What The Latest Fundraising Effectiveness Project News Means for You

I’ve been getting nervous emails from colleagues who attended the 2023 AFP ICON conference in New Orleans, all bemoaning the fact not just donors but also donations are down. You see, information was presented from the full 2022 Fundraising Effectiveness Project report, and the results were sadder than usual.  I want to share this with you, because you need to know.

I don’t need you to panic.

Let’s put this information in a little context. You probably already knew donor retention has been declining for the past decade. But this had been offset by larger average donations, so total philanthropic dollars didn’t contract.  The opposite, in fact.  It’s why I’ve been exhorting everyone to develop thoughtful major and mid-level gift programs, in lieu of concentrating primarily on quantities of gifts from (1) direct mail acquisition and events (new donors accounted for only 8% of total dollars, and were down by 18% last year) and (2) renewal (retention of new donors gained in 2021 fell by 26.4% in 2022).  You’ve got to go where the money is.

But… now it’s not there as much.

Philanthropy is still all around you, if you look.

Maybe it’s a little sourer than before, but when life is giving you lemons, you’re smart to make lemonade. Put in terms of another metaphor: play the hand you’re dealt. The surest way to lose is not to play the game at all.

Cards on the Table/Lemons in the Bag

Let’s take a look at what we’ve got, per the Fundraising Effectiveness Project Q4 2022 Report:

• Fewer donors last year. The long-term trend of waning donor participation, which started in 2012, experienced a sharp nose dive in 2022, with overall donors declining by 10%. The leading cause of donor decline is an 18% reduction in new donors. Repeat donor retention declined from 46.1% to 42.65, the lowest rate on record.
• Fewer dollars last year. The total dollar value of donations, which had been steadily increasing from 2012 until 2022, levelled off through Q3 and then weakened in Q4 (The time period that is typically the height of the giving season experienced a concerning 1.7% decline).
• Giving concentrated in major donors over decade. Since 2012 donations increased by 69% while donors declined by 19%. This meant a small, but mighty donor group played a large role in stabilizing the charitable sector. Today, given increased economic uncertainty, this heavy reliance on large donations may be unsustainable. The FEP called the 4^th quarter report a potential “canary in the coal mine.”

Pick Your Metaphor

When I can visualize what I’m doing, it helps me better develop and execute a plan. So, decide if you’re playing cards or juicing lemons or… whatever works for you.

The point is to know the resources available, then build a plan to use them most effectively to reach your goals.

Available resources mean things within your control. If you focus on what may happen with inflation, the stock market, disaster or pandemic, you’re apt to throw up your hands in despair. Desperation is not a good strategy from which to lead. So, whatever your role, know it is within your power to lead from something more positive.

Consider what you’re optimistic about, and develop concrete plans in that area.

Especially focus on what’s going to work for you over the long haul. Programs like monthly (see Monthly Giving Made Easy with Erica Waasdorp), non-cash (see Why Cash is Not King in Fundraising with Professor Russell James), and legacy giving (see Importance of Planned Giving on plannedgiving.com) come to mind. Put them in writing, commit to them, and hold yourself accountable.

“As an industry, we need to find ways to be more proactive in building sustainable giving models so we aren’t as dependent on economic forces we can’t control.”

— Mike Geiger, president and CEO of the Association of Fundraising Professionals.

Geiger is admonishing the sector to innovate. Whatever you do, do not simply say “Well, I guess we’ll keep doing what we’ve always done and hope for the best.” Hoping is a type of optimism, but absent a plan it won’t get you where you need to go to survive and thrive.

Innovation requires an investment of time and resources, and a shift in how you look at the world.

How to Build Sustainable Philanthropy

Look inwards, inside your organization, and see what’s up. What’s working/not working? What’s missing in your strategic approach to philanthropy facilitation?

Take your own pulse, rather than focusing on the pulse of the nation.

You can control the former, not the latter. And when you’re in control, it’s much easier to shake off any nervousness or despair.

I’m going to share three areas where I find too many nonprofits fall down on the job.

If you’re falling down here too, you’re going to be in trouble when there are fewer donors and dollars out there. But, there are still many philanthropic people; you just need to know where to focus your efforts.

1. Prioritize donor retention.

You shouldn’t even have an acquisition strategy if it isn’t joined at the hip with a retention strategy.  I mean it! Really, what’s the point if you’re just going to lose 8 out of 10 off the bat? That’s the average, more or less, for the past ten years.

For years, Dr. Adrian Sargeant has been telling anyone who would listen that just a 10% increase in your retention rate would double the lifetime value of your donors. But you can’t just hope this happens or rely on someone else to make it so. You need a well-articulated second gift strategy, or else.

This means focusing on lifetime value, not single gifts. I would argue saying thank you, expressing gratitude multiple times, reporting back on the impact of the donor’s gift, and developing meaningful engagement experiences that build relationships are more important than bringing in a new gift. Maybe one-off gifts will keep you in business for a month or a year, but that’s a heck of a way to live!

If you don’t have a written Donor Love and Loyalty Plan, now’s the time. You can grab a blueprint, written by me, on the Bloomerang website. It’s free.

2. Develop a mid-level giving program

Donors who make above-average gifts deserve your attention! You may not have the bandwidth to treat $500 donors like $1,500 donors, but you certainly should treat them differently than $5 donors. The more personally you communicate and solicit their next gift, the larger it is likely to be. Get started by:

• Deciding what constitutes a mid-level donor for you.
• Pulling a report of all these folks to identify who you want to work with more closely.
• Creating a manageable portfolio of these folks, depending on the amount of time you have to dedicate.
• Putting a dedicated, donor-centric staff person on this task so this doesn’t fall to the back burner.

NOTE: If you really want to get serious, look no further than the excellent Veritus Group Certification Course in Mid-Level Fundraising. It’s so good, in fact, I no longer offer my own course but have partnered with them to steer you here. It’s designed to help you learn exactly what you need to do to build strong relationships with these supporters with whom you already have a foot in the door. They’re generous, they’re connected to you, and they’re the easiest place to look for donor prospects because they’re right in your own database!

3. Develop a major gift program

Individual major gift fundraising is the most cost-effective form of fundraising. Raising $1 million from a handful of major donor-investors (who you’ll be able to steward and keep loyal over time) is simply easier – and more sensible — than trying to raise $1 from a million supporters. Plus, you should know so-called “micro donors” (less than $100) saw the greatest decline last year.  Since your future success – personal and organizational – is on the line every day, consider ramping up major gifts as your opportunity to seize the day and take control.

Honestly, there are very few organizations that can’t raise major gifts. But they don’t fall from the sky. You can’t ask virtual strangers for major gifts. You need a systematic plan for identifying, screening, qualifying and beginning to build relationships with viable prospects before you’re ready to approach them for a gift. This means doing all of the things suggested above for building a mid-level giving program, which is really the pipeline into your major gifts program.

NOTE: Whether you’re brand new to fundraising, transitioning into major individual gifts for the first time, or a seasoned pro, The Veritus Group Certification Course for Major Gift Fundraisers will deliver skills that will always be in high demand — whatever your role with your nonprofit. You’ll learn how to identify more prospects, get more meetings and secure more and larger gifts.

Final Thoughts

Yes, it’s scary to see the trend is declining donors and dollars. There are a lot of scary trends out there! All you can do is pay attention, see what’s happening in your own neck of the woods, and do what you can with the hand you’re dealt.

This is not a time to be on auto pilot. Learn how to play the game better. Study. Focus. Commit. There’s no cheating your way out of this one!

And don’t forget that optimistic outlook.

“May your choices reflect your hopes, not your fears.”
— Nelson Mandela

Image: Three San Francisco Hearts.Heart-of-Gold; Birds-of-the-Americas; Keeping-Balance. Benefit for S.F. General Hospital Foundation