CharityVillage® Research: Are you positioned for fundraising success in the 21st century?

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Are you positioned for fundraising success in the 21^st century?
By Judith Nichols
January 31, 2001; Canadian FundRaiser

We stand at the threshold of a new century with even greater demands predicted for non-governmental organizations and charities. Increasingly, government is turning the responsibility for quality of life back to the community. In response, the number of agencies has grown quickly, each asking -- even demanding -- that the community pledge its support. We send out more direct mail, run more special events, and ask for larger and more frequent major gifts.

This escalation of never ending appeals for money is leading to disturbing signs of "donor fatigue" among our supporters. Loyal donors are saying "enough already" and prospects are testing more carefully than before which organizations they might consider.

Futurists have a tantalizing way of describing the coming years as though being there has little to do with getting there. The future simply arrives full-blown. But, in truth, we can predict fairly accurately what is coming by looking at what has already changed.

Three major paradigm shifts -- a fear of economic instability, increasing cynicism, and a lessening of the bonds of community -- can be traced to two key overall population changes: increasing longevity and increasing diversity

Economic instability -- our increasing longevity is leading to an increasing reluctance to make significant charitable gifts from assets during one's life.

Increasing cynicism among post-World War II generations -- the idealistic baby boomers and reactive baby busters (also known as Generation X) demand more output-based results than did their parents and grandparents who trusted NGOs and charities, viewing them as knowledgeable authorities.

Lessening of the bonds of community -- increasing diversity among our population and increasing mobility coupled with the growth of "virtual" communities is leading citizens to exhibit less donor loyalty than pre-World War II generations.

Albert Einstein is credited with having said, "Insanity is when you do the same thing over and over and expect a different result. Too often, unfortunately, fundraisers and nonprofit marketers fail to step "outside the box" and examine what is driving their day-to-day behavior. In a time of changing paradigms this puts you at risk.

By expanding your understanding of donor audiences, communication and relationship development within each population segment, and new technology trends you can attract more and larger gifts.

Increasing Longevity:

The population of the developed world is aging. This means that proportionally, that fewer new adults make up the populations of developed countries. While today those over 65 are 2.6 million -- or 12% of Canadians, by 2020, elders will comprise 5.8 million -- or 16% -- of Canada's population. A shift from a fundraising strategy focusing on acquisition to one that makes aftermarketing (renewal and upgrading) a priority is necessary.

Not only are more people living longer, they are living a lot older. Increasing numbers of men and women are living past 90, 100, and even to 120 years of age. Canada's true life expectancy has recently been put at 85.26 years! As individuals live longer, they become more concerned about outliving their assets.

Women are making up a larger portion of our older population. While the average Canadian male lives to be 73, women live an additional six years to 79. Simply by outliving spouses, partners, fathers, and brothers, women are gaining increasing responsibility for determining the disposition of large amounts of wealth.

Increasing Diversity:

As our world shrinks, our countries are diversifying ethnically and racially. Typically, white audiences have felt welcome as donors and volunteers in traditional nonprofit organizations, but members of many minority groups have often not been asked either to give or to volunteer in leadership roles. Fundraisers must work to change people's perceptions, so that all will feel welcome.

Five key generations will dominate the next 25 years -- those born from the very beginning to the very end of the 20^th century -- each with different psychographics and financial lifestyles. Development professionals need to develop a different communication style for each.

Not surprisingly, the population trends in population and dramatic changes in technology and communication that have dominated the past two decades of business marketing have also shaped fundraising in the developed nations, which in turn has guided development strategies. Thus the focus of fundraising during the 1980s and 1990s has been heavily on gift acquisition through direct mail, workplace giving, and special events. During this time period, nonprofits could:

Use direct mail as the primary communication vehicle, because audiences were literate, computers could make each appeal "unique", and mailing costs were relatively inexpensive.

Expect civic and silent citizens (a predominant style among those born before World War II) to respond willingly to the authority and paternalism inherent in workplace giving and community appeals.

Count on boomers (born from -- roughly -- 1946-1964) entering adulthood for a prospect pool of ever-increasing, energetic younger adults eager to attend events for networking and socialization.

But today,

Our heavily civic Depression Babies are moving off the scene and the small group of Swing Babies born between the world wars is not eager to take their place philanthropically as concerns about outliving assets are becoming widespread.

Our boomer audiences are now middle-aged and time pressed. Growth in involvement in formal recreational activities (including galas, auctions, and athletic events -- especially physically active "thons" such as trekking and biking, and physically intense activities such as tennis and golf) may not keep pace with the growth in population. Attendance at many types of special events will peak, slowing down and even dropping.

Technology has moved rapidly, and younger audiences have different communication preferences. Whereas direct mail works best with those born before World War II, mid-life audiences respond better to phone requests coupled with an advance letter or video, and young adults expect us to communicate via the computer.

What are the implications for fund raising success in the 21^st century?

With the advent of the global economy and the availability of the Internet, charitable priorities change. Donors are more proactive in researching charitable interests. With a click of the mouse, you can browse through a worldwide list of potential charitable partners and contact them yourself rather than waiting passively for a letter or phone call. Increasingly, donors will make gifts to charities operating out of countries other than their own.

A change in charitable priorities is also being driven by differing attitudes towards charitable giving of different generations. As pre World War II audiences exit the giving scene and mid-aged and younger adults take center stage, we move from a society that views philanthropy as a duty to one that sees it a reward. Perhaps as a result of their more inner-directed attitudes, many boomers and busters want to "do the thing that feels good" rather than "their duty". Less institutional, often-smaller, charities may find themselves in a better position to connect to these wishes.

Viewing philanthropy not as a duty but as a reward, boomers have already passed their parents' generation in generosity. However, they give to many more causes, often obscuring our understanding of their generosity and appearing ineffective because of these smaller gifts. Generation X is taking a different approach all together: often creating a seamless world of operational volunteerism and financial commitment to a limited number of charities.

A move from "linear" to "cyclical" major giving. For as long as I can remember, development practitioners have preached the donor pyramid: a linear form of donor growth and education. The thinking goes like this: a prospect makes his or her first gift to your organization and, hopefully, moves on to an annual gift commitment. If the nonprofit nurtures the relationship and the donor responds, the gifts become larger and, ultimately, the organization will receive a bequest or life income arrangement.

Whereas this "linear" approach made perfect sense when people didn't live very long, today's life span of eighty to ninety years or more suggests that it will be lifestyle coupled with lifestage -- a more "cyclical" approach -- that will determine when major gifts will be made. Nonprofit organizations will need to be more attuned to finding these moments; this means keeping more in touch with donors and prospects.

Focusing on renewal and upgrading rather than broad acquisition. And finally, the focus of broad-based fundraising -- for the annual gift -- must change as well. The proportion of the population that will consist of new adults in the workplace, as opposed to adults living longer, is shifting dramatically. The slowing down of our population growth coupled with an increasing diversity in generations, gender, and ethnic and racial segments will make it more and more difficult to acquire a broad base of donors at a cost-effective price. Selective acquisition will work but will cost more. Therefore, it makes more sense than ever before -- with people living so much longer -- to work harder to keep and upgrade the donors you have.

A new era for fund raising.

The paradigm shifts include:

A shift in focus from broad-based acquisition to aftermarketing. For most organizations the remaining pre-World War II donors will continue to be our default audience as we selectively chose the audience "niches" to which we will prospect.

A shift from being methodology-driven to being donor-driven. We'll worry less about conducting annual appeals, special events, and capital campaigns. We will listen more to how and when our donors want to give. A more "holistic" approach to giving will prevail.

A redefinition of major giving will take place. We will focus on gifts made from affluence (income) rather than wealth (assets). We'll recognize and encourage cumulative gifts rather than one-off giving. And we'll actively work with donors of all ages to make bequests a part of their gift planning.

We will be required to "think out of the box" to succeed, but we'll benefit by becoming less complacent and wedded to old ways simply because "that's what we've always done." The trends can be your impetus to a stronger, more productive way of fundraising.

Based on a presentation to the German Direct Marketing Association Conference in Dusseldorf, Germany in September 2000. Judith Nichols is an Oregon-based consultant with clients throughout the USA, United Kingdom, Canada, and Europe. Her newest book, "Pinpointing Affluence in the 21st Century" (Bonus/Precept 1-800-225-3779) will be published in March 2001. For more information, or for a complimentary issue of her newsletter, "New Directions in Philanthropy", call or fax 503/478-9631, e-mail at judnich@aol.com, or write to 2327 NW Northrup Street, Ste 7, Portland OR 97210.