On Tuesday, January 15, 2013, the Chronicle of Philanthropy hosted the live online discussion, “2013 Outlook on Fundraising” to address the impact that the sluggish economy, shifts in grantmaking approaches, and changing technology are having on fundraising. The session was moderated by Holly Hall, feature editor at The Chronicle of Philanthropy, with the participation of guest bloggers:
- Patrick Rooney, associate dean for academic affairs and research at the Indiana University School of Philanthropy
- Steven MacLaughlin, director of the Idea Lab at Blackbaud, a global provider of software and services for nonprofits
The complete transcript of the blog session can be accessed here.
Key takeaways from the conversation topics are summarized below:
Is giving going up?
Ms. Hall shared two graphs, from The Chronicle of Philanthropy and from the New York Times, that compare the decline of big gifts in the Great Depression (on the left) and during the Great Recession (right).
Outcomes vs. Outputs
Mr. MacLaughlin points out that nonprofits have historically tracked output (# of books purchased) instead of outcomes (% of people that learned to read). However, a slowing economy and limited resources are now prompting donors to focus more on outcomes and this will require nonprofits to change. The stronger focus on outcomes is also leading grantmakers and individual donors to consider making loans instead of grants to their favorite charities, or using other business models such as “social impact bonds.” Social impact bonds are loans that pay the up-front costs of a social service program and generate an investment return—if the program succeeds. We are seeing this more from donor advised funds and foundations, which are approaching grantmaking more as an investment rather than with the “give-where-most-needed” approach. It's a big change in the sector.
Mr. Rooney added: Giving USA shows that foundations’ grantmaking has increased very slowly in the past few years, and so have their asset levels. However, we are also seeing foundations, including family foundations, becoming more strategic in their grantmaking by looking at new approaches such as, program related investments (PRI) and mission related investments (MRI). Even family foundations, which have traditionally not been so focused on strategy, are increasingly focusing on measurement around impact. Corporations will also be more strategic in their giving approach as they look to give to programs that either increase profits, directly or indirectly, or they will give to programs that are linked to corporate mission, customers, or employees.
Finally, Mr. MacLaughlin added that charities may see an increase in giving by donors who decide that it makes sense to move up gifts they planned for the future into this year. A factor that may be influencing this is Congress’s decision to revive a lapsed law that allows people to give up to $100,000 per year to charities, tax-free from their individual retirement accounts. If donors act by the end of January they can give another $100,000 from their IRA that will be counted as a 2012 gift.
Regional vs. National
Donors are responding well to local needs as opposed to nation-wide causes, which explains why smaller organizations have been having better results in the past 12 months. The local economy also plays a huge role in how organizations are doing. Minnesota’s successful “Give to the Max” day in late 2012 is a great example where regional fundraising is getting better.
Acquisition vs. Retention
Mr. MacLaughlin states that a big shift needs to happen away from donor acquisition to donor retention. Currently, nonprofits have an average ratio of 80% acquisition and 20% retention. Not only is donor acquisition unsustainable, it is also expensive. Retention focus delivers the best ROI of scarce resources. “We need to start seeing more organizations shift from fishing to farming.”
Strategies for Donor Communication
Mr. MacLaughlin comments: “single channel communication is dead.” Nonprofits need to engage their donors through the use of multiple channels. The best acquisition and retention numbers come from donors that are engaged using multiple channels. Mobile is probably one of the biggest things to start investing in. Mobile is here and it is only growing. Browsing the web on a mobile device will surpass desktop devices in 2014. And almost 40% of email is now opened on a mobile device. Nonprofits really need to look at how they engage constituents using this channel. But don’t discard the power of direct face-to-face communication, says Mr. Rooney, “…even in this advanced communication world that we live in. You cannot rely on one communication, a comprehensive approach is necessary.”
Additional resources on giving trends by Indiana University’s School of Philanthropy:
- School on Philanthropy Panel Studies (SOPPS)
- Million Dollar List
- 2012 Study of High Net Worth Philanthropy
This post was authored by Julieta Mendez, Development Associate, Foundation Center.