What's Driving Your Fundraising?
Suzy, the vice president of a nonprofit delivering health care in 70 poor countries, admitted she doesn’t have “the time or opportunity to think strategically.”
Her West Coast-based organization was enduring a “perfect storm” of problems: a new CEO; board demands to expand significantly the number of beneficiaries; and a fundraising team lacking experience, data and metrics for measuring results. If Suzy’s charity were a car, some might have called for an engine tune-up. Wrong. This organization needed a complete overhaul, a new way of doing business based on a new model of engaging supporters and donors.
The Tandon Institute has developed a framework to meet the needs of Suzy’s agency and many others. The 8-S Model is based on eight universal drivers that are applicable, regardless of a nonprofit’s location; its mission; its supporters; or its level of engagement in the latest technologies, fads or “buzz.” Applying the drivers, as a whole, defines a nonprofit’s long-term performance at engaging constituents and building sustainable and scalable funding engines. Technologies only make these drivers more relevant.
The need for a holistic engagement strategy has never been greater. Overall giving as a percentage of GDP has stayed principally flat since 1971, according to Giving USA data. Moreover, a report by the Stanford Center on Poverty and Inequality notes that growth in charitable giving among individuals between 2009 and 2011 was the slowest of any two-year period since 1971 with only one exception — the recession of 2001 following the Sept. 11 terrorist attacks.
In addition, many nonprofit leaders focus, almost ceaselessly, on reacquiring lapsed donors at high costs. They separate donors from volunteers — a strategic error. Moreover, many charities are not yet taking full advantage of social media and the Internet. The Blackbaud 2012 Charitable Giving Report, released in February, finds that online fundraising was a mere 7 percent of all giving in 2012. Given how much time each of us spends online, shouldn’t that percentage be much higher?
There are, indeed, extraordinary opportunities for nonprofit enterprises whose leaders demonstrate insight, take calculated risks and maintain perseverance in building on their winning strategies. Those opportunities include engaging constituents through innovation, technology and communications.
However, those leaders also face unprecedented challenges: an avalanche of information, multiple channels and products, changing demographics, fierce competition, and unprecedented scrutiny of charities. Above all, the lack of risk-taking capital and the resultant
risk-averse attitude of many nonprofit leaders prevent new models of engagement.
Navigating these opportunities and challenges demands a new way of doing business. The 8-S Model is not a series of separate and distinct tactics used simply to increase revenue. Rather, each “S” offers a comprehensive and integrated constituent-engagement strategy. Ignoring or leaving out even just one will depress both engagement and giving.
S1: Strong donors
Many nonprofits are not intentional about recruiting donors with high expected long-term value at the least possible cost. How does one determine long-term value? The key factors are monetary value of the donor’s first gift, frequency of the donor’s giving, date of the donor’s most recent gift and the donor’s longevity with the charity.
For many social-sector organizations, the biggest challenge is not acquiring new donors but, rather, failing to retain them. New donors often have the potential to be transformed into advocates — those who speak out for a charity’s cause and become fundraisers themselves. The first step along this road is a new “donor treatment” with compelling, differentiated offers, thereby encouraging second, third and on-going gifts — while ensuring that donor recruitment, cultivation and retention costs are controlled.
Many donors, especially those in their 20s and 30s, want to do more than just give money. Charities that are thriving in a recession recognize this and offer opportunities to serve their causes — that is, to engage, volunteer, advocate, recruit and even exercise influence on the charities’ behalf — in mutually transforming relationships. Historic, even iconic, examples include the United Way, the American Red Cross and the Salvation Army. Each has a long history of communicating its mission, vision and values to its supporters and engaging them in local volunteering opportunities.
One nonprofit that has mastered this art is charity: water. On its website, one can download a banner ad for a Facebook site or engage friends through individualized campaigns from “fishing for clean water” to “arm wrestling for clean water.” These efforts exemplify ways to build donors into advocates, champions and ambassadors of the cause, rather than simply viewing them as ATM machines.
Whether on a website, in a direct-mail piece or at an event, any fundraising strategy will fall short of its potential unless it simultaneously builds an organization’s brand and reinforces its core message, thereby connecting the charity with beneficiaries and supporters. Every nonprofit should:
- Understand how it is perceived by the public;
- Know its “brand story” and have a plan to shape public perception in alignment with that story;
- Have a clearly defined brand architecture — knowing its stakeholders and how each one can take action to reinforce the brand; and
- Ensure the brand links to donor-engagement strategies.
An investment of time, energy and capital in building and communicating its brand will ensure the nonprofit is calling the public to its cause, not constantly pushing direct-mail pieces at them. This investment multiplies engagements across various activities — volunteering, giving, advocating and others. World Vision’s brand strategy took nearly two years to build out in the early 2000s and paid for itself as the charity grew its revenues more than 300 percent in fewer than nine years.
All fundraising activities should not only pay for themselves, but also generate appropriate return on investment and be aligned with organizational priorities. Industry standards for fully leveraged ratios are 7:1 to 12:1 for major donors; 5:1 to 7:1 for midrange donors; and 3:1 to 5:1 for mass donors.
Social-enterprise leaders whose organizations are not achieving these numbers must ask themselves: “Are ratios of yields to programs (revenues less expenses) on my organization’s fundraising activities acceptable?” If the answer is no, those leaders should consider several actions, including robust integration of online and offline strategies; new-donor treatment streams to increase second — and successive — gifts; and stronger stories, images and video content to improve donors’ awareness and understanding of the charity’s mission.
One of the most often overlooked aspects of fundraising is the imperative to focus efforts on fundraising activities that can grow revenue incrementally without growing expenses at the same rate. Successful efforts will directly impact Step 4.
Scalability results from concentrating on the most productive donor segments, along with growing channels of donor recruitment. Also, fundraisers need to create offers that are engaging to prospective donors as well as be broad enough to ensure funds will not be designated too narrowly.
A Tandon Institute client in Southern California had no clear strategy to expand its donor base beyond the immediate geographic community, and its focus was almost exclusively on major donors. The organization now is developing and solidifying an “ambassador” program to engage midlevel and mass donors and scaling up its marketing through both traditional and social media.
Over the past decade, donors, journalists, watchdog groups and government regulators have grown increasingly discerning and, in some cases, cynical about charities’ overhead rates. While the demonstrated value of an organization’s impact is a much truer indication of effectiveness, the reality is that costs associated with fundraising and administration represent a defining issue all nonprofit leaders must address.
For example, nonprofits that accept gifts-in-kind must monitor those products’ valuations and their impact on overhead and reporting. This has been an area of government scrutiny for nongovernmental organizations in recent months. Investigations of NGOs often make headlines and do little to instill confidence among prospective donors. One strategy to mitigate criticism is ensuring your organization meets or exceeds standards of excellence or ratings of the Better Business Bureau and others.
S7: Size of Opportunity
A foundational element of successful, long-term, scalable funding opportunities is a comprehensive analysis of market potential. Drill past the veneer of annual budgets, and look ahead two to three years. If needed, seek expert counsel to examine the potential to attract new donors and the magnitude for revenue growth. Study market demands and market saturation. Any plans for programs to meet the organization’s mission must include commensurate plans for resources to ensure donors’ promises and expectations are fulfilled. And, of course, plan for the unexpected, whether the agency is trying to meet needs in inner-city Detroit or the slums of Delhi.
Providing proper “customer service” to donors and supporters effectively and in a timely manner is critical to any social-sector enterprise. Receipts must be mailed promptly following a gift. Impact reports, whether in-person, video or written, need to be delivered in a way that donors and supporters easily grasp the value of their investments in the organization, as well as inspire them to educate and enlighten others about the value of the agency’s work.
The 8-S Model is designed to provide nonprofit leaders a complete engagement platform to build avid supporters, strong public support, and most importantly of all, sustainable and scalable funding engines. These drivers are universal, and each component reinforces and builds on each of the others.
Suzy, her executive team and her board now have moved beyond that “perfect storm.” They are on course, with a clearly articulated strategy to help guide decisions on people, processes, products and promotions to yield long-term growth.
Atul Tandon is a serial entrepreneur, businessman, humanitartian and author who writes and advises on principles and practices driving the performance and impact of social enterprises and nonprofits. Reach him at firstname.lastname@example.org