#52 True or false? One fifth of your f2f donors will never debit

June 23, 2018

After having a conversation with a senior manager of a top-tier f2f agency, my imagination was sparked to poke and prod a fundraising assumption that might need to be pushed and popped.

 

Today’s myth to be busted is that 20% of your newly acquired f2f donors will never successfully debit. Yes, around one-fifth of most agencies’ donors suffer this fate (excluding instant debits)of which the vast majority will be declined cards, but it does not have to be this way, and making this assumption about your own business might mean that you have accepted it. As the senior manager said to me, “I don’t like the rebate model. Anyone who has it knows that a specific percentage of their product is going to be crap”.

 

In what other industry would the director or senior managers allow for 20% wastage?

 

Before we run headfirst into this minefield I should give you a little background and a disclaimer. Starting with the disclaimer, I don’t fully agree with that statement, so please don’t shoot the messenger, but it does raise an interesting point. Secondly, the background. The rebate model of selling pledges was designed to sit in line with the clawback version, but to simplify the process by building the assumed refund into the original fee so that the agency and client are not locked into a cycle of pay-refund-pay-refund every week until the end of the contract. The downsides are the lack of accuracy of accounting and accountability, and the upsides are cost savings due to less administration, and, with the correct contract, a safe and simple service.

 

The strength of the contract is everything. If you have no say or control over the cost of fundraising you are not fundraising responsibly.

 

A few agencies sold the idea of rebates to charities by stating that they would adjust the rebate percentage quarterly or annually in line with actual attrition but would commonly not follow through with the promise as it was not included in the contract.

 

F2F suppliers are ‘for profit’ and therefore should keep track of their wastage and, like any for profit business, devise policies and procedures to reduce this waste and increase their margins. Sadly, sometimes their efforts can often only be seen when their client pushes back hard, and they then cease as soon as the pressure subsides for fear that their efforts to improve quality will have a detrimental effect on their quantity.

 

However, if your attrition is poor, your sign-up rate is a false indicator.

 

The number one reason, by a country mile, for declining debits is ‘insufficient funds’. Instant debiting has gone some way to eliminating this issue, but the problem is the donors being signed up in the first place. If you are 21 years-old, unemployed and have a phone number that cuts out when the bill isn’t paid your debits are far more likely to reject.

 

Really simple measures such as raising age limits or banding lower age and lower donation values, restricting locations, and two-tier verification (not at point of acquisition this does not work) will change the attrition without hitting your volumes.

 

Bad attrition should hurt the supplier not the charity client.

 

A few agencies have begun to realise the scale of this problem. An account manager of one large supplier admitted that they lose up to 30% of their donors at verification (compared with industry 12%), let alone a further 20% at debit one. I cannot even imagine how much this is costing them.

 

So, charities, push back on poor attrition and don’t accept the benchmark. If we fight it hand-in-hand with our suppliers, we can beat it.

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