Not-For-Profit Industry Newsletter – Winter 2013

Fundraising Effectiveness

“Doing more with less” and “the new norm” are catch phrases that are a reality for most organizations. Not-for-profit organizations are scrambling to increase operational efficiencies through streamlined procedures, eliminating non-essential functions, and sometimes just doing without. Cost reductions are often the first line of defense for an organization’s survival because the budget is within its control. However, expenses are just part of the picture. Maintaining, and even increasing, contribution revenue is essential to every not-for-profit organization.

Particularly in tough economic times, detailed and exhaustive analyses are performed to identify where and how costs can be reduced to maximize savings to the organization while minimizing the pain. The same rigorous analyses should be applied to contribution revenue streams and sources so fundraising efforts can be effectively focused to maximize their return.

To better understand giving practices and increase organizational fundraising effectiveness, the Association of Fundraising Professionals (AFP) and the Center on Nonprofits and Philanthropy at the Urban Institute established the Fundraising Effectiveness Project (FEP). The stated goal of the project is “to help nonprofit organizations measure, compare, and maximize their annual growth in giving.” The Fundraising Effectiveness Survey started in 2006 and has been updated each year since. The latest published report for 2011 is based on 2009-2010 data voluntarily provided by 2,377 small to mid-sized U.S. non-profits.

The FEP is based on the concept of evaluating fundraising gains and losses as discrete components of giving growth. Fundraising gains consist of new donors, recaptured donors, and “upgraded” donors who increase the amount of their giving in any given year. Fundraising losses are made up of lost donors and “downgraded” donors who reduce their level of giving during the year. Actual giving growth is the net of fundraising gains and losses. Therefore, giving growth is affected by both gains and losses and can be most effectively maximized by both increasing gains and minimizing losses. This concept sounds easy, but in order to implement it, important trends in giving data must be extracted so the organization can decide where to invest its time and resources in fundraising.

Two important trends evaluated are the year-over-year change in contribution dollars and the change in number of donors. The 2011 FEP identified a net loss of 1.9% in fundraising growth based on contribution dollars. However, there was a net gain of 1.7% in the number of donors. What is interesting is that by both measures, dollars and number of donors, repeat donors showed a significant net loss.

Notice that the percentage of fundraising gain related to recaptured donors was 23%, but the loss due to departed repeat donors was 38%. Clearly, participating organizations had success in bringing in new donors; however, they lost existing donors at a much higher rate than they were able to recapture them. Likewise, organizations lost a higher number of repeat donors than they were able to recapture, as shown below. Since studies demonstrate it is far less expensive to retain an existing donor than to generate a new donor, organizations can reap large rewards by focusing on existing and loyal donors.

What causes donors to leave an organization?

The top 3 reasons cited by donors are:

  • Feeling they were solicited too often and asked for an inappropriate amount of money – 59%
  • Making a decision to support other causes – 34%
  • Responding to organizational changes in leadership or activities – 29%.

What steps should organizations take to keep their current donors engaged?

  • Say “thank you” – immediately, genuinely, and Donor acknowledgement should be given within two to three days of receipt of the gift.
  • Some studies recommend that an organization thank donors three times more often than it solicits gifts from
  • Be mindful of the number of “asks” – research shows there can be an inverse relationship between the frequency of solicitations and donor
  • Invest in non-fundraising communication – engage the Survey donors on their priorities. Report on the success of the project supported.
  • Allow donors to determine when and how they’d like to be Don’t alienate donors by appearing insensitive to their time.
  • Communicate changes in leadership or Lack of doing so will likely hurt the organization’s relationships with its donors.
  • Demonstrate outcomes – be transparent and Publish annual financial data and celebrate programmatic successes.
  • Maintain accurate donor data – updated contact information allows continued communications with
  • Teach your entire staff the importance of customer

In today’s world of scarcity, every organization must deploy its resources to their highest and best use. Effective fundraising will help organizations protect one of their most valuable assets: loyal and consistent donors.

Maxine Romano can be reached at 215-441-4600, or Email.

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