The Earth Is Flat
For five centuries, from the Phoenicians to the global exploration of the 15th century Spaniards the conventional wisdom of navigation rested on the belief that the Earth was flat. Venture farther than the known oceans and you would fall off the edge of the Earth into the mouths of dragons, the arms of sea monsters, and heavens only know what else.
Today’s fundraising has its own ‘flat Earth’ beliefs, and as we look at the obstacles and changes fundraisers have faced in the past five years, perhaps it’s time for some changes in our navigational systems.
One of the most impressive navigational charts of the early 21st Century has been Target Analytics National Index of Fundraising Performance. The Index benchmarks 80 or so organizations and millions and millions of direct response gifts to show what’s up, what’s down; who’s acquiring, who’s retaining, and who’s not. The Index provides fundraisers with a year-over-year quarterly analysis of the state of direct response fundraising.
For several years The Agitator has been reporting on trends revealed by the Index. Among the most concerning trends is the steady decline in the number of active donors and the fact that despite increased average gifts on the part of the donors, that increase is no longer enough to make up for declining acquisition and retention rates. All this at a time when the U.S. population is growing.
It’s troubled me a great deal that we really can’t pin down why this is happening. I’ve tried to ascribe the dip to changes in demographics, to the economy, to online media, you name it. But none of these explanations really explained the phenomenon.
Now I know why.
David Lawson of DonorTrends and I have just completed a study to determine why the National Index of Fundraising Performance didn’t match with trends we were seeing elsewhere. It turns out that The Index comprises mostly old organizations and does not take into account the dramatic increase in the number of younger organizations and the donors and funds they are siphoning from the older organizations.
We analyzed the patterns of 46 million gifts contained in our TrueGivers database that covers giving to nearly 23,000 organizations over the past 10 years, and we looked in-depth at the IRS data on the revenue of all public charities. This is what we found:
- Of the 80 organizations in Target’s National Index, 52 were founded before 1970;
- The median age of organizations in Target’s National Index is 59;
- Of the total giving for all of 2007 we studied, two-thirds of that total giving — $311 billion– went to “new” or “younger” organizations founded since 1970;
- 81.5% of all active organizations listed by the IRS have been formed since 1970 with nearly 59% formed since 1990;
- New organizations with focused missions are attracting gifts from donors that have traditionally supported more established organizations with broad missions.
The phenomenon of ‘category competition’ is well-known in retail sales. For example, while the number of Pizza Hut customers may level out or even decline, the actual number of pizza buyers is increasing because of the number of small, independent pizza shops and takeouts.
This shift from the ‘old’ to the ‘new’ was dramatically illustrated 15 years ago when Montgomery Ward went out of business and Sears went on life support as the growing number of shopping malls with their myriad shops sucked business away from the incumbents.
The same dynamic is now occurring in the field of fundraising. We’ve labeled it “Mission Competition” and David and I are going to discuss what it means and what to do about it in a free DonorTrends Webinar titled, Mission Competition: What’s Your Giving Share? on Thursday, March 18th at 2pm Eastern.
Although most of the “old” non-profits are doing OK, the fact is that many of the newer or younger ones are doing better. What we’ve found shakes a lot of conventional wisdom and sheds light on some new strategies every fundraiser should be exploring. I hope you’ll join us as we explain our findings more fully.
We won’t let the dragons get you.
Roger
4 responses to “The Earth Is Flat”
Behavioral Science Q & A
Integrating an individual giving appeal with other communications from a charity can have both positive and negative effects, and the outcome largely depends on how it’s executed. Advantages of Integration Brand Consistency: Maintaining a consistent appearance and messaging across all communications can reinforce the org’s brand identity and strengthen brand recognition and trust among your […]
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I’m not aware of any in-market tests specifically comparing recurring vs. gift frequency language. I suspect the answer might not be the same with all gift frequencies, nor with all people. It sounds like a great opportunity for you to test and find out what works for your audience. Based on the literature, here’s a couple […]
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Based on what we know from existing data, those renewal notices can actually be pretty effective in getting people to donate. They tap into our psychology – creating a sense of urgency, reminding us of past support, and using personalization to make the message hit home. They’re playing on our natural tendencies to feel obligated […]
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Interesting question. I had a quick look at the testing done on this topic. On the positive side, in all cases, over half of donors decide to cover the fee. In some cases, it goes as high as 65%. Not a negligible percentage at all. Here’s another test from iRaiser showing consistent results (see point […]
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There’s just one thing to consider when designing a supporter journey: the supporter. More specifically, you need to take into account: Who the supporter is i.e. their identity, which is the reason they support this cause, and their personality, which describes the way they “see” and process the world. These will determine the kind of […]
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I’m not an expert in this but a quick search surfaced this article on the effect of tax reforms on 2019’s charitable giving. The researchers didn’t find a reduction. Actually, they observed an “increase in charitable contributions in 2019, even with the lower tax rates and the dramatically smaller number of taxpayers who itemize their […]
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It should be noted that Target does not track mail volume and thus, not return rate as well. Number of donors may be down, but without mail volume and return rate figures, it is hard to draw conclusions about response. Mailers may be misguided and losing out on new donors in pulling back on mail volume, but do so nonetheless out of collective market fear. Clearly returns rates have dropped over the past 10 years, but I don’ t think Target’s index is necessarily a good measure of this.
Also, Target and this current Agitator Post do not account for the growing impact of Web donations, which are often not tracked back to direct mail campaigns even if they stem from mail. This likely varies widely by organization, but is growing overall.
First – I am disappointed The Agitator would allow such drivel to be posted without any fact checking. Very, very disappointing and makes me wonder what else I have read that is not accurate. Roger and David’s self promotion lately is getting to be over the top in their last two “articles”.
Roger (and David),
I am a long time participant in Target Analytics national index. Obviously you are not. The index is meant to compare peer organizations so that we can see how we are doing against each other. Your entire premise is wrong.
Next, I am guessing you are using NOZA data in your “True Givers” file and you should state that as your data source or one of your data sources.
Finally, you observation about ‘category competition’ is only partially right. You must not invest much of your money in the stock market or, if you do, you are not a savvy investor. There is something called “Same Store Sales” that better be going up…if not the store/stock is in trouble. If the trend is down – you better hope that the National Index (your peers) is trending the same way or you ARE going to be out of business and will end up in the heap of has-beens.
Even the two of you must understand – for a start up it is easy to have 20%, 50 even 400% growth – but they also fizzle out and FAIL just as quickly. So what good is all of that supposed growth if the fail rate is still high in the first 5 years?
I hope other readers can see through the self-promotion that these two guys are doing in their past 2 or 3 articles. It is really disappointing because they use to have a good reputation, now I don’t know if I would hire or associate either of them with my organization.
Sarah
Dear Sarah,
When you attack our integrity, I would appreciate your not using the cloak of anonymity.
Your innuendo aside, I think you have perfectly captured the point we are making about the National Index of Fundraising Performance: it is an accurate reflection of the state of older organizations as they compare to each other.
What the Index’s perspective fails to take into account is the reality that the donor community has a much broader range of interests that goes far beyond these venerable organizations. Your investor analogy is useful. I do well in the market because I don’t rely on the Dow Jones Industrial Index as my only guide.
I am sorry that you take offence to thinking that goes beyond the comfort of what you know. Our job is to jolt our readers and our clients out of conventional comfort zones using new sources to identify important trends. Why? Because the same old data yields the same old results. This might be comfortable, but is of little help to those concerned with the future.
I find your comment about self-promotion ironic given your clear plug of the Index. Fact is, I’m a fan of the National Index and for this reason believe it is even more critical for those who use it to also look beyond their peer group. Failure to do so will result in the same predicament that for-profit companies who studied only those they deemed worthy of study found themselves in. Ask Digital Equipment (remember them?) about Dell and Microsoft, or more recently Microsoft about Google.
Watching your peer group to make sure you are not sinking faster than the others seems to me to signal that sinking is OK. We don’t accept that. And that’s why we’re urging folks to look beyond the conventional to become truly donor-centric and look at the world through the eyes of your donors. Donors look at missions, not just organizations.
As for organizations failing fast, that is the hope of every incumbent. We’re into success for everyone, not protection of the few. Rather than hope that new organizations fail, we want to know why they are succeeding. Those who take the narrow, conventional view run the risk of making the ultimate mistake … which is to blame the people who have stopped supporting them.
There are nearly 23,000 organizations in the NOZA database. We believe this far wider scope gives a more accurate picture of the nonprofit community than just the 80 organizations contained in the Index — even if that 80 is a great representation of the current leaders.
By no means are we saying stop what you are doing, we’re simply suggesting you might want to consider doing something new.
Meanwhile, we’ll keep studying the quarterly Target reports as well.
Roger
Sarah,
Quite honestly I think it is a disgrace to hide who you really are…But if Target Analytics national index is so good help me understand. by the way who owns the index?
If 90% of your money comes from a small percentage and if the nonprofits i the index do not share the same donors giving 90% of the gifts then what of real value does the index tell you? Help me understand the impact the information from the national index actually makes?
I think NOZA makes a world of sense…If I had to chose between globalized low impact data to specific information about my actually donors I don’t think it would take anyone long to make that decision….unless the real loyalty was to keeping things the way they have always been.