Direct debit cancellations are on the up – so what?
Rapidata has just released a fantastic report on what’s happening to charity direct debits in the UK. If you’ve read the article in Third Sector, you’ve just scratched the surface of what you’ll find in the actual paper. It’s more than a simple document saying cancellation rates are increasing. It’s a six year bench-marking exercise showing rates of cancellation and the pdf can be downloaded by clicking here.
The headline grabbing data is the increase in the monthly rates of cancellation. From a low of 3.05% back in 2006/07, it grew to 4.64% in 2008/09 and actually topped 5% in July, September, October 2008 and January 2009.
I’ve converted the monthly figures into a graph. You’ll see that I’ve marked the big two confidence busting events – Northern Rock and Lehman Brothers – so you can see how they relate to the jumps
The red dotted trend line shows just what this means – an increase in the monthly cancellation rates of 15.6% in twelve months and the trend line is still going up.
Don’t forget this is real data showing what people are actually doing. It isn’t a projection based on attitudinal research.
So what should we do about it?
First, let’s place this into context.
Direct debit retention has been appalling. Look at the figures and you’ll see that year on year, cancellation rates have been averaging at about 40% – four out of ten of our expensively recruited ‘committed givers’ have been walking out on us and, until the recession reared its head, many charities have found this regrettable, but somehow acceptable.
And then there is the fact that many of these cancellations don’t directly impact on the charities concerned. That’s because they are covered by the attrition guarantees offered by the large street and door-to-door recruitment companies, where new donors who fail to give or cancel in the first few months are replaced at no extra charge.
But this isn’t a solution to the growing attrition rate – it’s part of the problem.
The implication of the guarantee is that the companies have been signing up the ‘wrong sort’ of donor. It’s true that by excluding young donors, for example, we can reduce attrition, but even so, is every cancellation really the fault of the recruiter?
Maybe – just maybe – we have been treating donors in the wrong way.
Take a look at any large charity communication programme and you’ll see the same traditional elements – appeals, magazines, irregular requests for petition signing or a legacy and perhaps an annual report. How do we know these are right for our donors – particularly those recruited via the newer techniques?
We don’t. We usually guess. The attitude often is, we have a magazine, why not send it out? Surely it’s better than nothing?
It’s not if your donor doesn’t want the magazine in the first place (I cancelled a direct debit recently simply because I couldn’t stand the sanctimonious periodical that was repeatedly forced on me).
When people first give to a charity, it is often a toe in the water. They are checking us out. If after a few months, they don’t feel like they are getting anything in return, they stop giving. It’s not rocket science.
When we talk about donors lapsing, we are not talking about our long-term and loyal donors. Attrition is worst in the first six months after a donor is recruited, then the first year and then it slowly starts to settle down to about 5% a year.
The problem that Rapidata is highlighting is not one of lapsing – it is that donors are not being engaged in the first place.
no engagement = fragile relationship = cancellations
It’s summed by one of the respondents to Bluefrog’s 2008 study into lapsed donors:
“You keep saying this thing lapsed. Lapsed from what? I never felt I was giving anything up.”
Stopping a Direct debit to a charity that gives you nothing you value is not a difficult decision. Why should we be surprised that attrition rates are going up if at times of plenty they were running at close to 40%?
If we really want to tackle the growing rates of cancellations, we should avoid guessing what donors want to receive and stop forcing them into communication programmes and brand constraints that are created without taking their needs or wishes into account.
How many organisations are adapting their communication strategy in response to the recession? Are brand guidelines changing to ensure that donors are engaged and included?
My advice is to place less emphasis on guesswork and more on finding out what your donors want. And how do we do that?
I’ll let a great new blog give you one possible answer. This is taken directly from Digital Native:
“Social media lets you connect with your… audience quicker. As in any new relationship you need to get to know each other. You’re not at the stage where you can fart in bed and leave the milk out with only a mild telling off. You need to get to know them. What they like. What they don’t. When it’s ok to not pick your dirty pants off the floor. How do you get to know this?
Well, talking to people and spending time with them usually helps. And with social media you can do this. Join the conversation with your new audience. If they don’t talk back to you, try again but in a different way. Ask them what they think. Get their input. It’ll avoid costly mistakes – such as spending massive amounts on developing offline materials, only to put them in the bin when you find that you haven’t quite got it right.
What’s better – if you do this in enough places and with enough people, you’ll have a ready-made audience who feel like they’ve got a stake in your brand. Ready-made brand advocates”.