Fundraising in tricky times

by Lynne Boardman on January 9th, 2023

(The below article by HMA’s Lynne Boardman has also been published by Hilborn Charity eNews. You can find part 1 and part 2 here.)


Those of us who have been in fundraising for a while have lived through a number of economic downturns and seen their effects on fundraising.

While nobody wants to tempt fate by uttering the “R” word, there is a possibility we will be in a recession in 2023. Even if that’s avoided, we know that the significant increases in interest rates and food prices are taking a real toll on people’s wallets, and emotions.

Back at the beginning of 2020 – when Covid first hit –fundraisers were nervous about whether donors would keep giving. But those charities that heeded the advice to continue fundraising discovered that donors were more generous than ever. Those who didn’t, of course, are still feeling the repercussions; smaller donor bases, and reduced financial stability.

But for almost 100% of our clients, the individual giving programs and direct mail / digital programs have performed better in 2020-2022 than ever before.

Based on our “recession” experience, 2023 may actually prove to be trickier. While many donor databases are made up of retired seniors who have likely paid off their mortgages, the spike in groceries and other living costs will hurt those living on a fixed income, no matter how asset-rich they may be. And folks aren’t staying home and saving money like they did during the worst of Covid. So, you’re competing with travel budgets, a new car, gifts to kids’ families to help them purchase a house, etc.

But, since we are fundraising in difficult times, here’s what we found to be true: a charity’s loyal, active donors became even more supportive than before. These are the people for whom your organization is a priority – they have wholly bought into your cause and the work you do. The places where results declined significantly were higher-value donors (mid-level + major) and prospecting.

Here is what we have seen in the past, and where you should consider that you may see a negative impact in the months or year ahead:

 

Prospecting

In the last two recessions, we found that response rates to prospect appeals declined. Net Cost on Acquisition went up. Existing donors stayed loyal, but people tended not to begin supporting new causes (with the exception of food banks and missions and homelessness charities – those very visibly serving the people struggling the most).

 

What you can do about prospecting: The decision to stop prospecting for new donors altogether has created a long-term disaster for charities that ceased acquisition, since there are no new donors to offset natural donor attrition. We recommend you continue prospect campaigns, but budget for lower results and trim the lower-performing segments and lists if necessary. Or, reduce the number of prospect campaigns each year, but don’t stop them altogether. You can reduce costs by including prospect lists in House appeals, with variable copy.

Many charities have databases with tens of thousands of people who once gave but haven’t in 3, 5, or 10, years …. Make sure you test those segments in Prospect appeals instead of relying solely on trades and rental lists. Test those deep lapsed and dormant names in Prospect packs as well as House packs, as well as with targeted lapsed mailings/telephone/digital campaigns. Be upfront. Rather than simply one varied paragraph or Johnson box, carry a “why have you forsaken us” message on your OE or subject line.

Test a lower gift array on prospecting.

 

Mid-Levels and Majors

In terms of active donors, these are the groups where we saw the greatest decline in financially troubled times. The issue, of course, is that most of these individuals are invested in the stock market – and when that declines significantly, they feel what’s known as “psychic poverty” if not real financial stress.

We’ve had many clients over the years who can vouch that no matter what is going on in the world – and what is going on with their mission and their charity – the most significant predictor of how their mid and high-value donors will give is how the stock market is doing.

Consider this: In the past year, The Dow and TSE are down, NASDAQ down 27%; Crypto (well let’s hope you weren’t invested).

This tweet from @Markyphillips sums it up perfectly:

“As economic squeeze continues, the more financially-savvy mid-value donors are broadly reporting that they are increasingly disappointed if they don’t see evidence of what their money is achieving. So, lack of evidence gets them questioning why they should continue to invest with you when giving elsewhere might give them a greater sense of achievement. Plenty of giving decisions are happening now. Sort out your MV thanking and reporting back today!”

 

What you can do about mid-level and major donors: Keep your key donors close, even if there’s a lull in their giving.

Now is the time to invest in stewardship.

If you don’t have a dedicated member of staff focusing on mid-level donors, hire one. Talk to your own consultants about crafting an impactful stewardship program or ask us. Do not ask donors for another gift before you have 1) thanked them for their recent gift and 2) shown them the impact of their generosity. A lack of gratitude and reporting back are the surest ways to make donors feel like they are bank machines rather than key allies.

  • Tailor your appeals.
  • Send ad-hoc notes and information on things you know they care about.
  • Invite them to webinars or keep up with them on WhatsApp.
  • Thank them for their past support.
  • Thank them again.
  • Show them how the world is better because of their gifts.

At the very least, even if their personal financial concerns limit their donations in the next twelve months, you will have kept the relationship alive until things get better.

 

Active Donor Base

As we’ve said, your most loyal donors generally stay loyal or give even more often. That shouldn’t be taken for granted, though, so consider the following:

  • Be very careful with your budgeting and projections. We are advising our clients not to continue forecasting the same results as we saw in the unique years of 2020 – 2022. In particular, it is safer to budget for a 10% drop in income from Mid-level donors and a similar impact on Majors. If more money comes in that’s wonderful – invested in helping the people you serve. But if you have a shortfall in your budget, bad things can happen.
  • Be cautious about attempting to get donors to upgrade their giving (except for food banks and other front-line services that help people suffering from the economic situation). Obviously, you want to ask people to keep supporting your work – just don’t turn up the pressure to give even more than they have in the past.
  • When it comes to Lapsed donors, in fact we recommend a modest downgrade in the ask. The most important thing is to keep them giving.
  • Consider the technique of citing their last 12 months’ donations and suggesting that they make that amount again the year ahead, but as an easier-to-manage monthly donation. (Be careful not to infer that you’ll never ask them for special gifts again, though).
  • Being able to remind donors (via copy in a mailing or email or script in a telephone call) about the date and amount of their last gift is a foundation of direct response fundraising. Yet more and more charities are reporting that they don’t think their data is accurate enough to do this. This feels like we, as a sector, are slipping backwards in data health. Do everything you can to sort out any data issues, so that you can accurately include these critical numbers and dates in your appeals. Donors always think they’ve given more recently than they have – and citing the last gift of 12 or 18 months ago is a big part of securing another one.
  • Be honest with your case for support – if your charity is experiencing troubles because of fundraising income or because more people than ever are relying on you, strongly share that message. It’s imperative when crafting appeals that we leave people with hope. And it’s also incredibly important that we honestly present need – none of our organizations would or should exist if there isn’t one.

 

For hospitals and children’s hospitals, in particular

While our health system is in crisis, and our hospitals have unprecedented numbers of patients, staff shortages, and wait times, we strongly recommend considering the marketplace and “emotional context” in which your appeals and communications are landing.

Be honest with donors – in Canada, donors’ gifts can’t be directed towards doctors, nurses and beds, but they can help purchase the new equipment that will let medical teams see more people more quickly. If the current crisis of Covid + flu + RSV continues, consider sending urgent appeals via email, telephone, even mail. Or adding an insert to a mailing pack that’s already underway.

It’s also worth reconsidering marketing messages that might jar with people who have just waited 11 hours with their sick child. Or who have watched repeatedly on the news about wait times and GP shortages and what keeps being presented as a crumbling health care system.

 

Legacies

It’s always a great time to talk to your donors about legacies. Those charities with a healthy legacy program withstand many storms. Craft your legacy messages so donors see what a great opportunity it is to make a much more significant impact than they ever dreamed possible. Keep in mind the five main concerns that legacy donors have and how to address them upfront. (If you don’t have these already, contact lynne@harveymckinnon.com).

 

In a nutshell

What we already know to be true still stands: treating donors with respect and honesty is essential to fundraising. Take it back to what grandmothers around the world have always taught us: ask politely; thank genuinely; show them what you’ve done with their gift.

 

Please be in touch if there’s anything we can do to help!

 

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