August 8, 2010 | Read Time: 6 minutes
When Giving USA released its latest survey of American giving showing a second straight year of decline, it confirmed what many nonprofit executives and fund raisers already knew: Raising money is getting harder. Yet as the country remains in the economic doldrums, many nonprofit groups face unprecedented demand for services. All of which means it’s more critical than ever to deploy fund-raising resources effectively.
That’s easier said than done. But there is a payoff. Our research shows that $45-billion in donations annually is up for grabs for organizations that take the right approach.
Making smart decisions about how and where to pursue donors and capture some of that $45-billion requires good information regarding donor motivations and behavior. When for-profit companies attempt to increase their market share, they typically invest significant sums in customer research designed to help them understand potential customers and how to reach them.
Most nonprofit groups don’t do customer research. That’s one of the reasons we set out, with support from the Aspen Network of Development Entrepreneurs, the William and Flora Hewlett Foundation, the Metanoia Fund, and the Rockefeller Foundation, to really understand the donor market today. We looked at the highly sophisticated techniques used by Fortune 500 companies to drive their marketing decisions and conducted a survey that gathered data from 4,000 Americans.
What we learned is both encouraging and frightening. On the encouraging side, we found that $45-billion in potential donations is available annually from people who make $80,000 or more a year. (Those people make up the wealthiest 30 percent of American households.) That figure includes gifts that donors would be willing to switch from the charities they support now and new money they would be willing to donate to organizations that appeal to them the right way.
On the frightening side, we learned that most nonprofit groups are pursuing the $45-billion in the wrong ways—ways that, despite their best intentions and efforts, are unlikely to be effective. And being ineffective is easy given that $150-billion of the donations that affluent Americans contribute annually is essentially out of reach. Donors are exceedingly loyal to the organizations they already support, and they are not likely to change their minds about how to distribute that $150-billion.
So how can you be sure that your organization is maximizing its chances to capture some of the $45-billion, rather than throwing money and effort at fund-raising efforts that are not as effective as they could be? Our research suggests five things that virtually any organization can do to improve their fund-raising success.
Focus on behavior, not demographics. Some charities treat all donors alike and fail to realize how many types of donors exist. Organizations that do categorize their donors into pools typically rely on demographics, such as wealthy retired people or people with incomes above $200,000. Our research showed that while factors like income and assets can help identify how much someone may be willing to give, they are not helpful in determining why someone gives—and therefore, how to attract that individual.
We set out to understand donor motivations and behaviors for charitable giving, and we found that they statistically group into six segments. (See box on next page.)
Understanding these six segments and how they are different is the critical starting point for effective fund raising.
Concentrate on just a few types of donors. You can’t be all things to all people. Everyone understands this, yet when we describe the six segments, organizations often ask us how they can appeal to each segment. That isn’t the right question. Successful organizations focus on the segments that are most likely to be attracted to their organizations. This isn’t to say that a nonprofit group should ever turn away donations from individuals but that it should focus its outbound messages to solicit donations from the one to three segments that the group feels it has the best opportunity to attract.
Keep track of donors. People making $500,000 a year don’t act very differently when making their charitable gifts than do people making $100,000. However, just because demographic traits are easier to observe than someone’s motivations, does not mean that it is impossible to determine into which of the six behavioral segments a donor fits. No more than four simple questions asking why a donor gave in the past, or what that person likes most about your charity, can help you quickly identify into which segment he or she fits. Once you have this information, you can classify the donor in your database. This will help with solicitations and as a quick refresher when following up personally with major donors.
Develop a focused, consistent, and simple marketing approach. Marketing messages should always focus on what matters to people in each donor segment you want to attract. And no matter what medium—your Web site, your mail appeals, or conversations with donors—you must convey the same message over and over.
We also believe that the messages need to be simple. We studied how many donors conduct research before they make a charitable donation, how long they spend scouting out a charity, why they do it, what information they seek, and where they look for that information.
It turns out that only about one-third of all donors do any research before making a donation, and the vast majority of those who do, research simply to validate their gift (not to look for the charity that will make the greatest difference with their donation). Donors also want simple facts and figures and look to the nonprofit itself for that information. So make that easy to find. You don’t need to provide them with 15 key measures of performance or an abundance of information that does not matter to them (like, for instance, the size of the problem you are trying to solve).
We have seen some organizations do a great job of making information easily accessible to donors. Some groups put two or three key measures of performance on their home page, such as “90 percent of donations went to beneficiaries” or “we helped 174 farmers last year.” This meets donors’ need for simple validation.
Others ask a few key questions on the home page, designed to be fun but that actually help them determine prospective donors’ interests and motivations to direct them to a Web page that speaks in a language that will appeal to that donor. And we have seen at least one nonprofit organization that has three simple one-page documents explaining what they do and why they need money. Why three? They are focusing on the three segments of donors most likely to give to them.
Spend time and money on actions that drive donor behavior. It is our nature to try to improve on our weaknesses, and when nonprofit groups hear that donors are displeased with their performance in a certain area, they attempt to improve. But in a world of scarce resources, it is worth focusing on the areas that will change how much donors give. Specifically, you should invest to improve both in areas that are important to donors and where donors feel that your organization is underperforming—and look to cut back and save precious time and resources in the areas donors don’t consider important.
By understanding donor behavior, any charity can succeed in increasing donations—even in these difficult times.
Greg Ulrich is a management consultant who has worked with businesses and nonprofit groups. He led the study, Money for Good, on which this article is based. Hope Neighbor is the founder and chief executive of Hope Consulting, which oversaw the study.
