The Dynamic Growth in Continental Europe
It’s not just the lure of culture, tapas and vino tinto that is bringing many international NGOs into the Spanish fundraising market, or the Coliseum, pasta and Barolo that draw them to Italy. As the third sector globalises and acts as a counterbalance to the enormous forces of global business, it, too, is moving into new markets as traditional ones become saturated, and new opportunities overseas are on the horizon.
Not all international charities are keen to take on the challenge of investing in growth too far from their cultural and geographical bases, so they have looked increasingly at Eastern and Southern Europe as underdeveloped markets that offer new fundraising opportunities.
When INGOs look to Southern Europe, Italy or Spain usually end up at or near the top of the list. Both markets have a fair degree of cultural similarity, but have differing advantages for an outside NGO to take into account.
Italy is a more mature and developed market than Spain. It is well-represented by the major international-brand fundraising organisations and has thriving, indigenous national and regional charities covering all aspects of civil society.
A relatively wealthy G8 country with a population of just more than 58 million, Italy represents a sizable market for fundraising. There are around 221,000 active nonprofit organisations in Italy. These organisations raised $2.7 billion in 2002 from individuals, companies and foundations. It is estimated that only 20 to 30 organisations use “professional” direct-marketing-led fundraising techniques. This presents a significant window of opportunity for INGOs that have well-developed fundraising tools and encourage monthly giving via direct debit.
There has been growth in donor numbers and revenue in Italy, but there’s potential for even more. Growth has been via cold direct mail and off-the-page advertising with occasional bursts of recruitment via TV telethons and massive response via SMS to emergencies at home. However, in recent years cold direct mail has taken a significant decline in effectiveness; new donor recruitment via new media/Internet is not delivering the same volumes; and a drastic shortage of supply of professional face-to-face/door-to-door fundraising means that charities in Italy are struggling to achieve much more growth in new donors, focusing on increasing the value of their current support bases and keeping attrition low.
Apart from significant government funding for a number of organisations, fundraising in Italy is dominated by individual giving, which is increasing both in number of givers and in level of average gifts. In 2003, 19 million Italians gave at least one donation with an average annual value of 60 euros. In 2004, 60 percent of the total donations from individuals went to medical causes. UNICEF is the largest charity in Italy while Caritas, a fundraising arm of the Catholic Church, is the best known.
The Italian fundraising sector is still characterised by high levels of volunteerism and low levels of (poorly paid) professionals, making it hard for new NGOs entering the market, as well as those already there, to find really top-notch professional fundraising staff.
In terms of infrastructure, until recently, a poor, slow and inefficient postal system hindered direct-mail fundraising, timely supporter communications and donor-relationship management. This has been gradually improving, but the sector still suffers from a poor and outdated banking infrastructure.
Spain has experienced 14 years of unprecedented economic growth and transformed over the 33 years since the death of its long-time dictator Gen. Francisco Franco. Spain today has a thriving civil society that was banned under the fascist dictatorship.
Nevertheless, there is no doubt that the “boom” is over, and tougher times are ahead. The Spanish charity market has grown significantly in recent years — both in terms of the overall amount of funds raised and the number of active fundraising NGOs establishing themselves. There is still space for new market entrants and for the overall number of donors to expand from the current levels of around 2.5 million charity donors to closer to 10 million in the next five years, out of a population of 40 million. Similar to Italy, it is estimated that there are around 260,000 nonprofit organisations in Spain. In practice, the formalised NGOs, as we would understand them, in Spain total around 500, and of them, only 40 or so are operating at levels of professional fundraising close to that of NGOs in North America.
Many of the major international players already are established in Spain such as The Office of the UN High Commissioner for Refugees (UNHCR), Cruz Roja (Red Cross) and Ayuda en Acción (ActionAid). Additionally, there are numerous Spanish development NGOs that are closely associated with the Catholic Church.
Those organisations investing heavily in fundraising in recent years have seen extraordinary growth, especially those operating in overseas development and child sponsorship. Organisations such as SOS Children’s Villages have been major investors in and beneficiaries of this growth. For UNICEF, for example, Spain currently is one of its most profitable markets.
Most of the fundraising techniques that are commonly used in other mature markets work well, with high average gifts, and payment is almost always via monthly direct debit other than for emergency appeals. Face to face, telephone, SMS, e-mail/Internet all work well, but cold mail is not effective for a combination of cultural reasons and poor quality lists for rental. Two well-known U.S. charities tried and failed to enter the Spanish market without any prior studies or consultation with market experts. They failed catastrophically by trying to enter exclusively by cold direct mail.
Most Spaniards have never been asked to give to a charity. Fundraising has been focused in the major cities, and when people in the smaller cities are asked to give, it probably will be the first time — and the response is positive.
When people are asked in the street or by telephone, the response rates are better than they typically are in the more mature markets. Furthermore, donors expect to make relatively high monthly gifts of 15 euros to 30 euros via bank direct debit. Unlike Italy, a telephone pledge for a monthly direct debit is enough for the bank to process the regular giving pledge. As a result, there is little culture of asking for one-off gifts in Spain, except in emergencies.
Not quite there
Major-donor fundraising is in its infancy, as is legacy fundraising; this is largely due to lack of activity and expertise within the NGOs and other institutions such as universities. This is slowly changing, but it is taking considerable effort to convince senior management and board members to understand the value of this area of fundraising.
Additionally, the wealthy and powerful of Spain have not been educated as to the concept of large-scale philanthropy, nor do they seem especially motivated in this area to date.
Corporations are beginning to pay lip service to corporate social responsibility — especially the multinationals — but few have dedicated departments or even staff dealing with it. Indeed, most are not really very aware of the mutual benefits of association with the nonprofit sector. Foundations tend to be associated with the same major corporations as above and very often mix the role of the foundation with that of the marketing department, using the foundation to sponsor events.
A further major lure for international development charities to establish in Spain is to gain access to the increasing pool of funding from national and regional government overseas development aid.
An interesting dilemma currently facing INGOs when looking to enter into new markets is: If revenues are tight in the home market and the U.S. dollar weak against the euro, why invest in new markets? For me, the answer is simple. It’s wiser to invest in a new market that is not in recession and has a higher long-term return on investment on fundraising than your home market. FS
Got a story to share about fundraising in Europe or elsewhere in the world? Contact FS Editor-in-Chief Margaret Battistelli at email@example.com