In today's fundraising landscape, marked by a noticeable decrease in overall giving, dwindling donor numbers, and falling retention rates, it's important for fundraisers to consider new fundraising strategies and approaches. This is an opportune moment to critically evaluate established fundraising methods and philosophies and evaluate the role of data and technology infrastructure in supporting these methods.
In this post, we will discuss the current challenges in nonprofit fundraising. We will challenge current fundraising philosophies - debunking the commonly held belief that wealth dictates generosity - and offer an alternative approach. We will also demonstrate how critical a technology infrastructure is to support a new fundraising philosophy.
State of the Union: Current Challenges in Nonprofit Fundraising
The Quarterly Fundraising Report released by The Fundraising Effectiveness Project earlier this year released some disappointing results for the charitable sector:
- Fundraising dollars fell by .7% in comparison with 2022
- Donor retention rates fell across donor types
- 4.8% decrease in new donor retention
- 2.1% decrease in repeat donor retention
- 18.9% decrease in recaptured donors
- Donor numbers are down by 3.8%
These numbers continue to reinforce the 'leaky bucket' phenomenon in fundraising. This metaphor reflects how funding leaks out the organization at a pace in which it cannot be replaced. These numbers indicate that the sector is losing donors and funding at a rate that surpasses acquisition and fundraising efforts. The industry needs to prioritize donor retention, enhance engagement, and revisit 'tried-and-true' fundraising strategies to combat this issue.
How to Address the 'Leaky Bucket' Syndrome
Both new donor acquisition and the retention of existing donors contribute to the issue of the "leaky bucket." Given the high cost to acquire new donors, nonprofit fundraisers are eager for a return on their spend. The all-too-common fundraising strategy of 'throwing spaghetti at the wall' is not only exhausting for fundraisers, marketers, and event planners but also a poor use of financial resources.
A key reframing that nonprofit fundraisers must make is that wealth is not an indicator of generosity. By prioritizing donors that have perceived or actual wealth, you neglect those donors with a strong affiliation or connection with your cause.
This sentiment was discussed during a special StratusLIVE Tech Talk series - Forging a New Path in Healthcare Philanthropy with Gratitude - during the recent AHP International Conference in Orlando. Although the conference was geared for professionals within healthcare philanthropy, the message discussed by Nathan Chappel, Senior Vice President of DonorSearch AI, is still relevant:
So, what do you prioritize beyond wealth?
It starts with understanding your donors - beyond basic demographic information; it involves understanding their connection and affiliation with your cause. What drives them to support your organization? What are their personal motivations? By delving deeper into their minds, you can tailor your fundraising efforts to resonate with them on a more personal level.
In addition to understanding their connection to your cause, it can be helpful to know what keeps your donors up at night. What are the challenges they face in their daily lives? For example, if economic uncertainty is a major concern, you might focus on more cost-effective ways for them to contribute, like micro-donations or matching gift programs.
Furthermore, in today's fast-paced world, it's essential to stay relevant and connected to current events. Does your mission or programs directly or indirectly contribute to ongoing social, environmental, or economic issues? By aligning your organization with these larger issues, you can attract donors who are passionate about making a meaningful impact. Keeping your finger on the pulse of current events allows you to adapt your fundraising strategies and messaging accordingly.
Ultimately, understanding your donors' motivations, concerns, and connection to current events will help you identify their trigger points — the final ask or conversion point that convinces them to donate.
As you capture this information, you can utilize it to build better donor relationships - the key to donor retention. Ask yourself the following questions:
- What do you need to know from your donors that will improve your relationships?
- What's between you and creating the best relationships with your donors?
The answer to these questions may involve challenging existing conventions (fundraising philosophies for example) and re-examining operational procedures such as donor intake forms. For example, is it necessary to ask for your donor's birthday if you do not send a note to acknowledge it? Or more generally, why does your prospect research team collect the data that they do?
By incorporating these insights into your fundraising approach, you can break free from the "leaky bucket" phenomenon and create a more sustainable and impactful fundraising strategy.
How a Strong Data Infrastructure Reinforces your Fundraising Philosophy
To fully realize your fundraising strategy, it is essential to have a unified technology platform and a strong data infrastructure. Your organization's website serves as the initial point of entry for donations, event registration, and volunteer sign-ups. A digital engagement platform captures valuable data that reveals your donors' trigger points. This includes communication responses, event participation, interest data, email and social media engagement, as well as demographic information.
Once this data is collected and consolidated, you can leverage business intelligence, visualizations, and AI-driven technologies to analyze the results and scale your efforts. This shift from transactional fundraising to a more personalized approach allows you to build fundraising strategies based on how each donor wants to engage with your organization. If you aspire to drive systemic change and move beyond wealth as the sole driver of generosity, your data and systems must facilitate and support that change.
To complete the circle of donor data, it is crucial to securely store all the information in a nonprofit CRM for further analysis and segmentation. Since it could take years from the first interaction with your organization to receiving a significant gift, having a comprehensive nonprofit CRM enables you to implement nurture campaigns that ensure continued support.
Hear more from Geoff Knue, VP of Sales at StratusLIVE, regarding how systems of engagement, intelligence, and record interact with one another.
Conclusion
For too long, the nonprofit industry has been plagued by the 'leaky bucket.' Transactional fundraising tactics fail to inspire donors and showcase the true potential of philanthropy.
Without reframing your current fundraising philosophy, the same narratives will be enforced and the dilemma will continue. The power of fundraising comes from a keen understanding of your donors and a robust digital infrastructure that supports and reinforces this strategy.
If this conversation inspires you, watch the entirety of this StratusLIVE Tech Talk. Please share your thoughts or opinions within the comments.
