Chris Anders - Internet Strategy Consultant

Introduction

This document, written in December 2008, reviews studies on fundraising in past economic downturns and reviews some of the literature on what is considered to be best practice for charitable fundraising during a recession. The focus of this paper is largely on the development of unrestricted income via supporters rather than grants from institutions or other grant giving organisations.

Background: Fundraising during Economic Downturns

There have been a large number of articles published on the likely impact of the downturn on charitable giving in 2009. On the face of it many of these paint a pretty bleak picture for fundraising.

A review of fundraising during past downturns and closer analysis of some recent reports however reveals a challenging but hopefully less apocalyptic picture. Fundraising in 2009 is likely however to be difficult for many charities and they will have to work much harder to raise funds.

In reviewing media commentary and past research it should be noted that a common problem is that many reports:

i) focus exclusively on larger charities
ii) use anecdotal evidence
iii) are based upon largely unscientific surveys
iv) are based upon current hype around the downturn and media frenzy

The historical picture:

Looking historically at past charitable giving, many studies clearly indicate that at a macro level charitable giving remains largely unchanged during a downturn. Indeed during many economic downturns many not for profits have fared considerably better than their compatriots in the commercial sector.

Studies in the US indicate that fundraising for non profits falls far less than expected during recessionary periods. A study that looked at ten international crises over the last eighty years (including the dot.com crash, September 11th, the 1974 crisis and World War 2) found that in all but one crisis fundraising actually increased at a macro level. The exception was in the 1987 financial crisis but even here fundraising fell by only 1.3% - a far better performance than in many other sectors.

How individual charities are affected:

Whilst at a macro level fundraising is often less adversely affected than expected there is a clear and often dramatic range in performance amongst individual charities – some of whom can be severely affected. Very few, if any, charities can just sail through a recession and charities that do well take the downturn seriously and work harder at fundraising. Charities that are quick to cut fundraising budgets or that don’t think strategically are most at risk.

As well as the charity’s response to the downturn changes in patterns of giving have also emerged as a significant factor during past downturns. These often depend upon the charity’s activities and geographical area covered.

For example, faith based organisations tend to outperform non religious groups and charities servicing the “local” community tend to be more resilient than international organisations.

Patterns of giving are also likely to change. In the US past downturns have demonstrated a difference between donor types. Smaller donors making modest gifts in the range of $100-$300 were most adversely affected. Overall individual giving dropped by 3.9% on average

Larger charities are likely to have their own particular problems. For example charities heavily reliant on endowments, legacy giving or with significant investment income may see a significant drop in income. Due to plummeting asset prices this is likely to be particularly problematic during the current downturn.

What are the likely affect of this downturn on smaller charities fundraising?

To a certain extent this economic downturn may well be unprecedented due to 24 hour media coverage and the global reach of the financial crisis.

Historical experience within the sector and recent reporting does however provide some clues as to the likely effect.

1. A recent survey in the UK suggested that 49% of people in the poll planned to give less over the coming year (although the basis of the survey was not particularly scientific and other surveys have had less pessimistic results)

2. Overall it is anticipated that people making modest gifts will be more adversely affected than larger donors.

3. Corporate giving is likely to become a lot harder to tap into.

4. Events: There is likely to be continued interest in low cost participatory events. However interest in special events (e.g. trekking in Nepal) is likely to fall off dramatically. Individuals are likely to want the majority of any benefits to go directly to a charity.

5. Trusts: The outlook depends upon the foundation concerned. Some foundations will not be significantly affected by the current economic crisis but Trusts that are dependent on endowments may have suffered significant losses be likely to be more cautious with their giving. A survey in the US however found that 55% planned to increase donations in order to help charities through the current crisis.

6. Some research suggests people may be more inclined to make smaller regular donations rather than larger one off giving. The evidence for this however was not clear.

7. Transparency: There are likely to be far more enquiries about how money donated will be used. Charities will need to demonstrate the effectiveness of their work and be transparent about how donations are spent.

8. Generally it is thought that direct mail (postal) for fundraising is less effective during a downturn

9. The cost of acquiring new donors is likely to increase and become harder.


What strategies are considered best practice for charitable fundraising during a downturn?

1. Organisations must prioritise fundraising efforts and maintain a long term view. Cuts to fundraising can feed into a negative feedback loop (the charity earns less thus has even less money to spend on fundraising that can lead to a downward spiral in income).

2. It is extremely important to diversify funding streams

3. As new donor acquisition is likely to become harder, charities must focus on donor retention and donor development through planned communications and donor stewardship.

4. Charities must keep communicating with their donors and supporters.

5. Charities should strive towards greater transparency in terms of how gifts are used and demonstrate the effectiveness of their work.

6. Charities must get the message right – they need to focus on the cause rather than their organisations achievements.

7. Charities will need to innovate and develop new fundraising approaches. Direct mail (postal) campaigns are likely to be less effective.

8. Participatory events are likely to continue to perform well but special events where there is a higher cost associated with running or participating in them (e.g. overseas treks) are likely to prove far more challenging.

9. Charities need to optimise existing resources and potential – for example through donor profiling or maximising gift aid income.

10. Charities should prioritise developing planned giving .e.g. regular donations.

11. Charities need a well developed online strategy and visitor engagement is important.


Some Interesting articles:


1. http://business.timesonline.co.uk/tol/business/industry_sectors/public_sector/article5372778.ece

2. http://www.institute-of-fundraising.org.uk/informationaboutfundraising/CreditCrunch.htm

3. http://recessionwatch.blogspot.com/

4. http://www.case.org/files/CommunicationsMarketing/PDF/OnlineFundraisingSurvivalGuide.pdf

5. http://philanthropy.ie/images/uploads/Fundraising_in_a_Cold_Climate.pdf

6. http://www.cass.city.ac.uk/philanthropy/recession-and-charities.pdf

7. http://www.professionalfundraising.co.uk/home/content.php?id=1371