We aren’t raising the question of “should” your organization be raising money.  The question we’re asking is “how viable “will your fundraising be in this time of crisis?

The answer?  It depends.

But first, a major caveat.

The situation we are in is very different from those analyzed or theorized about in the past and extrapolating may not hold water.  There are factors at play now that we won’t understand for some time.  Not least of which being the global nature of this pandemic.  Just as important, there’s the notion that each individual has, within their power, the choice to “give” something via their behavior.  How does that personal, direct role that each of us can play in this crisis impact our willingness to give?  Who knows? is the best, non-answer we can offer.

That said, here goes.

There are two wonky but useful economic concepts that may shed some light on this situation.

Substitution Effect:  If I increase my giving to Charity A due to some “shock” or atypical emergency or crisis does that come at the expense of my giving to Charity B?

A related question that’s germane today is whether the substitution effect differs if Charities A and B are in similar lines of work.

Crowding Out Effect:  This effect is traditionally applied to private spending (donations or otherwise) that might go down if government spending goes up.  For  purposes of the current situation, we’ll broaden this concept to apply to charitable giving that might be crowded out as discretionary dollars are redirected to other consumption (paying bills, buying food) or savings.

Let’s address crowding out first as it’s a relatively simpler story.  As a general matter, as income goes down, giving goes down. It’s either a 1-to-1 relationship or giving goes down less than income.  But, what about in periods of “shock” or stress, which is certainly where we are now?

The Great Recession provides a bit of a clue and it’s counterintuitive:  income elasticity was less than in other economic declines; meaning the drop in income yielded less of a drop in giving than at other periods.  But, remember, total giving still went down.

Two other factors to consider; income volatility and the impact of tax policy (which is often thought of in economic terms as the cost of a dollar).  There is evidence that income volatility depresses charitable giving, even when holding current income constant.

Tax policy impacts the price of giving.  If you donate a dollar and your tax on that dollar would have been $.25 the price of giving is only $.75.  The impact of the “price of giving” (i.e. tax policy) was greater during and after the Great Recession than has been seen at other times.

It doesn’t take a genius prognosticator to predict the following,

• Covid-19 is going to reduce charitable giving; and
• The reduction could be a three-pronged, negative impact with lower real incomes, income volatility, and tax policies (if they raise the price of giving)

But, reduction in giving isn’t evenly distributed. Religious giving in general and during a “shock” is less elastic; secular groups should prepare for a bigger hit.

But even that hit among secular groups isn’t evenly distributed.  Charitable giving won’t drop to zero but it also isn’t likely to drop equally across sub-sectors.

What might happen then?

In a study of non-domestic, disaster giving it was shown that giving spiked to international relief causes (a “water-is-wet” finding) and that this giving did not reduce subsequent giving to those same international relief groups later in the year. And… there was no substitution effect as such except for health charities that did see less giving because of the increased giving to international relief.

However, all sub-groups did see a time-shift in giving, meaning giving to a charity that was not directly tied to the disaster relief effort had its donations delayed.

However, in a broader analysis that looks at data within-households over time (this disaggregation matters) across a myriad of “shocks” both domestic and international there appear to be several robust substitution effects tied to paired categories of giving during “shocks”.

• Specifically, there is a strong, negative relationship between contributions to health charities and what were characterized as “basic needs” charities (e.g. homeless shelters and food banks).
• But, a positive relationship between basic needs and more general social service charities (e.g. United Way). And overall, there is a larger substitution effect for larger dollar donors.

Finally, from experimental studies there is evidence of substitution effects when charities are similar – e.g. two food banks.

Where does this leave us?

• If your charity is on the front lines of Covid-19 (e.g. basic need charity), then fundraising in this environment is imperative.
• If you are tangentially connected to Covid-19 (e.g. United Way), then fundraising in this environment is advised.
• For front line and related causes, the first mover advantage likely matters as substitution effects among similar groups means a bit of a zero-sum game.
• If you are not directly or tangentially tied to Covid-19 and especially if you are a Health charity (per the research finding of a negative correlation with organizations categorized as serving the Needy), then it is quite likely giving by your donors is going to be deferred. (e.g. Diabetes, Cancer, Heart organizations as opposed hospitals, food banks, homeless shelters.)
• Deferred income for those not on the front (or related) lines of Covid-19 and future income for those that are could be negatively impacted by income volatility, tax policy and real income loss such that it is not only deferred but lower and in some cases perhaps, greatly so.

Ok, so that seems bleak for a whole bunch of groups in the short term (those not on front lines) and maybe for the sector in the long term (recession, income volatility).  So, what are some suggestions, especially for the large portion of the charitable sector that is not front lines.

Some Recommendations

We’ll try to keep these recommendations evidence-based,  but will inevitably dovetail into some ideas that are more conjecture-based.

The blanket, “keep asking” mantra is wasteful at best and probably much worse in signaling you don’t have a clue or give a damn about the donor.  Trying to stretch the limits of a mission to make it Covid-19 related is the equivalent of a 3-bank shot in billiards and is likely to result in undermining your credibility.

This is not to suggest you shouldn’t try a house appeal.  Just be prepared for history-as-prologue with it not bringing in as much revenue (perhaps by a long shot) and realizing you might be sacrificing future revenue.  But, cash flow might dictate you try.  Acquisition is another story as it’s always an investment and short-term cash, loss leader.  The loss will likely be much bigger and perhaps not on terms that make it viable.

For those groups that have an organizational crisis (if, for example, event revenue is a big part of your mix) then it is recommended that you make a concerted effort to pitch this need to corporate, foundation and most importantly, major donors and/or figure out if there’s a way you can devise a virtual alternative to your event.

Corporates create a good name for themselves when they donate some of their proceeds to charitable causes.  However, this is only the case if there is a clear, obvious connection between your brand and that of the company (or celebrity for that matter, same applies).  An example is Louis Vuitton using the perfume production line to deliver hand sanitizers to the public for free. This mental credit could later transform to actual credit. Charities can approach corporates they’ve worked with in the past or new companies and ask for support at this crucial time. The corporate can advertise this and build its image and the charity gets the money it needs.

Some major donors have an increased desire for agency; they want to be more involved with the organization, they want to share their advice, they want to know about difficulties, delays or particular program needs and to be offered the opportunity to solve a crisis. Many major donors also have an increased need for personal impact – they want to see the difference, they personally made. In combination, at this time of crisis, this gives you the opportunity to approach your major donors and:

• Present the current challenge and concern about serving the cause;
• Offer them the opportunity to provide a solution and personally “save” the organization and its beneficiaries;
• Demonstrate that you value their view, opinion and advice – who knows? Maybe they will have other ideas for revenue generation.

More broadly, how might you communicate or engage or communicate with donors in a non-asking capacity (or asking as a test – with house file) that can be remotely useful or relevant in the moment?

• Health charities: emphasize how they’re protecting vulnerable populations – our work is more important than ever
• Environmental: trigger reciprocity – The National Trust in the UK gave free access to parks to facilitate social distancing.

And as a fuller, concrete example, we share this full email (link here as well) from a conservation group whose main constituency are “human-powered” users of the outdoors – hikers, kayakers, nature photographers, bird watchers.  This, in our estimation, is really well done – genuine, credible and realistic.

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CONSERVATION IN THE TIME OF COVID-19

March 18, 2020Adam Cramer

We are all navigating some gripping times these days with Covid-19. At Outdoor Alliance, our plan is to stick with our mission to conserve and protect the outdoors and turn outdoor enthusiasts into outdoor advocates, but we are modifying how we pursue these goals for the immediate future.

First and most importantly, Outdoor Alliance is all in on social distancing. Our DC office is closed and thanks to technology, our team has been working remotely. No more travel and no more in-person meetings. Full stop. There is really nothing like sitting at a table and poring over a map with stakeholders, or being able to meet with a lawmaker in person, look them in the eye and make your case for conservation. Given the risks, we will not be doing these things for the time being.

Science says social distancing works, and we love science at Outdoor Alliance. Check out these visualizations from the Washington Post that illustrate how this strategy works.

Second, we pride ourselves on knowing what’s going on in the policy world and on finding the best and most relevant opportunities for the community to engage and make a difference. We will continue to find opportunities for people who love the outdoors to continue advocating for conservation, climate protections, and access to the outdoors, even if our advocacy news doesn’t flow as readily as it usually does.

Third, we are going to be realistic with what can be accomplished in the public land policy space for the time being. Since January, we’ve been on a tear, helping the House fire up a lands package, standing up for NEPA and the Clean Water Rule, and getting LWCF ready to be fully and permanently funded. Lawmakers right now are rightly focused on dealing with the pandemic. In the meantime, we’ll keep planning and scheming to go big for the outdoors when the time is right.

Finally, speaking of the outdoors — we encourage you get out to to your favorite frontcountry spot, practice good social distancing, and recharge your soul in these stressful times. The outdoors are one of the best ways we can exercise and connect at this uncertain time. But as a reminder, we should visit our favorite close-to-home places and do so carefully. This is not the moment for a climbing roadtrip. Young people in particular have been known to be contagious without knowing it, potentially bringing the virus to rural communities. Secondly, medical facilities will very likely be overtaxed treating patients with Covid-19, so we should be even more careful than usual not to get injured or need medical help.

Onward.

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Please share what strategy you’ve adopted for the Covid-19 crisis.

Kevin