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Nonprofit Fundraising Strategy To Increase Donations Without Increasing Overhead

Our Fundraising Strategy Needs To Improve

Our Fundraising Strategy Needs To Improve

Nonprofit fundraising goals continue to increase, but with continued scrutiny on organizational overhead expense, your headcount within donor Development isn’t keeping pace.  Your staff is getting stressed out

It takes a lot of hard work and patience before you can “make the ask”; Success is definitely not guaranteed.

The only thing that is virtually guaranteed is that your fundraising goal will increase again next year without sufficient headcount. This is not a sustainable fundraising model for you, your staff or your nonprofit organization.

Leadership from the Development VP/Director is needed to help your nonprofit explore and implement a more sustainable fundraising model.

The Critical Fundraising Challenges Facing Donor Development

The phrase “making the ask” greatly understates the complexity and skill involved in successful fundraising.  Experienced Development staff make it look easier than it really is.

Fundraising is a complex process of identifying potential donors, establishing and nurturing a face-to-face relationship with them, discovering their motivations and desires, working step by step in support of the donor’s giving decision process, securing the largest donation the donor is comfortable giving, and stewarding them towards becoming a major repeat donor in support of the organization’s mission.

Experienced fundraisers are a very skilled resource who are relied upon to make the nonprofit’s goal.  However, there is typically not enough Development staff  to pursue all the potential opportunities, so they focus only on the potential large donors. Yet they don’t want to miss an opportunity, so they end up trying to spread their time across too many opportunities, thereby reducing their focus on their most likely donors.

It’s getting harder each year to make the fundraising goal; Your staff is getting stressed out. Unless the fundraising strategy changes, next year the fundraising goal will increase, Development will again narrow the list of donors that they will try to focus on, resulting in an even larger list of underserved opportunities.  This is not a sustainable fundraising model.

The Underserved Fundraising Opportunities Continue To Increase

It is 5 to 10 times harder and more expensive to bring new donors into the organization than building upon the relationships of existing donors.

It should be much easier to convert new donors into repeat donors, and convert small donors into larger donors, than starting from scratch to attract and convert new donors.  After all, existing donors already have a relationship with the organization and have already stepped forward with a donation in support of the organization’s mission.   However, with the current fundraising strategy, that doesn’t seem to be the case:

  • Development will need to help replace the donations from 73% of last year’s new donors before attempting to increase fundraising above last year’s achievement level.   Only 27% of last year’s new donors are expected to give again this year.  The 73% who became inactive can afford to give again.  In fact, the majority of them decided to give to a different nonprofit organization that they found more compelling than yours, according to Dunham + Company.  But it gets worse…
  • Development will need to help add the equivalent of 5% more donors than last year, just to maintain last year’s donor level. For every 100 new and returning donors, 105 departed from the same charity, according to Giving USA 2014. Why is the donor base of the typical nonprofit losing donors?  The most common reason was they were only contacted when the organization needed money.
  • There is inadequate Development staff to steward “smaller donors” to “middle donors” to “major donors”.  That was not always the case.  For example, Michael Bloomberg started as a small donor of $5 to John Hopkins University in 1965. The size and frequency of his donations increased over the years, probably with the help of Development stewardship.  Bloomberg has donated more than $1 billion dollars to John Hopkins so far.
  • There is inadequate focus to develop “middle donors”. Over 33% of total donations come from just 1% of the donors, the “middle donors”, according to a study by Sea Change Strategies.  Unfortunately, their donation level is too high for Marketing techniques to be effective and too low for Development’s major gift focus, so they receive inadequate attention.

By significantly increasing donor retention, and applying cost-effective focus on “small and middle” donors, your incremental fundraising goal within Development could be reduced to much more sustainable level.

The Donor’s Giving Journey and Donor’s Giving Decision Process has Changed

Ten years ago, the majority of donors still preferred hard copy mail and face-to-face communication.  Only a few donors were ready to make online donations.  So it made sense to many nonprofit organizations to have all fundraising related to the Internet become the responsibility of the marketing departments, while all other fundraising remained the responsibility of development departments.

Fast forward to today and you’ll find the majority of donors are online, including those 66 and older.   In fact, 60% of donors who are 66 and older, and 60% of donors who are 65 and younger, give online according to a recent study by Dunham+Company/Campbell Rinker.

  • Donors no longer rely on an annual report and the occasional face-to-face meeting with a Development manager. They discover giving opportunities on a blog, receive emails about compelling success stories from nonprofits, share their experiences on social media with friends and family, and donate online.   Their telephone is now a smartphone that can access photos, videos, and information whenever and wherever they want.
  • Donors can no longer be classified as simply “online” donors or “offline” donors.  They are no longer dependent on nonprofit face-to-face stewardship to form their opinions or make their giving decisions.  They will leverage both the internet and nonprofit sponsored events to help them decide on who they will donate to, and they will donate online and offline, whichever is most convenient for them.

Your Fundraising Strategy must better align with your Donor’s Giving Journey

While the donor giving process has evolved, your organization’s fundraising process has not kept pace with this change.  Development focuses on the major donors, while Marketing focuses on the smaller donors, and no one is really focused on donor retention or mid-level donor conversion.  This behavior is often re-enforced with revenue recognition rules that incent both marketing and development staffs to scramble after the same potential donor, just to secure revenue attribution credit for their group’s effort.  Resource energy is wasted.  Opportunities are missed.

  • Marketing can (and should) be more than “just” a marketing communications group.  They understand the skills/knowledge needed to influence a target audience cost effectively.   Digital marketing, email marketing, social media marketing, content marketing, peer-to-peer marketing, marketing automation and nurturing campaigns are just a few of the marketing tools that are critical in cost-effectively improving donor retention, converting more donors into repeat donors and into “middle donors”, and increasing the number of qualified donor leads for Development.
  • Development can (and should) be more than “just” fundraising to big donors that need face-to-face contact.  They understand the skills/knowledge needed to convert a prospect into a donor.

A better Fundraising strategy needs to be considered which incentivizes both Marketing and Development to work much more as a team to deploy the most cost-effective fundraising techniques:

  • Development must focus more on qualified donors where their one-to-one communications expertise is most effective in making more successful asks.
  • Marketing must focus more on developing qualified donor prospects for Development where their one-to-many communications expertise is most cost effective.
  • Marketing and Development must work together to effectively nurture donors into repeat donors, and to steward smaller donors to large donor prospects.  This will require a team effort that combines cost-effective marketing nurturing/stewarding techniques with lower-cost donor development techniques.
  • Current revenue attribution goals must be revised with goals that clearly result in fundraising teamwork, not internal fundraising competition.

A More Cost Effective and Sustainable Fundraising Strategy Must Be Explored

If Marketing and Development can come together in a strong partnership, the current fundraising model can be made more effective, scalable and sustainable.   It would allow for a fundraising strategy such as the following example:

  • Low cost fundraising techniques for low-level donations: Marketing would use one-to-many marketing techniques to increase first time donors and online donations, to improve donor retention, and deliver high quality prospect leads to Development. They would use digital marketing techniques to ask for online donations, nurturing and social campaigns to retain donors, marketing communications techniques to steward low-level donors into mid-level donors, and help steward mid and high level donors in partnership with Development.
  • Medium cost/ medium skill fundraising techniques for mid-level donations: Inside Development specialists would use one-to-one phone/email/social techniques to encourage repeat and mid-level donors to increase their donation size, and, would leverage the CRM/Marketing Automation database and other tools to identify and qualify mid-level donors as potential prospects for Development experts.
  • High cost/ high skill fundraising techniques for high-level donations: Development experts use face-to-face meetings to increase the number of donors and donation size of major gifts, planned giving and grants.  Low-probability prospects could be turned over to the inside Development specialists for occasional follow-up and qualification.

However, moving from the current unsustainable fundraising strategy to a new strategy will not happen overnight.

Implementing A More Effective Fundraising Strategy Within Overhead Constraints

To accomplish the organization’s fundraising goals, the organization must better align with its donors’ giving journey and donors’ decision process.

However, the speed at which this can be accomplished varies by organization.  Every organization represents a unique situation, defined by their mission, history, culture, leadership, organization structure and financial performance. Roll out your updated strategy in stages.  Here is a sample, simplified roll-out approach.

  1. Dramatically improve donor retention using email nurturing and social media.
    1. Review existing content marketing communication to donors (i.e. all the content messaging that was used to attract the donor, convert them to a donor, thank them for their donation, and to nurture them to become a repeat donor).
    2. Conduct market research of inactive donors who were previously one-year and multi-year donors (i.e. select a small representative number of inactive donors, interview them to determine what they think of your organization, identify areas where the organization could improve, determine why they chose to stop donating to your organization, and then why they chose to continue donating to other organizations instead).
    3. Launch an email campaign designed to reactivate lapsed donors.  According to a case study by Blackbaud, 8.2% to 10.6% of lapsed donors were successfully reactivated.
    4. Launch an email and social nurturing campaign to retain donors and convert them to repeat donors.
  2. Build upon the success of the above donor retention initiative by adding marketing “stewardship” of low-level donors to mid-level donors, with subsequent qualification by Inside Development specialists.  Review and revise existing revenue recognition goals to better align the Development and Marketing departments in providing seamless engagement with donors throughout their giving journey.
  3. Build upon the success of the above stewardship initiative by having the Inside Development specialist provide active stewardship support of mid-level and high-level donors, with the support of marketing, and in partnership with the development experts.

Obviously, to stay within overhead budget constraints, there may need to be a few short-term sacrifices:

  • Some of the budget for events, print production and promotional gifts may need to be re-deployed to fund more cost-effective retention and lead development techniques.
  • Some of the budget for entertainment and additional Development experts may need to be re-deployed to fund the addition of Inside Development specialists.
  • The “new CRM” acquisition will need to be re-evaluated to ensure it adequately supports a sustainable, long term fundraising strategy and departmental fundraising-related activities.

Your Next Steps

The pressure continues to increase donations.  You and your colleagues are feeling the pain.  Next year will be even more challenging. Continuing to do the same things over and over again, while expecting the results to change, does not represent a sustainable fundraising model.

As the Fundraising expert, and the group leader responsible for delivering most of the organization’s fundraising goal, you are in the best position to initiate a discussion about a better fundraising strategy for the organization.

Development should help lead the effort to evolve the organization’s fundraising strategy.

However, you do not want to be the author of this strategy.  To avoid internal politics you should identify, and enlist the help of, a third party consultant to lead an unbiased discussion of nonprofit fundraising strategy with the board’s fundraising committee.  By being a sponsor of the discussion rather than the presenter, you will be demonstrating executive leadership on the fundraising issue, while retaining your freedom to fully represent Development’s perspective.

Therefore, your first step is to identify a consultant who is willing to lead an unbiased discussion about strategy options and impact.   The consultant should be experienced in development and marketing techniques, with a track record of increasing revenues by designing and executing successful transformation strategies, without dramatically increasing expense.  Technology, such as CRM/Marketing Automation and cloud computing ,will be an important enabler to any successful fundraising strategy.  A consultant experienced in aligning technology strategy with organization strategy would be an added plus.

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About David Hubbard

David Hubbard is a Revenue Growth Expert, a pragmatic Marketing and Sales Consultant, a proven business leader and the CEO of Marketing Outfield. He has helped both private and public companies grow by 25-50% per year by properly enhancing their revenue strategy, sales and marketing activities, and incentive compensation plans to better align the company with their target market buyers. With a unique professional track record within the Sales, Marketing and Product Management functions, he brings a frank and unbiased perspective to his clients. Request a Complimentary Audit Consultation from Dave and his team and follow him on LinkedIn.