The Rapidata Charity Direct Debit Tracking Report saw cancellation rates for 2009 show a marked decline across the year. In January, 5.63 per cent of all direct debits were being cancelled. By December, this had fallen to 2.63 per cent – the first time cancellation rates had fallen below the 3 per cent mark last seen in June 2007. Overall, the rate for the whole year was 4.05 per cent – still above levels before the credit crunch, but down from a peak of 4.33 per cent in 2008.
“We have seen a dip in December in the lead up to Christmas, when we would expect cancellations to go down, and we do expect them to have picked up in January this year,” says Scott Gray, managing director of Rapidata Services which carries out the study based on 4 million charity direct debit transactions it processes each year.
He says the clear seasonality to when consumers back out of committed giving should be factored into fundraising marketing plans. “Fundraisers often just put their campaigns out to get new people on board. This shows the importance of data and using it to achieve better retention,” says Gray.
“A couple of years ago at third sector conferences, all the presentations were about new techniques to get new supporters in. Not much thought was given to what you do thereafter,” he says. “The recession has caused that to change. Over the last 18 months, things have turned around and fundraisers are talking about how to reduce attrition by using data.”
One striking finding in the report is the way in which donors choose to cancel a direct debit and how this has changed. Before the start of the recession in 2007, 9.44 per cent of all cancellations were notified directly to the charity. By 2009, this had fallen to 8.4 per cent. Conversely, 61.01 per cent of donors cancelled via their bank in 2007, rising to 68.38 per cent in 2009.
It is possible to read into this a growing shyness among consumers about their need to pull back from supporting a cause. The emotional bond which charity marketers look to create with donors can be hard to break, which is why many opt to do so indirectly.
Another notable finding is an actual decline in the number of direct debits being returned unpaid. During 2007, these stood at 26.27 per cent of all cancelled transactions, perhaps indicating the level of financial strain consumers were under before the collapse of the housing market. During 2009, this fell back to 19.60 per cent.
Another sign of improving household finances can be found in the value of transactions. While eight out of 12 categories of fundraising saw their average donation value fall further in 2009, the total number of transactions actually rose, giving them higher revenues. Growth ranged from 15 to 38 per cent year-on-year for the top five causes.
“Many people do give to charity, but when times are tough and the economy is hard, people do cancel. Charities need to look at their information on when that is likely to happen. Increasing the rate of retention can make a huge difference to return on investment,” say Gray. l