Growth

  |  
10 Min Read

Donor File Reveals Potential Disruption Due to Impact-Based Philanthropy

 

I recently completed a research project for a nonprofit client. The question at hand was to discover what, if any, difference existed in giving behavior between two donor cohorts: donors 65+ and donors 55-64. 

What's important about that is the client didn't want to juxtapose two non-connecting generations such as seniors and millennials which often happens. While there are certainly instances where one might want to study those two cohorts within a single donor file, the differences are so stark that little actionable intelligence can be derived. Too many variables are at play to compare at a broad level. 

The net result of that research project was two important observations that exemplified divergent realities that must be reconciled as they further refined their donor development strategies:

  1. Donors 65+ gave 12-14 times a year on average, relatively similar dollars per gift, and overwhelming allocated their gifts to unrestricted giving. 

  2. However, donors in the 55-64 category gave 4-6 times a year, inconsistent amounts per gift, and almost exclusively to restricted projects.

The Data Was Clear

The most troubling finding was the substantial difference between unrestricted and restricted fund support.

 

Given current course and speed, business as usual was only going to sustain the organization for so long.

The leadership team had to decide today what changes needed to take place in order to be ready for the tide that was already turning.

As this leadership team digested this information, they recognized a broader trend others were seeing, too. It was more than just a category of giving preference by age segment that was exclusive to their donor file. This behavior represented a much more complex reality that shouldn't be quickly dismissed or explained away.

What this leadership team had to wrestle with is the reality that one generation gives to organizations they trust while the generation behind them gives to organizations who can demonstrate impact.

 

That fundamental shift demands a much more customized, structured, and data-driven approach to managing donor acquisition, retention, upgrade, and moves management.

If This Is the Reality for Most Nonprofits and Churches, Why Aren't More Leaders Aggressively Responding to Address These Changes?

I have some ideas based on observing how leaders make decisions and how nonprofits and churches operate in a variety of different contexts of why this might be true:

  • There is still enough money to keep the most difficult challenges at bay. Like it or not, nonprofits are reactive in nature. I'd like to see different behavior, but I don't.

  • Too few leaders are asking the tough questions like my client above did of themselves and their donor file. As long as there is enough money coming in, the primary focus is managing current funds rather than predictive modeling to inform short-term and long-term forecasting.

  • Donor models have yet to mature to levels that would alert executive leadership to make proactive decisions. I don't see enough organizations dividing their donor portfolios into segments to drive lifetime value by segment. Until you do this, your only donor strategy is one-size-fits-all. That's fine until your singular approach is only effective with a declining segment of your donor base--even if that declining segment is still your largest.

If You Find Yourself Wondering What You Can Do to Get Ahead of This Curve, I Strongly Suggest You Consider:

  • Conducting a similar study on your donor file. Apply a valuation method to each portfolio and study the habits and behaviors that you can then compare across segments. Your donors are already telling you their intentions by the actions they are or are not taking. You need to build a listening platform to inform your future strategies.

  • Building impact measures into every aspect of your nonprofit or church. If you can't turn your vision into objectives and your objectives into key results, you're incredibly vulnerable to impact-based philanthropy. The truth is the primary reason unrestricted giving will suffer is that leaders don't measure its impact as precisely as they do restricted giving projects. Thus, communication efforts tend to be the general impact for unrestricted giving funds rather than specific impact and progress measures as it most likely for restricted funds.

  • Gathering your executive leadership team and agree that a one-size-fits-all donor development strategy is a bad idea. The future must be cross-functional, interdisciplinary, and multi-channel. This is going to complicate things like current attribution models, but so what? Lifetime value per donor segment should be the penultimate output that challenges or validates your success at growing the size, influence, and revenue across each donor segment anyway.

Pivot Before You Have to, Not Because You Have To

Data affords leaders the ability to adapt to impact-based philanthropy and drive key decisions around donor development that will inherently result in a more effective operational allocation of time, money, and people.

Without data, activity will remain the standard metric which is a poorly tuned measure to drive current and future giving.

The competition for share of wallet is going to continue to exponentially increase. The good news is there are more philanthropic dollars flowing into nonprofits and churches than at any time in human history.

 

That means if you have a revenue problem, stop pointing the finger at your donors.

Instead, start facing the reality that your strategies may be baked into assumptions and formulas that aren't consistent with the dramatic shifts in philanthropic behavior that are being documented again and again.

The best time to make a pivot is now.

 


 

Ben Stroup is Chief Growth Architect and President at Velocity Strategy Solutions where he helps leaders design, develop, and deploy smarter business growth strategies. Ben is a futurist, disruptor, and data champion. He leads a team that takes a structured learning approach to business challenges, which allows them to assist leaders in bridging the gap between ideas, innovation, and revenue—taking ideas from mind to market.

Velocity Strategy Solutions is an on-demand, next-generation business strategy and management consulting firm which provides clients with a relentless focus on data, execution, and results that positively impact the bottom line. Velocity delivers integrated people and revenue strategies combined with a disciplined approach to growth architecture that elevates the capacity of leaders, teams, and organizations to succeed and win more.

Topics:   Growth