Those of us who have been in fundraising for a while have lived through a number of economic downturns and seen their effects on fundraising.
While nobody wants to tempt fate by uttering the “R” word, there is a high possibility we will be in a recession in 2023. Even if that’s avoided, we know that the significant increases in interest rates and food prices are taking a real toll on people’s wallets, and emotions.
At the beginning of 2020 – when Covid first hit –fundraisers were nervous about whether donors would keep giving. But those charities that heeded the advice to continue fundraising discovered that donors were more generous than ever. Those who didn’t, of course, are still feeling the repercussions; smaller donor bases, and reduced financial stability.
But for almost 100% of our clients, the individual giving programs and direct mail / digital programs have performed better in 2020-2022 than ever before.
Based on our “recession” experience, we don’t think this will be the case this time.
While many donor databases are made up of retired seniors who have likely paid off their mortgages, the spike in groceries and other living costs will hurt those living on a fixed income, no matter how asset-rich they may be and folks aren’t staying home and saving money like they did during the worst of Covid. You’re competing with travel budgets, a new car, gifts to kids’ families to help them purchase a house, etc.
Since we are fundraising in difficult times, here’s what we found to be true: a charity’s loyal, active donors became even more supportive than before. These are the people for whom your organization is a priority – they have wholly bought into your cause and the work you do. The places where results declined significantly were higher-value donors (mid-level + major) and prospecting.
Here is what we have seen in the past, and where you may see a negative impact in the months or year ahead:
Mid-level and major donors
In terms of active donors, these are the groups where we saw the greatest decline in financially troubled times. The issue, of course, is that most of these individuals are invested in the stock market – and when that declines significantly, they feel what’s known as “psychic poverty” if not real financial stress.
We’ve had many clients over the years who can vouch that no matter what is going on in the world – and what is going on with their mission and their charity – the most significant predictor of how their mid and high-value donors will give is how the stock market is doing.
Consider this: In the past year, The Dow and TSE are down, NASDAQ down 27%; Crypto (well let’s hope you weren’t invested).
This tweet from @Markyphillips sums it up perfectly:
“As economic squeeze continues, the more financially-savvy mid-value donors are broadly reporting that they are increasingly disappointed if they don’t see evidence of what their money is achieving. So, lack of evidence gets them questioning why they should continue to invest with you when giving elsewhere might give them a greater sense of achievement. Plenty of giving decisions are happening now. Sort out your MV thanking and reporting back today!”
What you can do about mid-level and major donors: keep your key donors close, even if there’s a lull in their giving.
Now is the time to invest in stewardship.
If you don’t have a dedicated member of staff focusing on mid-level donors, hire one. Craft an impactful stewardship program. Don’t ask donors for another gift before you have 1) thanked them for their recent gift and 2) shown them the impact of their generosity. A lack of gratitude and reporting back are the surest ways to make donors feel like they are bank machines rather than key allies.
At the very least, even if their personal financial concerns limit their donations in the next twelve months, you will have kept the relationship alive until things get better.
Active donor base
As we’ve said, your most loyal donors generally stay loyal or give even more often. That shouldn’t be taken for granted, though, so consider the following:
Be very careful with your budgeting and projections. We are advising clients not to continue forecasting the same results as we saw in the unique years of 2020 – 2022. In particular, it is safer to budget for a 10% drop in income from Mid-level donors and a similar impact on Majors. If more money comes in that’s wonderful – invest it in helping the people you serve. But if you have a shortfall in your budget, bad things can happen.
Be cautious about attempting to get donors to upgrade their giving (except for food banks and other front-line services that help people suffering from the economic situation). Obviously, you want to ask people to keep supporting your work – just don’t turn up the pressure to give even more than they have in the past.
When it comes to Lapsed donors, in fact we recommend a modest downgrade in the ask. The most important thing is to keep them giving.
Consider the technique of citing their last 12 months’ donations and suggesting that they make that amount again the year ahead, but as an easier-to-manage monthly donation. (Be careful not to infer that you’ll never ask them for special gifts again, though).
Being able to remind donors (via copy in a mailing or email or script in a telephone call) about the date and amount of their last gift is a foundation of direct response fundraising. Yet more and more charities are reporting that they don’t think their data is accurate enough to do this. This feels like we, as a sector, are slipping backwards in data health. Do everything you can to sort out any data issues, so that you can accurately include these critical numbers and dates in your appeals. Donors always think they’ve given more recently than they have – and citing the last gift of 12 or 18 months ago is a big part of securing another one.
Be honest with your case for support – if your charity is experiencing troubles because of fundraising income or because more people than ever are relying on you, strongly share that message. It’s imperative when crafting appeals that we leave people with hope. And it’s also incredibly important that we honestly present the need – none of our organizations would or should exist if there isn’t one.
Lynne Boardman has spent over 20 years creating successful individual giving programs for charities in both Canada and the UK. Her work has spanned health care, international development, human rights, education and environmental causes. She is currently the Managing Director of HMA, working with clients like Amnesty, Oxfam, Indspire, Covenant House, and many children's hospitals across the country. She speaks, strategizes and writes about legacy fundraising whenever there is someone nearby to listen. You can reach her at lynne@harveymckinnon.com
