Industry Outlooks: The New Fundraising Paradigm
By Chip Grizzard
(Jan. 12, 2009) In the United States, Canada and countries around the world, direct marketing is rapidly changing. Most organizations are experiencing declines in the number of donors responding, acquisition efforts are becoming less effective and renewal rates for long-term supporters have begun to fall.
These changes are not a result of donor fatigue, the economy or any other short term impact. They are a signal that donors are changing, the media is changing and the competition is changing. Consequently, organizations had better be changing if they want to survive.
Donors are changing
The World War II generation was all about hard work and trust, and they responded to need. This generation communicated by mail and preferred to support many charities with relatively small gifts. But this audience is shrinking at a rate of almost 5 percent per year and is being replaced by an enormous wave of Baby Boomers who are quite different.
This boomer generation is more cynical, insists on accountability and is more tech savvy. They are not loyal to a given charity, but prefer to invest their money with the charity that can best demonstrate they can solve a problem. They prefer to support fewer organizations with larger gifts.
Media is changing
In the 1980s, media options were limited, paying bills and donating by check were the accepted practice and relying on single-channel direct mail was extremely successful. Today, the average household receives a record 118 television channels and is exposed to hundreds of advertising messages a day. To stand out in today’s clutter, integrated marketing is the answer. Not only does this increase awareness and visibility of your message, but t it also improves retention, gift frequency and higher lifetime value from your donors. In order to tap into the Baby Boomer bulge that is upon us, successful organizations will use direct mail even more, but it will be used to drive response by phone or the Internet.
Competition is changing
While the number of nonprofits has increased 54 percent over the last decade, that is only part of the story. Today, corporate America has become a competitor to nonprofit organizations. When you purchase Ethos water from Starbucks, you are helping to provide clean water for children around the world. Or how about Warren Buffett? He donated billions of dollars to the Bill and Melinda Gates Foundation because he felt they could solve problems more effectively than any charity. And finally, there’s Kiva.org. Instead of giving donations to international relief agencies, now you can lend money to help entrepreneurs start new businesses in places like Uganda or Bolivia.
What to do
The speed of the paradigm shift will begin to accelerate over the next few years as more Baby Boomers hit 60. You should not make radical changes to your current program, but it is imperative that you take action and begin testing new strategies. The old paradigm will continue to be effective to the builder generation, but current trends are not going to reverse course with minor tweaks in offers, list strategy or the design and message of appeals.
The number of potential donors moving into their prime giving years presents a huge opportunity, but there are two paths you can take. If you choose to stay the current course, stop focusing on growth, strive to maximize net income per donor and manage your expectations. Your program will continue on a slow decline.
If you want to survive and thrive, budget for innovation to find what motivates this new generation of donor to support your organization. Test more color, photos and eye-catching content that are supported in an integrated way. The copy should be inspiring, tangible and focus on solving a problem. Don’t just bury a website address at the bottom of the letter. Make it very clear and visible that there are multiple channels available in which to respond. And most importantly, commit the necessary resources to create closer relationships with your donors.
Direct response fundraising has an incredibly bright future, but only for those organizations that adjust to the new paradigm.
Chip Grizzard is CEO of Grizzard, a direct response marketing firm with offices in Los Angeles and Atlanta.