Individual Donors: Musings from the Master

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September 11th elicited at least two very positive responses from the American public: an extraordinary outpouring of dollars and millions of new donors. Surveys indicate that eight out of ten Americans donated money for the recovery. Since usually seven out of ten people give anything during most years, this means tens of millions of new people gave money response to this tragedy. Many of the first time donors were young and, hopefully, will continue giving.

Balancing that, media coverage of the Red Cross’s handling of donations may have a negative affect on some donors. The scale of support also highlighted an endemic problem: that most donors have a very unrealistic idea of how much money needs to be spent on administration. Because most donors don’t know what to look for, some first time givers may feel like they got ripped off. When you have thousands of donations pouring in, and you are expected to mobilize instantaneously, there has to be a strong infrastructure (read: administration) to handle the sheer volume of donations and to adequately prepare for the range of possibilities.

That said, implying one thing about where donations will be used and doing another presents a very big problem–and not just for a single organization. In communications with their donors the Red Cross really fell apart–making promises that they were not prepared to honor.

The problem lies in encouraging donors to direct, in detail, how their money is to be spent. I tell donors, if you trust the group, send them money. If you don’t, then don’t. It’s ridiculous to assume that you can make a nonprofit more trustworthy by telling them how to spend your money. Too many groups and foundations are beginning to play to the myth that donors want this kind of oversight and it is making the fundraising terrain very difficult. The major assurance that most donors want is to know that you are using their money to achieve your mission.

The truth is we are still figuring out how to create the many types of partnerships that can exist between a donor and a group. It has to be realistic.

Some organizations think that if a donor gives them $20,000, all that should be required in return is a thank you note and a newsletter—that’s all. That is not a reasonable relationship. People who invest significantly in your work want a little more connection than that. Figuring out how to engage and thank and keep donors informed is an art form.

The other extreme, where the donor is at the organization all the time “advising” the group how to spend his or her money, is obviously unworkable. Venture philanthropists popularized this rather expansive interpretation of donor involvement.

I’m not convinced donors want the kind of control they are being handed. I have no doubt that a few people expressed an interest in additional influence that someone else declared it a trend and that the rest of us are being dragged along. “If I want to be a sophisticated donor, this is how I must do it.” Donors are actually being encouraged to exert more control by so-called philanthropy brokers (with too much time on their hands). Leaders of community and progressive foundations and United Ways need to educate people about how to be appropriately involved in an organization, and how to know when a group is spending money properly.

What does it mean for most of us to be a donor? Mr. and Mrs. Front Porch want to put in their $50 and know the group they support is trustworthy and effective. What do you look for to know a group is trustworthy? That’s the question for me. That’s want donors want.

The anthrax scare had some affect on the response rate from fundraising appeals sent through the mail, but recent indications are that direct mail in general seems to have rebounded. As a practical result of that scare, however, all envelopes now need a return address—people will not open a completely blank envelope.

Two and three page letters are doing very well—while longer letters are not doing as well as they used to. People want evidence of environmental consciousness in their mail. At the same time, a one-page letter will rarely do as well as two or three pages because people also want some information about the group they are being asked to support. For community-based groups, letters with enclosed premiums—like little magnets–are not necessary to make direct mail work. Don’t waste your money and the world’s resources.

I think direct mail is still a good way to acquire donors. Remember, direct mail appeals to new donors do not really raise money—they break even at best. People need to clearly understand that this is justified as part of a long-term base building strategy. You have to build on this, upgrading promising donors and creating a network of respectful partnerships that will last over time.

There is a possibility that direct mail could eventually be replaced by e-mail, but that may take a while. It takes time for such things to shift. In the 1960s, when direct mail started to be used a lot by secular organizations, many people said Americans would never donate by mail because it was impersonal and a violation of privacy—yet, over time people got used to it. I believe the same will eventually be true for e-mail and we should all keep an eye on the research and maybe, over time, do a few small experiments of our own–but not to the extent of jumping in with all four feet.

In more general terms, the Internet continues to grow exponentially, and I think that organizations that take this technology seriously are finding it useful.  By taking it seriously I mean they use Web sites and e-mail to keep people informed on a routine basis. They also use their Web sites to raise money. Many organizations are having very good luck with this. However, groups need to have the capacity to maintain a level of online energy, freshness and vitality for this medium to benefit their fundraising.

Some groups are using an interesting twist on direct mail by sending out letters directing people to their Web site where they ask for donations. The Web page evidently holds people’s attention for a longer period of time than direct mail. A Web site is a dynamic interchange; if you are just going to post something once or twice a year, you might as well not have a site at all.

Many people ask me, “how do you know if a Web site and e-mail strategy is working?” Well there’s no good point of comparison because this technology is so new. Many times you won’t really know what role the Web site might have played for people who make decisions to donate or volunteer. They may be inspired by information at the Web site, or simply use it for validation—you can’t always track this. Some groups that invest in an Internet strategy have said, “This is not working.” When I asked, “What does not working mean?” They don’t really know.

Wealthy people have far less money than has recently been the case–this is obvious but worth stating. As a result, some large donors are paying their pledges over longer periods of time. You’ll see fewer gifts of stock and fewer gifts made through the more sophisticated instruments of planned giving—like charitable remainder trusts. On the other hand, instruments with fixed interest rates like annuities are now becoming more attractive. These declines can be devastating for some organizations, with the Chronicle of Philanthropy citing some groups experiencing a 50 percent drop in income, but it varies. It takes about a year for any movement in the economy to show up in nonprofit income.

More generally, recessions don’t have a major effect on giving.  For average income people, the 2001 data from the annual Giving USA survey indicated giving was down by one percent when factored for inflation–the first decline they documented in seven years.  Giving was still up from 2000 in actual dollars—continuing a 40-year pattern.  I don’t think the one percent drop is statistically significant, so I’m not too nervous about this. Given how uncertain things are—people losing their jobs and the declining value of their 401(k)’s–I think we’re doing very well.

Organizations are continuing to raise large amounts of money for capital campaigns and endowments. With the lowered value of the stock market, endowment campaigns are a little harder because the interest off the invested income is less. But overall, I think the stock market effect is mixed. A lot depends on the donor’s source of money. I recommend not waiting for the market or the right time.  There is an old saying in fundraising that the right time to ask for money is when you need it.

Many events are doing very well—some are raising more than ever. People are really enjoying getting together, and building community.  Good events will continue to do well and inadequately planned or thought-through events will do poorly.

Most Important:  Basic Fundraising Principles Still Hold

Over the last several years some organizations shifted their attention away from individual donors and alienated them. Now they’re trying to get them back and the donors aren’t falling for it. The era of massive amounts of money from foundations is gone, gone, gone; yet I find a lot of groups are in denial about this. One nonprofit leader in her 30s told me recently that in her whole working life she could always get funds from foundations. She couldn’t keep up with generating enough proposals. Around 1998 to 2000, I think this was probably true—foundations were flush. Now that’s over.

The situation after September 11th proved again what we have long known: groups that have a broad base of loyal donors continue to receive contributions regardless of what is happening in the economy. Groups that have not done the work on building an individual donor base, relying instead on foundations, are in a more precarious position.

You can read about all the trends and you can make yourself depressed. What’s the point? You still have to raise money. If you ask enough people, you will get your money. This is always true. There are no easy answers. You just have to keep making real relationships with real people.

Kim Klein is an internationally known fundraiser and fundraising trainer. She is best known for adapting traditional fundraising techniques to the needs of small grassroots nonprofits. She also publishes the Grassroots Fundraising Journal and has written several books on the subject. For more information contact Chardon Press.