A strong sustainer program is the lifeblood of a healthy nonprofit. You have a group of supporters so dedicated to your mission that they pledge to donate regularly, and those payments are often automatically charged or transferred from a bank account. Assuming you keep those sustainers, you have a reliable source of funds coming in and valuable data as you project growth and plan future campaigns.
Most nonprofits think that any software that can process recurring payments is a great solution for their sustainer program. This is a huge mistake that can not only degrade your donor experience but also cost you tens of thousands (or even millions) of dollars in lost revenue.
What Nonprofits Can Learn from Gyms
The advent of the subscription economy (like Netflix and HBO) illustrated the need for payment technology that can run a successful subscription program. And those companies leaned on what other industries, like health and fitness, pioneered and have perfected over the past 30 years.
Companies like Equinox Fitness and other gyms and the vendors that support them have mastered the art of minimizing or eliminating passive churn: losing a customer because their credit card expires or their monthly donation can’t be charged because of donor behavior (mistyping a zip code, for example, or reporting a card as lost or stolen). These companies purpose-built payment technology that has been honed over the past few decades. Nonprofits also want to minimize or eliminate passive churn, meaning purpose-built technology is necessary.
That’s the first takeaway: To maximize sustainer revenue, nonprofits need payment technology built to handle monthly sustainer payments.
And then you must focus on collection rates.
The Right Tech Can Capture Sustainer Donations
This subscription economy is fueled by e-commerce. Your credit card gets charged or your bank account is drafted, and you can watch a movie or hop on the treadmill. But with all this e-commerce comes a collection problem.
Did you know that the average nonprofit has 80% to 90% of pledges collected?
That leaves 10% to 20% of pledges uncollected, which means a lot of unrealized revenue for your nonprofit. What does it look like to lose just 10% of pledges intended for your nonprofit?
- A smaller nonprofit could generate an additional $300,000 just by capturing that 10%.
- A midsize nonprofit can add $1.3 million to dollars raised.
- And an enterprise nonprofit is missing $2.5 million with those lost pledges.
You can put hundreds of thousands of dollars, if not millions, back into your nonprofit and your mission. All you need is the right payment tech stack.
This brings us to our second takeaway: Your payment technology must be effective at collections and be able to collect more than 90% of pledges.
(And here’s an insider tip. Run-of-the-mill CRMs using PayPal or Stripe will tell you they can bill monthly donors and collect a high percentage of pledges. They can’t. Ask for their collection data.)
Next up, it’s important to understand why some pledges aren’t collected and what can be done to offset these losses.
Why Aren’t Pledges Collected?
The next logical question is: Where did that 10% go? Why aren’t those pledges being collected? Are donors changing their minds about giving?
- Donor attrition, or churn, does happen. Active churn is when a subscriber cancels, and donor retention strategies can be used to offset that. Passive churn happens when transactions fail, and technology can be used to offset this.
- 30% of all credit cards “go bad” in a year—passive churn. This can mean the card expired, the owner moved and forgot to change addresses, or it was reported as lost. For some reason, the charge is declined.
- Or a donation fails because the donor mistyped a zip code or other detail.
If you think these are crazy reasons to lose hundreds of thousands, or even millions, of dollars, you’re right. And the savviest of nonprofits will recognize that technology could sidestep those reasons and choose a system built just for sustainer billing and collection.
A third takeaway: Much of donor churn can be avoided with the right technology.
Payment Processing for Sustainer Revenue
Anyone can bill donors each month and process payments. But true sustainer payment processing technology is a different game entirely. In fact, payment technology for recurring giving is even more specialized than payment processing for one-time donations or event registrations.
CharityEngine is a payment processor, and we brought payment technology from the commercial space (the health and fitness industry) into the nonprofit industry. Remember how we said gyms know something nonprofits don’t? They understand the need for software built for monthly giving.
We’ve also honed our technology over decades, and we’ve tested our ability to manage the most successful and largest sustainer programs around. CharityEngine is the best software solution for nonprofits with robust sustainer programs.
The health and fitness industry pioneered subscription billing and collection. CharityEngine’s payment stack is the only one with native billing and collection technology. Our software helps clients retain more sustainers and collect more pledges, leading to substantially high revenue.
Regardless of which payment processor you choose, there are a few tips we offer:
- Own your credit card data. If you don’t, you have limited flexibility in switching providers because your collection rates are low.
- Focus on how your sustainer program is performing. Identify the fees you’re paying and the collection rate to see if you’re leaving money on the table.
- If you’re using an e-commerce platform to process donations, their collection rates tend to be low.
A final takeaway: Uncollected revenue is lost revenue.
A Payment Processing Partner
We’ve written extensively about payment processing – we’ve given you the basic tutorial, shown you how we get our clients started, and even covered fraud and PCI compliance. But we aren’t the only payment processor in town, and we aren’t the only nonprofit CRM in town.
Whichever nonprofit CRM you choose, and whichever payment processor that vendor uses, we ask that you evaluate your relationship and ask the right questions.
- Was this technology built to handle monthly billing and payments?
- Can the vendor prove collection rates north of 90%?
- How is passive donor churn offset or avoided?
These questions will help you develop an educated assessment of the vendor. And when you’re ready to talk to CharityEngine, we’re here.
