July 24, 2014;Third Sector Today

It seems that everyone in the world is dumping buckets of ice water on their heads and challenging others to do the same, all in the name of fundraising for a good cause. That is all well and good, and I have to admit that I have enjoyed watching people react to the cold water. But is it a sustainable fundraising initiative that will add to organizations’ bottom lines year after year? As reported in NPQ, the ice bucket fad may actually be indicative of many things that are wrong with trends in current philanthropy.

So what does work? As we head into the third quarter of the year, many minds will turn to the annual fund—a venerable workhorse for nonprofits of every size. Crowdsourcing and other ideas may be fun, but research recently released by the Nonprofit Research Collaborative demonstrates just how important it really is to pay attention to the annual fund.

The research defines annual fund as an initiative to raise money for the current year’s operating expenses. Organizations that have an annual fund appeal are far more likely to achieve their fundraising goals than organizations that do not have an annual fund: 77 percent of organizations with an annual fund report being on track to achieve their goals while only 57 percent of organizations with no annual fund report being on track. Although larger organizations are more likely to have an annual fund, the success rate is found across the board.

Other key elements of success:

  • Donor retention. Organizations that retain at least 50 percent of their donors from the prior year are far more likely to achieve annual fund goals. Having at least five percent of prior-year donors increase the level of their gift is another strong indicator of success. Organizations with a high donor retention rate also report that their donors often increase their gift year upon year. In that way, donor working to retain donors is a good way to increase the annual fund.
  • Dedicated staff. Organizations with at least one staff person devoted to the annual fund are more likely to achieve success. This is true for nonprofits of all sizes and so becomes yet another argument for the importance of investing in operational capacity.
  • Benefits do not mean much. Offering tangible benefits in thanks for a gift does not seem to have a positive impact on retention rate or gift size. Benefits may include a gift item, or membership with incentives (a theatre company offering discounts on tickets, for example). For larger organizations, having gift clubs (usually seen as identified categories of giving listed in the annual report) can have a positive impact.
  • Thank donors, thank them again, and then thank them once more. It seems unlikely that anyone would dump two buckets of water on their heads, but a very old school trick of sending a donor a handwritten thank-you note is one of the most successful ways of keeping them and increasing their level of giving.

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New-fangled technological gimmicks may be fun, but sometimes it’s the old school tools that mean the most and have the best results. The research shows that success will follow having someone on staff devoted to reaching out to donors with information (and the survey says print newsletters are more effective than electronic ones), asking prospects to give, and then working very hard to get them to give again. It’s not rocket science (or ice buckets).—Rob Meiksins