Nothing Can or Should Substitute for Philanthropy, Part 2

Print Share on LinkedIn More

Simone Joyaux

Yes, I’m worried by what I see as an excessive focus on generating revenue by nonprofits. Of course, nonprofits should generate revenue if they can. Fees for service. Admission fees. All that stuff.

But what I’m hearing is something different. What I’m hearing is: “Let’s start a business where customers buy stuff and then we won’t have to rely so heavily on donations!” Articles proclaim that nonprofits are “finally wising up.”

It’s as if revenue is better than charitable contributions. It’s seems as if the reliance on donations is seen as somewhat demeaning. Wow. Stop right there!

Sure revenue is good but it doesn’t substitute for charitable gifts. Sure, customer loyalty is great. I’m an ardent Apple fan. I’m a very loyal customer. But in a tough economy, I may not buy the newest iPod or the even newer laptop, which is so cool and better than the one I have.

I was a loyal customer of Michigan State University, my alma mater. But I’m not a customer any longer. I am, however, a donor. I’m a loyal donor. I’ve made a bequest in my will to MSU, too.

Loyal customers are wonderful…those Apple buyers and Trinity Repertory Company subscribers. But the Trinity Rep subscribers who are also donors – now that’s really something.

Customers and donors are not interchangeable, not even the really loyal ones. Yes, customers and donors have much in common. Just read Adrian Sargeant’s book Building Donor Loyalty. But customers and donors are not exactly the same.

Loyal customers can be affected by the economy. Customers can move on once their need is met, or in search of product enhancements.

Ticket buyers may not buy tickets to the most challenging and controversial plays, even though that’s the mission of the theatre. Donors allow the theatre to fulfill its mission rather than produce popular plays only. (Popular plays, subject to customer whim, is Broadway.)

Donors give beyond a particular play because they’re committed to mission. Donors give in tough economic times. Donors increase their gifts without the expectation of goods and services. Donors can be forever, even after death.

Fundraising events aren’t as good as charitable gifts either

Nothing substitutes for donors. And there’s a parallel in fundraising itself: Nothing substitutes for charitable gifts, not even ticket purchases for fundraising events. Fundraising events cannot substitute for requesting a donation.

The reality is, buying a ticket to an event is usually about attending the event. If people are not interested in attending the event, they may not buy the ticket. And most fundraising events have no real connection to the cause anyway; the event is just about making money. (Oh don’t even get me started on golf events!)

Also, in my experience, the economy affects fundraising events more than the economy affects charitable giving. Corporations back off of event sponsorship, but still may give a gift. Individuals don’t buy tickets to events when times are tough, but these same individuals will still give a donation. The ticket is equated with the event. A donation – with no goods or services exchanged – is about the cause.

So beware of too much focus on fundraising events. Spend more time on charitable gifts and donors. Beware of too much time focused on revenue generation – or over-reliance on revenue, which is subject to the whim of customers.

Nothing substitutes for donors. Nothing. Ever. Never.

Read Part I.

  • John G

    Contributions are a revenue stream, and as you pointed out a hard earned revenue stream. Why do some believe that sales, admissions, fees are some how easier and more valuable than a donation?

    I had a client last year that was convinced if they could create a business to generate revenue it would put his organization on course for a sustainable future. He may have been correct, but he and his Board did not want to do the work, to earn the contributions the organization needed to sustain itself.

    Joyaux is rightly diplomatic in not singaling anyone group out for fault. Many Board members from the for-profit-sector prefer to abdicate their role as fund raisers and look for other revenue streams that require less effort on their part. Thanks for the posts Joyaux.
    John G

  • Nelson Burns

    You make an important distinction between social entrepreneurship and philanthropy. Both are very important and they are different revenue streams. What is not mentioned is the important difference: cost ratios!

    S.E. or Philanthropy is only effective when the cost ratios are acceptable. If you are giving away the revenue through raising money, that is not any better than the same result with S.E.

    Our industry needs to do a better job with its metrix measurements and start talking about real outcomes and effective strategies.