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| Path: Main Street : Resources & Library : Research Articles : Feature Article |
Online fundraising — does it work?By Gillian Kerr, RealWorld Systems
The information in this article is current as of June 8, 2001.
One of the reasons that nonprofits develop web sites is the possibility of online fundraising. There has been a great deal of interest in this topic. Helping.org and others (‘How Charities can Profit on the Web’ as well as various research articles cited in CharityVillage) have published advice and best practices on fundraising approaches.
I’ve been looking for evidence on the success of online fundraising for about three years now, and the evidence is slim, especially in Canada. In an attempt to get more information about the state of the art in this area, I spoke to three experts: Eric Rutten, the new President of Charity.ca; Meredith McGinnis, the Executive Director of CanadaHelps.org, and Neil Gallaiford, the principal of F R M Consulting, a strategic and database fundraising consultancy.
All of them made three basic points:
- We are not seeing profitable online fundraising in Canada yet, for a number of reasons. The web is so new that agencies are floundering around trying to figure out what works. Canadian consumers are still conservative about making financial transactions on the web, though they are starting to. And successful charity fundraisers might be reluctant to share their knowledge given the highly competitive nature of the industry.
- All successful fundraising involves an interaction with donors. A ‘donate now’ button on the site will not pull in the dollars unless it is associated with other forms of communication and solicitation–most giving remains ‘prompted giving’ in the Canadian context. Agency web sites are just one form of communicating with donors and with the public, and have to be part of a larger strategy if they are ever to be a legitimate channel for donations.
- The web will be an important source of funds in the future, as donors become more comfortable with e-commerce and charities learn how to fundraise effectively using this medium. Charities should be making cautious investments in the web, and experimenting with online communication methods.
Meredith McGinnis, CanadaHelps.org
Meredith McGinnis runs CanadaHelps.org, a new registered charity that enables donors to give to any Canadian registered charity over the web. CanadaHelps.org is sponsored by several major corporations, which allows them to process funds without charging a fee. Meredith agrees that there’s little empirical data on the success of fundraising. However, she adds that in the 6 months that CanadaHelps.org has been active, they have facilitated over $150,000 for 250 Canadian charities, involving 1300 donors, with very little marketing. Most of those donations are small — about $50 to $100 each, though there has been one major donor of $10,000.
CanadaHelps.org is finding that donors are starting to use the service to facilitate all of their charitable giving. Repeat donors — about 20 of them — have been demanding more functionality, such as the ability to give to more than one charity at a time, to keep a donor profile, to offer a shopping cart, and so on. CanadaHelps.org suspects that this group will grow as donors look for ways to streamline their giving.
Neil Gallaiford, F R M Consulting
Neil Gallaiford has been managing direct response fundraising programs for years, and now helps charities develop and implement fundraising strategies. He recalls the early years of direct mail, when charities spent years trying to figure out what approaches worked best. Direct mail is now a major source of donations, but it took a great deal of experimentation and investment before it paid off for the pioneers. There is always a tendency to think that the latest new new thing will completely take over. That hasn’t happened: direct mail, phone fundraising and direct response TV have added to charities’ options but have not replaced older methods. It will be the same with the Internet.
However, Neil is convinced that Internet-based or Internet-supported fundraising will be a major element of resource development in the next few years. It may be initially helpful for planning and managing special events, for example. Special event registrations can help to build email lists for further interaction. Connected participants could use email to ask for pledges, and include a live link that would take friends to a donations form.
Fundraisers can be forgiven for saying that agencies should not do anything until online methods have proven themselves--after all fundraisers are responsible for their current year bottom line. But the potential of the web, unproven as it is, is still enough to warrant attention. Neil recommends that charities make space in the budget to experiment with the web, starting with a professional (not necessarily elaborate) web site, even though charities should not expect any significant income from online sources for at least two years.
The first objective should be to establish some profile on the Web: donors should be able to find the charity using major search engines, and there should be some (easy) way to donate from the Web site. However, since most fundraising must be active to be successful, fundraisers should be supporting their web initiatives through more conventional marketing techniques–radio, outdoor and space come to mind. The web should be a channel option for those donors who feel comfortable doing business online but they must still be prompted to go there.
Finally, Neil suggests that agency web sites are just one way of enabling online giving. Charities, for example, should get onto online bank payment lists to allow donors to transfer money online if they wish. For example, CanadaTrust’s EasyWeb online banking service, as Neil points out, includes the Hamilton Golf and Country Club among their payees — why not the major charities? And, just as in the commercial sector, email marketing initiatives seem to hold the most promise. The principles of marketing are always the same — go to the right people at the right time with the right message. Email ought to be able to allow us to do that. Now that donors are increasingly online, we just have to figure out how to communicate with them. Eventually the Internet will find its place as a profitable fundraising technique to augment the proven tools charities are already using.
Eric Rutten, Charity.ca and Sentient, Inc.
I spoke also to Eric Rutten, the new President of Charity.ca and also Director of Business Development and Solutions at Sentient Inc. Sentient bought Charity.ca a couple of weeks ago, and is combining their CharityCommerce division with Charity.ca. They plan to introduce some enhancements to Charity.ca, and add the option to integrate their eTapestry product into the Charity.ca offering.
Eric believes that agencies need to be careful on investments in this area. Some large charities have invested well over half a million dollars on web site development. The sophisticated charities are saying that this is an investment in a credible web presence, not a short-term investment in online fundraising, but many charities will be disappointed if they expect immediate donations.
On the other hand, it’s a good idea to begin experimenting with online communication. The cost of the technology to send out direct emails and set up online donations is not that high. Charities can outsource online fundraising functions on a fee-for-service basis, which allows smaller charities to engage. And there will be an advantage in knowledge acquisition for those who start early and can afford the staff time to experiment.
Agencies must structure their communications to control the interaction with donors, just like direct mail. Direct mail is specific — you send this piece to this target. Internet marketing requires the same discipline and marketing segmentation, but it allows agencies to go beyond a direct-mail type of interaction - we can control an entire interaction process that is going to better inform their constituents, better understand their likes and dislikes, and develop a deeper relationship with them.
Quick Comparison of CanadaHelps.org and Charity.ca
Both CanadaHelps.org and Charity.ca are charity portals that offer financial processing services for donations. Charities are responsible for doing their own marketing, while the portals handle the financial transactions. This is a great way for small charities to move into online fundraising, especially if they link to a customized donations form from their own web site. The two services are quite different, so charities should compare them carefully before choosing one to provide their ‘donate now’ button. CanadaHelps.org currently charges nothing for processing donations (for a limited time they are even covering credit card fees), while Charity.ca charges a processing fee of 8%. Charity.ca is a for-profit enterprise while CanadaHelps.org is a registered charity supported by corporate donations. CanadaHelps.org lists and sends funds to all the registered charities in Canada, while Charity.ca lists only their members. So, for example, donors who want to use a charity portal to streamline their giving would probably prefer CanadaHelps.org. However, there is no disadvantage to registering for both.
They both need to improve their user interfaces. For example, CanadaHelps.org demands that you give them an email address before accepting a donation, and even instructs donors to sign up for Hotmail if they don’t currently have an email address. It’s a great way to discourage donors instantly, and it’s unnecessary — the email is just to enable CanadaHelps.org to send out a tax receipt, and could be done at the end of the process. Charity.ca has a strange search function — when I looked for ‘United Way’ it found no charity of that name anywhere in Canada. When I tried again with the same search string, it found 37 agencies, none of them United Ways. It was not clear to me as a potential donor that only members are listed.
As usual with technology services, know what you’re getting into, stay in control of your own information, including donor data, and be prepared to switch providers quickly if necessary.
Future articles on this topic
Please, if you have observations or comments on this topic, email them to me at gkerr@goodenough.ca. I will incorporate them into next month’s article.
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Gillian Kerr, Ph.D., C.Psych.
President, RealWorld Systems
gkerr at realworldsystems.netRead my weblog at http://blog.realworldsystems.net
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