Corporate and Individual Giving: What to Expect in Coming Months

Business-charity marketing deals won’t suffer

Charities nationwide report that companies are pulling back from making outright grants and supporting walkathons, galas, and other special fund-raising events. But cause-related marketing deals — in which companies donate a portion of product sales or promote other activities to support charities while also boosting their corporate image — are likely to remain attractive to companies and even grow this year, says David Hessekiel, president of the Cause Marketing Forum, in Rye, N.Y.

IEG, a Chicago company, projects that dollars spent on business-charity efforts will grow by 3.1 percent this year, to $1.6-billion.

Among the signs of continued interest in charity marketing deals is an arrangement between Starbucks and Product Red, a marketing program that works with businesses that agree to donate a portion of their product sales to efforts to fight AIDS and other diseases.

Through December 31, five cents of every purchase made with a Starbucks Product Red gift card will go to the Global Fund to Fight AIDS, Tuberculosis, and Malaria. In the first two weeks of the promotion, it raised enough to pay for 1.4 million doses of antiviral medication.

Mr. Hessekiel says companies are continuing to support marketing deals in part because a 2008 study conducted by Duke University and Cone, a Boston company, provided evidence that consumers who see advertisements for products that benefit a charitable cause tend to subsequently buy those products more frequently than consumers who have not seen such ads. (Previous studies were less convincing because they relied on what consumers said they might buy, rather than actual purchasing behavior.) He also says the economic crisis and last year’s presidential election have led people to focus more on grass-roots organizing and helping needy people.

“Culturally now, there is more emphasis on helping each other.” he says. “Companies have to advertise their products, people are looking for meaning, and giving back is very in. This bodes well for folks in marketing trying to attach themselves to things that will resonate with consumers.”

Donors will base most decisions on their current income

Many charities have seen individuals become more hesitant in recent months about making large gifts from stock holdings and other assets, compared with their willingness to give smaller cash donations.

The Nature Conservancy, now in a campaign to raise $1.6-billion by next year, says that of gifts of $1-million or more promised in the form of securities, land, and other assets, some $32-million — or more than half of those in the pipeline — have been put on hold by the donors.

“There is a long list of individuals who now want to wait until the market turns around, but what does that mean?” says Angela Sosdian, the conservancy’s director of philanthropy for gift planning. “No one knows how quickly the market will rebound, and we don’t know what threshold donors are looking for to move forward. With market losses this severe, their advisers are saying, ‘Don’t lock in that loss,’ so many of our largest gifts are on hold.”

Bequests and annuities will increase

The Nature Conservancy says that while some big pledges are in limbo, it has received a growing number of promises from donors who say that they plan to leave the charity money when they die.

Since July 1, the start of the charity’s fiscal year, “we have seen a 24-percent increase in the number of notifications of bequests,” says Ms. Sosdian. “This increase has to be partly due to donors shifting into bequests. There are individuals who want to support us and are looking to switch their support from an outright to a deferred gift.”

Bill Sturtevant, vice president for principal gifts at the University of Illinois Foundation, reports increased interest in gift annuities, which enable donors to make a large contribution in exchange for a tax write-off and guaranteed payments until their death or the death of another beneficiary, usually a spouse.

When the last beneficiary dies, the charity keeps the money left over.

“Annuities look attractive — and safe,” says Mr. Sturtevant.

Older donors whose assets have been battered in the stock market, he explains, find guaranteed payments an attractive hedge against running out of money in retirement.

What’s more, turning their assets over to a reputable charity in exchange for guaranteed income seems like a better investment to many donors than parking their life savings at banks and investment firms, many of which have failed.

Some experts, however, warn that some donors could regret setting up gift annuities if there is a sharp rise in inflation, which some economists have predicted will occur in later stages of the downturn.

In that case, donors’ fixed annuity payments could be eroded by a steep rise in the cost of living.

More charities will try to raise money with text messages

“I believe this is the year we will see mobile-phone fund raising start to happen,” says Madeline Stanionis, chief executive of Watershed, a San Francisco online fund-raising consulting company.

Text-message drives urge donors to use their cellphones to call a number and punch in a code that automatically adds a $5 or $10 donation to their monthly phone bill. But, until recently, such campaigns were not attractive to charities because cellphone carriers kept up to half of any donation.

Now that companies and charities have collaborated to channel more to charity, “it is starting to look more lucrative,” says Ms. Stanionis.

In addition, organizations like the Mobile Giving Foundation, a nonprofit organization in Bellevue, Wash., are working to make it easier for charities to solicit monthly cellphone donations.

Ms. Stanionis says that one of her clients, the Humane Society of the United States, has collected thousands of cellphone numbers from supporters and recently tested using text messages to reinforce its e-mail appeals for a year-end gift. Nearly 4,000 of its supporters got e-mail appeals only, while another group of more than 7,500 supporters also got a text message asking for the year-end gift. People who got both e-mail and text messages were 77 percent more likely to make a contribution than those receiving only e-mail.

“This trend will be about integration of channels,” Ms. Stanionis says. “If you have a billboard or a table at an event or somewhere in public, try using it to advertise your text message to give a $5 gift.”

Gifts from individual retirement accounts will dip

Most nonprofit leaders applauded last year when Congress passed a law extending a provision that enables people age 70&frac; to give up to $100,000 annually from their individual retirement accounts through 2009.

But now, many of those same charity leaders are concerned that such gifts will be less attractive to donors this year, because of another recent law that seeks to help retired people conserve savings eroded by declining stock values.

The new law eliminates a requirement that people age 70&frac; take out a minimum sum, which is taxed, from their IRA each year. The required distribution, however, was an incentive for charitable gifts: If people withdrew the money and gave it to charity, they owed no tax on the withdrawal. Because no withdrawal is required now, some charity leaders fear that many donors won’t be inclined to make IRA gifts this year.

Still, even if the new law does reduce the number and amount of IRA gifts this year, some experts say they might be able to use the loss of the giving incentive as a way to push Congress to take other steps to encourage donors to channel money from their retirement accounts to charity.

Organizations such as the Partnership for Philanthropic Planning, formerly the National Committee on Planned Giving, have lobbied to get Congress to remove the $100,000 annual limit, allow IRA transfers among donors as young as 59&frac;, and allow people to transfer IRA money into certain types of gifts, such as gift annuities, that provide donors with guaranteed payments.

“There are donors waiting in the wings to do this,” says Conrad Teitell, a Stamford, Conn., tax lawyer.