The 2021 Giving USA report is hot off the presses and there are some surprises and not surprises. Here are 5 highlights for me and one word of caution:
Highlight #1: Total giving was up again, this time 5% over 2019, setting a new record of $471 billion.
This isn’t surprising since both the Fundraising Effectiveness Project and Blackbaud reports issued within the last two months showed growth in 2020. Giving was driven by outpouring of generosity to COVID-19 relief, the racial justice movement, and a strong end-of-year stock market.
Highlight #2: Patterns in giving reflected the economic environment.
2020 was a complex year for all. the. reasons. But economically, the S&P grew 16% which was one of the best years in recent years. We saw record unemployment. And the GDP declined 3.5%. So, not surprisingly, the categories of giving that are aligned with the GDP saw declines in giving. Take corporations, for example. Corporate pre-tax profits declined 3.5% in current dollars and we saw corporate giving also decline by 2.3%.
Let’s look at individuals. The CARES Act helped to boost the economy and, in turn, had a positive impact on charitable giving. Disposable personal income, which is generally associated with giving by individuals, grew by 7% in 2020 but might have actually declined without government intervention. Maybe some people were inspired to give because of the new $300 deduction. But that likely didn’t spur significant increases because we know that tax deduction is not the main driver of donors.
Highlight #3: Individual giving remains the largest piece of the pie but is shrinking.
For the second year in a row, giving from individual giving was just below 70% of total contributions. This is certainly not cause to only focus on institutional donors. Individual donors still remain the largest contribution source. But we’re starting to see family foundations as a growing giving vehicle. Additionally, bequests, which generally come from individuals and couples, have grown 66% in the past ten years. Bequests and giving by individuals together comprise 78% of total giving.
Key takeaway for fundraisers: if you don’t have a legacy program in place, you’re missing out. Begin to encourage your audience now to consider leaving your nonprofit in their estate plans.
Highlight #4: Megagifts.
Once again, megagifts played a noticeable part in the year’s giving patterns. In 2020, megagifts comprised nearly $10 billion of the $324 billion from individuals. Half of that $10 billion from MacKenzie Scott. Don’t get me wrong, megagifts are incredible examples of generosity. But, as fundraisers, we must resist the temptation to pay most of our attention on chasing our own megagifts. The $314 billion of individual giving that didn’t come from megagifts was from donors that might get overlooked otherwise—our “bread and butter” annual donors, mid-level donors, monthly donors, as a few examples.
Let’s celebrate the megadonors AND pay attention to the wider net of our supporters to build our pipeline for future “megagifts.”
Highlight #5: Top subsectors that saw increased giving since 2018 were: public-society benefit (25%) and education (21%). But giving to health decreased.
Yes, religious organizations, education causes, and human services were the top three recipients in 2020. But I was more curious about the trendlines over time. Where are we seeing growth and decrease in giving? Here’s what caught my attention.
The public-society benefit subsector includes a wide range of organizations, including national DAFs such as Fidelity Charitable, pass-through organizations such as the United Way, Jewish federations, rights and legal advocacy funds, and community/economic development groups such as Community Development Financial Institutions (or CDFIs). Generally, there have been strong linkages between stock market growth and growth in giving to this subsector. Giving to this subsector grew 25% from 2018 to 2020.
Giving to education tends to keep pace with the stock market, and is impacted by large gifts made in years when the stock market was strong. Last year the S&P grew 16% and higher education institutions received many major gifts, including MacKenzie Scott’s gifts to HBCUs, tribal colleges, Hispanic-serving institutions, and community colleges. Giving jumped 21% from 2018 to 2020 likely from MacKenzie Scott’s and a few other megagifts.
So, how do we explain the decrease in giving to health? Giving to this subsector generally follows trends in the GDP, which declined last year. Non-COVID-19 response health organizations, while still important, seem to have been overshadowed temporarily by the urgent response efforts. Some organizations may have also seen lower rates of participation or may have had to cancel in-person runs, walks, and other fundraising events due to the pandemic.
Bottom line: Time to celebrate, right? Well, yes and no.
Yes, once again there’s cause to applaud how donors once again stepped up their generosity when our communities needed it the most. After all, $20 billion contributed more than in 2019 is nothing to scoff at. Trust in your donors even when the world is literally shutting down (hopefully never again, but you get the idea).
But we might miss an opportunity. And here’s the word of caution: we can’t lose sight of donor retention. In the frenzy of focusing on how much is given to our organizations, we can’t ignore who’s giving. This outpouring of giving reflects many first-time gifts, upgraded gifts, and reactivated donors reengaging with nonprofits they once supported. Your own organization most definitely saw a mix of all three of these donor groups. Your stewardship now must be built on retention.
It’s critical to pay attention to keeping as many donors as you can now after a record year and always.
The recent Fundraising Effectiveness Project report showed that last year despite upticks in number of donors and amount giving, the average donor retention actually fell 4% to 43% and retention of those first-time donors are still at or slightly below 20%.
As you do your own 2020 analysis, what are you going to do with all those first-time donors to your organization last year? Do you have a plan in place to welcome back those who started giving to you again so they don’t lapse once more?
It’s worth calculating the opportunity costs of not focusing on keeping more donors. Lifetime value is a good metric to ballpark how much less you will raise with fewer donors sticking around over a longer period of time. Can your organization afford to continue to waste money on churn?
Let’s celebrate the generosity of donors last year who stepped up when we needed it most. But let’s not make 2021 the year of donor attrition.
Windmill Hill Consulting is a proud member of the Giving Institute and supporter of the Giving USA Foundation.
