You need a better way to fundraise.
You might not realize it yet.
Maybe your results coming out of the COVID-19 pandemic look great in comparison to 2018 and 2019. They might even still look strong today. Many organizations reached a decade-high in giving over the last few years.
But here’s what most organizations have failed to realize.
Giving today doesn’t match the same patterns as it has over the last several decades. The philanthropic landscape is changing and has changed. But fundamentally, fundraising agencies that serve nonprofits have not changed, and they are not changing fast enough to help most ministries and nonprofits get ahead of this change in a meaningful way.
We continue to see some of the lowest levels of donor retention over the last decade at the same time that we have seen decreases in the number of new donors supporting charities for the first time. The number of total households giving to charity is in steep decline over the last 20 years, and that’s cause for concern for all in our sector.
In December of 2022, Pew Charitable Trust released an assessment of aggregate household income that should cause everyone in the nonprofit sector to rethink their approach to fundraising.
Pew has tracked aggregate income held by U.S. households from 1970 to 2020. They have broken this data down into three cohorts: 1) Lower Income, 2) Middle Income, and 3) Upper Income.
What they found is that the percentage of income held by Lower Income households has remained essentially flat over the last 50 years. In 1970 this cohort held 10% of all household income. In 2020, that number fell slightly to 8%.
Over the same period, Upper-Income households saw a massive increase in income, from 29% in 1970 to 50% in 2020.
The most concerning piece of information in Pew’s assessment of aggregate income is what they discovered about Middle-Income households. These households have seen aggregate income plummet from 62% in 1970 to 42% in 2020. That’s a huge decline in aggregate income and should be a major warning to anyone responsible for managing fundraising and growth for a nonprofit organization or ministry.
This is concerning is that most nonprofits generate a majority of their revenue from donors who live within the Middle-Income category. Traditional high-volume, low-relationship quality direct marketing programs are focused on squeezing as much cash from Middle-Income donors as possible in transactions that range anywhere from $14 to $85.
Ministries and other nonprofit organizations are struggling to squeeze every last drop of discretionary income from a shrinking group of donors who have seen their total aggregate household income decline by nearly 50% over the last half-century.
This is not sustainable. A continued focus on highly transactional, low-dollar fundraising tactics forces organizations to compete in a dangerous race to the bottom. This is not how we achieve transformational mission impact.
Here’s what a better way looks like:
- A comprehensive fundraising strategy that prioritizes relationships over transactions.
- An intentional plan to engage high net worth donors and potential donors and to invite them to make a transformational impact in your mission, in a way that meets their personal philanthropic objectives.
- A direct response fundraising program that includes an intentional and specific cadence for Mid-level and Major donors that acknowledges the differences in the way they behave and honors the relationship instead of focusing exclusively on their pocketbook.
- Increased levels of relationship cultivation, impact reporting, and stewardship without always including an ask.
- More robust and in-depth storytelling, impact reporting, and two-way communication with your best donors and investors.
- A significantly larger focus on inviting and encouraging donors to give from their assets instead of from their cash accounts.
- An expense budgeting process that is nimble and responsive to the marketplace, where you can shift budget quickly from low-performing efforts to higher-performing efforts, across channels and audiences.
- Shifting your focus away from donor file size and gross revenue growth to a focus on donor retention and net revenue maximization.
If you’re ready to adopt a better way to fundraise, I’d welcome the opportunity to talk with you about your vision for a better future. You can reach me at Andrew.firstname.lastname@example.org, or at 612.201.1967.