Don’t Worry – Rich People Are Here To Save Us

March 6, 2019      Kevin Schulman, Founder, DonorVoice and DVCanvass

…at least for now.

A couple weeks ago, Roger talked about Blackbaud’s report on 2018 giving that found a 1.5% increase in giving in 2018.  He mentioned that we wouldn’t know more details until Fundraising Effectiveness Project (FEP) released their data.  Well, guess what just happened!  It’s up here.

A word of warning: even though overall giving was up 1.6% in the FEP report, it should probably be read the way I watch movie scenes where someone is doing surgery on themselves (except my wife is not available to tell you when the gross parts are done):

  • Overall retention is down (6%)
  • Our number of donors is down (5%)
  • New donors are down (7%)
  • Retained new donors are down (15%)
  • Retention of repeat donors is down (2 percentage points)
  • New donor retention is down (4 percentage points)
  • Recapture rates are down (over 10%)

Down dooby doo down down.

So what on earth is up?  I spoiled it with the blog post title, didn’t I?

Revenue from donors under $1000 was down 4 percent.  But $1000 plus gifts were up – really the only thing that was up – by 2.6%.  Since big gifts are bigger (that’s the hard-hitting analysis for which people come to the Agitator!), they had a disproportionate impact and dragged overall revenue higher, kicking and screaming.

Is that sustainable?  Can we make a future where all the other indicators are down, but we are saved by checks with a few more zeros?

Let’s ask a related question: where do major donors come from?

A hint: it doesn’t happen when a mommy major donor and a daddy major donor love each other very much and have a special sort of hug.  (OK, it may, but there’s 50 or so years lead time needed.)

Major donors usually don’t start as major donors.  They try you out with a gift.  You grow on them.  They grow on you.  You learn about them.  You build a relationship.  Pretty soon, they don’t know what they’d do without you.  They are committed.  And their giving moves from the transactional to the transformational.

If our new donor numbers are down, our retention is down, our retention of new donors specifically is down, and our recapture rates are down, where are the major donors of the future going to come from?

Think for a moment what the sales of buggy whips must have looked like with the advent of the automobile.  People who were committed to their buggy whips still bought them and needed them.  But new buggy whip purchasers declined.  And the retention of those purchasers declined.  Play that timeline out long enough and you have the scenario described by Danny Devito in the (IMHO underappreciated) Other People’s Money:

“You know, at one time there must’ve been dozens of companies makin’ buggy whips. And I’ll bet the last company around was the one that made the best g**d*** buggy whip you ever saw. Now how would you have liked to have been a stockholder in that company? You invested in a business and this business is dead. Let’s have the intelligence, let’s have the decency to sign the death certificate, collect the insurance, and invest in something with a future.”

So where will the next major donors come from?  The concern is that they won’t come from anywhere.

But let’s say for the sake of argument we figure out a way to get from no relationship to $1K+ relationships without the mucking about with relationships in the middle.  I would argue that’s still not a good basis for philanthropy.  Pareto is already a wimp: four percent of donors give 76% of donations and 96% of revenues come from the top third.  And over a decade (2003-2013) contributions from those making less than $100K went down 34% at the same time as donations among those making more than $100K went up 40%.

Some implications of this:

  • Centralization of donations means centralization of control. Nonprofits have already faced pressures to change themselves to accommodate large funders (including grantors).  Fewer donors means increased pressure.  As the cynical version of the Golden Rule goes, those who have the gold rule.
  • Reliance on fewer funders is less stable. Losing a few big donors can put a crimp in the good you do in the world.
  • Giving is instilled from a young age. If only the scions of the wealthy get those values and a generation of fundraisers are trained to cast narrow nets, we threaten broad-based philanthropy.

Granted, this is a fairly dour look at a report that showed overall growth.  But it shouldn’t be our goal to make it to retirement before stuff gets bad.

We must figure out solutions to recruit new donors and to keep them with us for the long-term.

The only thing certain is that what got us here won’t get us out of this decline.

Nick

P.S. Some late-breaking news: DonorTrends has created a quick video summarizing the highlights from the FEP report; you can also download the slides.

7 responses to “Don’t Worry – Rich People Are Here To Save Us”

  1. Chip Grizzard says:
    March 6, 2019 at 9:07 am

    One solution is to invest in your Legacy Giving Program. I recently spoke with the Legacy Giving Director of a major International organization and she reports that their ROI is 4,800% and the Cost to Raise a dollar is 2 cents. Yet, this organization continues to do the same thing and invest in their Direct Response program. They continue to invest for the dollars today while neglecting any investment for the future.

    While the much hyped transfer of wealth hasn’t happened, I do think it is about to accelerate as the death rate increases. Even on the low end, the projections of how much charities stand to benefit is staggering.

    Instead of trying to invent a new buggy whip (direct mail), maybe it’s time to jump to the automobile (legacies).

    • Nick Ellinger, VP of Marketing Strategy, DonorVoice says:
      March 6, 2019 at 10:23 am

      I agree with the sentiment – legacy giving seems underinvested, likely because folks who are looking for the next job or fearing for the current one are unwilling to wait out the time from investment to reward.

      That doesn’t mean, however, that legacy giving doesn’t have the same buggy whip problem of having fewer donors. Like major donors, legacy givers are not spontaneously generated or immaculately birthed. While we can and should increase the proportion of constituents and donors who become legacy givers, the shadow of fewer givers overall falls on legacy givers just as much as it does on major, mid, and regular Nick-size givers.

      Two paths come from this, for legacy and for non-legacy: bringing new people into philanthropy (increasing our N) and increasing our donors love for us and fit with the organization. On this latter path, people don’t give significant legacy gifts, major gifts, or (increasingly) any additional gifts to their seventh favorite organization. As we’ve said before and will say again, it is not enough to be loved — we must be preferred.

  2. anjay nirula says:
    March 6, 2019 at 10:35 am

    Awesome read… Thank you! Love reading your content. We are focused on retaining and loving our existing donors. We encourage our team to love donors, so we could build the relationship to ask for referrals – hopefully, they can introduce us to others like them… It is tough to get new major donors.

  3. Rich says:
    March 6, 2019 at 11:51 am

    Perhaps the overall issue is much larger.

    Money has continually flowed to the top few percent, while the rest of the population has gotten poorer, and the middle class dwindles into poverty. Perhaps if there was more social equality, it would be more people would have money to give to causes, rather than not even having enough to sustain themselves. Perhaps then maybe you wouldn’t need to suck up to a few wealthy people and hope for a trickle of pennies from them, selling your own morals, values, and pride to appease your benevolent benefactors.

    Rich people aren’t here to save you. There are here to use you to allow themselves to get richer.

  4. Ron Bell says:
    March 6, 2019 at 8:12 pm

    Perhaps some of the trend is due to donors making fewer, larger gifts to a smaller selection of organizations. My father-in-law used to give $5 to $10 to over 100 different organizations, and I explained to him that this was a waste of both his money and the organizations… but this “greatest generation” didn’t believe it. As a fundraiser myself, I personally encourage my friends and family members to concentrate their giving to a few, tightly focused charities where you can have a larger impact and minimize the organization’s fundraising costs.
    However, I do believe that the accelerating inequalities in income and wealth are having the largest impact on the movement in giving. And Nick is correct in that we (and our clients) need to focus on nurturing donors and activists from all ages in multiple ways to encourage them to support the causes both financially and in other ways.

  5. Posturecorrectorformen says:
    March 8, 2019 at 2:52 pm

    Chip Grizzard says:, thanks a lot for the post.Really thank you! Much obliged.

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