Ask Small, Ask Once

Part 2 of 3: The strategy. Why five dollars a month is the right first ask when the household donor is being squeezed.

Last week we showed what our data says about community nonprofits: the typical one is receiving about 30 percent fewer gifts than before the pandemic, the size of the gift hasn't changed in a decade, and the loss is almost entirely in one-time giving. The monthly sustainers held their floor. The one-time donors walked out.

This week: why that's happening, and what to do about it.

The household on the lower arm of the K

The household that funds the community nonprofit is being squeezed from four directions at once, and none of them is a one-day event.

• Interest rates are rising again. After a period of easing, the Federal Reserve has reversed course to fight inflation that stopped falling. Every rate a household faces is priced off that — mortgages near 7 percent, auto loans, and above all credit cards.
• Consumer debt is at a record and getting more expensive to carry. Card balances exceed $1.25 trillion at rates above 22 percent and climbing. For a family carrying a balance, every increase is a direct transfer out of disposable income.
• Fuel and everyday prices are up. Regular gas has run around $4.50 this year — about $30 more per tank, on the order of $1,000 a year for a two-car household. That's twenty median online gifts, gone before the household has bought anything. Diesel passed $6 for the first time on record, and diesel moves everything they buy.
• The cushion is gone. The personal saving rate has fallen to around 2.5 percent, the lowest since before the pandemic. Real disposable income has been declining while nominal spending rises.

Federal Reserve researchers describe the pattern as K-shaped: high-income households have kept spending; lower-income households have cut back and show the most credit stress. That is exactly the split in our data. The donors funding national giving records are on the upper arm. The household that sends $50 to the food pantry is on the lower arm, with a bigger card payment, a thinner cushion, and a heavier gas bill. When the next appeal arrives, more of them than ever will not respond.

Two facts, one conclusion

Put the findings together. Households aren't giving less per gift; fewer of them are giving. And the gifts that survive a squeeze are the ones that don't require a fresh decision every time.

The strategy writes itself, and it's the opposite of what most of the sector's advice says: stop optimizing for the big one-time ask. Start every new donor as a small monthly sustainer — five dollars a month is the right number to say out loud — and make keeping that donor the entire job.

The arithmetic

Five dollars a month is $60 a year, which is more than the median one-time gift of $50. It's a number no household has to think about — below the threshold at which a family with a 2.5 percent saving rate re-examines a decision. And once it's running, it has the one property the one-time gift lacks: it survives the month when gas goes up, because the donor doesn't have to say yes again.

Our retention research says the same thing from the other direction. Donors who stay active across consecutive periods are retained at 91.7 percent. Donors who go silent for a period come back at 15.1 percent. That six-fold gap is the whole case for recurring giving. A sustainer never goes silent by default. A one-time donor goes silent by default and has to be re-won, at full acquisition cost, in an economy where the re-winning gets harder every year.

An old idea, corrected

Twenty years ago, Chris Anderson's The Long Tail argued that when the cost of delivering a product falls to almost nothing, the millions of items that each sell a little can collectively rival the hits. The same logic makes the $5 sustainer viable. A $5 check in the mail was never economic — opening it, depositing it, thanking it and tracking it cost more than $5. A $5 recurring gift, with automated receipting and payment-method upkeep, costs almost nothing to service. The infrastructure is what turns the tail into a revenue base.

But the book said the tail would grow on its own as the friction came out. In giving, it hasn't. The largest organizations carry a growing share of all giving, and at small organizations the $1,000-plus gift went from 31 percent of revenue to 45. The tail of household donors is thinning, not thickening. So a sustainer program isn't riding a trend; it's a deliberate counter-move against one. You have to build the tail, one $5 decision at a time — and then protect it.

Make five the default, not the floor

If the form leads with $25, $50, $100, the household on the lower arm of the K picks none of them. Lead with $5 a month. The donors who want to give more will. The ones who would otherwise give nothing now give $60 a year and stay.

One more thing about large gifts. Nothing here says don't cultivate them. It says don't depend on them, because the small organizations in our data that became dependent on $1,000 gifts are now one lost donor away from a crisis. A base of $5 sustainers isn't a substitute for a major donor. It's the floor that keeps the organization standing while it looks for one.

Next week: the three mechanical reasons a sustainer quietly leaves — and how to stop each one.

Want to talk through what this means for your organization? Contact us and one of our specialists will call you for a conversation.