Gazing into the (Immediate) Future of Fundraising

The article below was featured in the September issue of ZGive Magazine. I think they do a good job covering the nonprofit sector — they consistently present compelling perspectives. Check them out!

On July 1, 2022, the cover of the highly regarded, 35-year-old publication The Chronicle of Philanthropy read “The Giving Crisis — How Fundraising Can Bring Americans Back to Charity — If It Changes”. Despite previous issues of this and other publications talking about “storm clouds ahead” or “future-proofing”, this cover created alarm in the community. It’s the first time I’ve seen something this strong — an image and statement that drives home the message that change in the philanthropy sector is critical. Specifically, change in the way nonprofits fundraise must happen now.

When I wrote my book, “The Philanthropy Revolution” nearly two years ago, I encountered a large number of young, mid-level fundraisers and nonprofit leaders who told me that they were well aware that wholesale change was necessary in the nonprofit world, but they didn’t feel that there was a “safe” forum to voice this need — nor the ability to make change, given their current positions. Some of the more senior fundraisers, on the other hand, were incredulous about my even using the term “revolution”. They claimed that all was fine in the way they operated and that it was the fault of the donors that they either didn’t give or didn’t give as much as they should. A few claimed that fundraising challenges and the need for change only existed for the “smaller” organizations and that the legacy, institutional nonprofits were doing everything correctly. After all, if those organizations had existed for decades, they must be doing something correctly, right? Wrong.

Here are some data points to prove that The Chronicle of Philanthropy’s cover was accurate:

1. Despite a massive increase in new donors during COVID, the number of new donors in 2021 essentially remained flat.

2. 82% of 18 to 34-year-olds who heard about Giving Tuesday 2021 participated, yet most nonprofits claim that young people “don’t have money” and instead focus on donors in their 40s and above.

3. 18% of Gen Z donors (age 11-24 currently) want nonprofits to ask them for donations more often, and said that they would increase their gift if asked. Unfortunately, most nonprofits don’t consider this group worthy of “cultivating”.

4. As of late 2019 (the last year that research was released), there were 618K “Millennial Millionaires” in the United States. Yet the vast majority of nonprofit boards have zero Millennial members, claiming that this age group “doesn’t have the means to contribute”.

5. Per Nonprofit Quarterly, there are approximately $160 billion sitting in Donor Advised Funds in the US. While some of that money does go to charities every year, the total “balance” in those funds continues to increase every year. For whatever reason, most nonprofits seem to be intimidated by DAF donations, and therefore they don’t make it easy for DAF donors to give.

6. Over the last several years, retention rates of new and existing donors continue to decline, with retention rates of new donors in the 18-22% range, and retention rates of existing donors in the 40-45% range. This is disturbing to almost everyone watching the stats on the issue.

7. Recurring (monthly) revenue programs are one of the bright lights in the fundraising sector, with more and more donors giving monthly. Although all ages give monthly, many more young people give monthly than their elders. However, most nonprofits don’t see the benefit of focusing on this, as a $50 monthly gift is put into the “bucket” of a $50 annual (or small) donor, despite monthly donors being much more “sticky” than other categories of donors, and therefore that $50 monthly donor should really be categorized, and stewarded, as a $600 donor. This, unfortunately, isn’t happening so much.

So where are the bright lights? Happily, there are many and most of them have to do with technology.

Technology continues to evolve, and the number of innovations in the “phil-tech” field are just becoming well-known now. Many of them mirror the for-profit world, but with adjustments for the nonprofit sector.

Examples include:

1. Better methods, including AI, of parsing customer (and prospective customer) lists.

2. Zoom and other video technologies help reduce costs, retain staff, and even send a custom video thank you message. (This often results in increased “stickiness” and reduced costs.)

3. New and improved technologies allow donors to make a more frictionless donation. This includes giving via text message, but also giving via nontraditional means, as in DAF gifts, appreciated securities, and cryptocurrency.

4. Technologies that pull information from social media and other sources to better qualify and locate prospective donors.

5. Programs that allow free and near-immediate surveys to be sent to donors, allowing a much better and personalized relationship between donor and nonprofit to evolve and thrive.

The pandemic gave many organizations pause to evaluate their strategies and future plans. It also allowed many entrepreneurs to have more time to solve problems and provide new and existing tools for the nonprofit community.

Our challenge now is to embrace change — at all levels of the philanthropic sector — and to “carpe diem”!

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I’m Saving Giving by providing a clear path to success, supported by data, statistics, and interviews. You can find more great newsletters like this one here on Philanthropy 451, in my bestselling book, Philanthropy Revolution, or on Twitter, and LinkedIn to learn more.

- Lisa