-mail donor is key,” she says. The advocacy group provides monthly donors with a copy of the speech its executive director makes at its annual meeting, an item not usually given to other contributors, as well as sending them other items.

Special correspondence, especially sent during the first year a donor agrees to give monthly, can be crucial to retaining such donors, says Ms. Miles of Save the Children. The charity sends new monthly donors 10 letters each in the initial year to thank them for their gifts, as opposed to seven letters during the following years. “If you can form a relationship in the first year, there are donors who will stay with you for many, many years,” Ms. Miles says.

Some fund raisers, however, say that the most important step in reaping the rewards of monthly donors is simply starting to seek them out — and soon. “For those organizations that do it first in any country, they’re going to do very well indeed because it’s a way to differentiate what you’re asking for,” says Mr. Kliffen of Doctors Without Borders-UK.

Mr. McKinnon, the fund-raising consultant, says his research supports such a conclusion. “There’s incredible potential for monthly giving in the States, but every day that goes by eats into that potential a little for charities that do not do it.”