New Rapidata report sheds interesting light on direct debit cancellation rates
The apparent reversion of 2009 cancellation rates to the pre-2007 levels and pattern is both encouraging and challenging. Encouraging, because it suggests that the future for direct debit regular giving – the mainstay of individual giving – may be brighter than we may have feared in recent years. Challenging, because we need to fully understand the underlying factors that are driving this in order to correctly inform our strategies.
Part of the explanation may be that the downward trend in 2007 and 2008 was a reflection of people’s growing concern about the looming recession. As we moved through the recession their confidence began to recover with a boost following the official announcement in January 2010 that the UK had finally begun to come out of the recession.
There is experience from the 1990s recession which suggests that the economic downturn itself could be contributing to improved loyalty. During this recession we found that strongly committed donors became stronger i.e. less likely to cancel their support for their core charities, more likely to increase it during hard time. This effect may be helping the 2009 cancellation rates. However, we should not assume that this is permanent. After the 1990s recession some of these most committed supporters reduced their support to previous levels, spreading their giving across their full portfolio of charities again.
We also found that less committed donors were more likely to reduce or stop their support, resulting in higher cancellations amongst established supporters. Paradoxically this can also have a positive effect on recruitment and hence cancellation rates for new supporters. The people who are least committed to your cause are likely to be those who are most likely to cancel; the fewer of these who sign up, the better the overall cancellation rate is likely to be. Might we therefore see the quality of recruits dropping again once less committed people begin to sign up again post-recession?
This leads us to another factor we might want to consider. As attrition is highest in the first year, a significant change in overall recruitment levels is likely to impact the overall average cancellation rate. To what extent might the fall in cancellation rates be a reflection of charities recruiting fewer new supporters during 2009? And if there is a big increase in recruitment post-recession might this lead to an increase in cancellation rates?
Recessions have traditionally been good for renewing our focus on supporter retention and this too may be a factor in the improvement in cancellation rates and average gifts. As we come out of the recession we need to make sure we do not take our eye off the ball of supporter loyalty. Regular giving through direct debit is the mainstay of sustainable general fund income for many charities. As the cost per recruit rises our strongest weapons in the fight to maintain a good lifetime value are to extend supporter lifetime and to increase average gift. A key message to our most loyal supporters as we exit the recession must be that we still need our donors to support us at their current levels, even though times are improving.
What we must remember is that:
- Good fundraising strategies will place the supporter journey at their heart, prioritising retention activities that give supporters timely and appropriate feedback on how their money is making a difference to the cause, constantly reinforcing the original case for support.
- Good investment strategies will continue to prioritise campaigns to upgrade current supporters over campaigns to recruit new supporters.
- Good communications strategies will ensure that the case for support is just as compelling post-recession as it was during the recession.
Rapidata’s Charity Direct Debit Tracking Report 2010: The Full Picture is available to download for free.