One of today’s most talked about business models has been a mainstay of nonprofit fundraising for decades. This year, business strategy consultant Robbie Kellman Baxter released her book, The Membership Economy. In it, she discusses the rise of subscription-based business and how a membership model can grow a company’s customer base and build relationships and revenue. The Membership Economy explains why many smart businesses are saying “join us” instead of “buy from us.”
The increasing popularity of subscription-based business is tied to the growing influence of millennials, who appear to prefer paying for ongoing access to goods or services instead of ownership. More and more people are choosing to pay organizations a small monthly fee, much like a recurring donation. With online and automatic payment, the arrangement is almost effortless.
This is good news for nonprofits seeking to grow their recurring revenue programs. The social sector has historically incorporated membership-based fundraising, which taps into the inborn human need for belonging and ultimately provides reliable support for a social good organization.
The same retention and relational benefits driving the for-profit membership economy makes monthly giving a powerful tool for nonprofits. The growth of the membership economy even provides some helpful insights for organizations looking to revitalize their monthly giving program.
New and Old Forms of Membership
Some of the most successful and resilient businesses operate entirely or in-part on a membership model. The foremost example is Netflix. Today, almost half of American households subscribe to Netflix or a similar streaming service. The American Auto Association and Costco are two membership-based businesses that have not only grown extensively over the years, but have become trusted institutions for their loyal customers.
There are also success stories from the nonprofit sector. From churches to zoos to museums, lots of organizations are able to plan and execute large, long-term programs because they have sizable recurring revenue programs. Monthly giving creates a continuous and ongoing base of support, driven both by donor loyalty and force of habit.
In an interview with Forbes, Robbie Kellman Baxter explains, “Once we become members, we don’t reconsider the transaction every month or every year—it’s automatic. And that is very different than something you buy repeatedly—in those situations, like when you buy a candy bar or choose a rental car company, each purchase is an opportunity to reconsider your choice.” This is one reason why acquiring monthly donors is one of the smartest things you can do for your nonprofit.
Benefits of Membership and Monthly Giving
Part of what makes membership-based business and monthly giving so attractive is that it brings stability and reliable income to an organization. With the uncertain nature of grants, sponsorships, and one-time individual gifts, many nonprofits are forced to operate without knowing how much revenue they will have three months, six months, or a year from now. This makes planning future programs and campaigns a dangerous wager.
With a strong monthly giving program, though, nonprofits can plan programs and expenses with their monthly recurring revenue in mind. Barring a public relations disaster, the majority of recurring donors will make their regular gift three months from now. The retention rate for monthly donors is about 70 percent, well above retention for one-time gifts. These regular donations add up to greater annual contributions and higher lifetime donor value.Calculate Your Recurring Giving Potential Now
For nonprofits and for-profits alike, however, revenue is not the only advantage of the membership model. As Forbes contributor Roberta Matuson puts it, “The Membership Economy is also about community.” The bond between an organization and a monthly giver will be closer than with a one-time donor. If you communicate well and show your appreciation, recurring donors (or customers) can become devoted advocates for your cause.
Tips from Membership Marketers
To ramp up your nonprofit’s recurring revenue program, think about how you can optimize the donor’s experience. Baxter illuminated some of the ways marketers can promote membership in a presentation with 33voices, a hub for entrepreneurship and business experts.
- Break Down Barriers – Consider reasons someone would hesitate to become a monthly donor and address them. A reasonable suggested donation size and a short donation form are a good start. Make it easy to be a monthly donor.
- Provide Immediate Value – Once a donor signs up, start this relationship right with a prompt, heartfelt thank you. Follow up with outstanding content and impact updates. Remember, membership business models only work if the company delivers the product it sells.
- Reward Members – Many membership-based businesses provide rewards for their best customers. While donors usually aren’t interested in receiving merchandise in exchange for a donation, you can reward them in other ways. It can be something small, like an email with exclusive news or publicly acknowledging their support on social media. You can even host a special event just for monthly supporters.
The most important tip that all nonprofits should remember for monthly giving is that communication is key. Anyone who makes a monthly gift to your organization deserves to be thanked and to continually see the impact of their donations. Ongoing gifts require ongoing stewardship.