Politics, Society and Economics
How is fundraising affected by the economy?
Is there a historical trend on how donations are affected by large stock market drops?
How can our ongoing needs "compete" with a local disaster?
How will new privacy laws affect nonprofit fundraising?
How has Sept 11 affected nonprofits in terms of marketing and branding their services?
Is September 11 still a date to avoid for events?
Should we postpone our mailings because of the war with Iraq?
How will the election affect nonprofit mail campaigns?
What is the effect of nonstop electoral fundraising on the rest of us?
How does a Presidential election factor in to the timing for a Fall appeal?
How is fundraising affected by the economy?
Many of my suppliers have been asking me lately what affect the current economy is having on my non-profit clients, and direct mail fundraising in general. Many of these suppliers are experiencing the crunch, and wonder if the 'buyers' are as well. Over the years, it has seemed to me that my non-profit clients' fundraising is not affected by economic slumps. I would be very interested in your experience and opinion on this matter.
Mal answers: There are many in the nonprofit world who believe fundraising is economically counter-cyclical -- that is, activity picks up when times are tough. I'm not convinced this is the case, although I have anecdotal experience that there's some truth to the claim. In any case, I have seen virtually no decline so far this year in results for any of our direct mail clients. Most of them are frightened that the effects of the downturn will make themselves felt later this year, but I'm not to sure. I believe, actually, that the business cycle has far greater impact on major gift fundraising than on direct response -- the direct mail, telephone, and online contacts we use.
The rate things are going downhill, though, we may, unfortunately, have an excellent opportunity to find out firsthand in the very near future!
Is there a historical trend on how donations are affected by large stock market drops?
Mal answers: I believe there is a correlation between major bear markets and the level of giving in the U.S., but I can't put my finger on any research that shows that is the case. I've written to the head of research at the Center on Philanthropy at Indiana University asking essentially that question, and I've copied you on the message. If he doesn't copy you on his answer, I'll write again myself. This is obviously a timely question.
How can our ongoing needs "compete" with a local disaster?
Our community of 72,000 has recently been the victim of disastrous flooding. In just two weeks the economic costs are estimated at 50 million and are climbing daily. Disaster relief has been coming in as a result of a very high-profile presence in the national media and unbelievable need. As the regional health centre, we have a commitment to raise over $800,000 annually to address current equipment needs to enable quality health care. With the competition of a disaster fundraising project, which is top of mind for a large percentage of our donors, how do we continue to position our needs to the community? ... and anticipate success?
Mal answers: Time and again, I have been overwhelmed by the generosity of the public — and I've noted that the public responds most generously to honesty. I strongly suspect you can easily raise a substantial amount from your existing donors without jeopardizing your annual fundraising goals. After all, you're in the midst of a genuine emergency, and who but your donors would better understand that? I'm certain that some of them are experiencing difficulties of their own and may be unable to respond. (That should of course be acknowledged in any appeal!) But others will probably be unaffected.
By the same token, many others in the community at large may be willing and able to respond. An appeal to a broader public should bring good results, especially if you can gain the active, on-air support of local radio and television stations and the local newspapers.
I sincerely wish you all the very best of luck!
How will new privacy laws affect nonprofit fundraising?
I'm writing a series about the ongoing privacy debate and was wondering whether shutting down information that currently is available to the public has had -- or may soon have -- any unintended consequences for nonprofit fundraising, as it has for healthcare providers, private investigators, small businesses and others. Any thoughts? For example, will it make it more difficult for organizations to sell or buy mailing lists?
Mal answers: There are few questions more likely to cause blood pressure to rise in direct marketers than this one! The lifeblood of direct marketing -- including direct mail, telephone and online fundraising -- is a steady stream of information. Cut off that flow, and you'll cause a host of costly problems.
For many nonprofit organizations, any legislation that requires donors' prior consent ("opt-in") to the use of information about them will cripple fundraising efforts. Nonprofits that depend heavily on direct mail -- a substantial minority of the larger organizations, especially those that operate on a national scale -- base their fundraising programs on the assumption that they can exchange their mailing lists, thus substantially lowering the cost of the mail. The economics of the business will change dramatically -- for the worse -- if an opt-in process slashes the number of names available for exchange. Similarly, nonprofits will be able to access the names of far fewer prospective donors even if they're willing to pay for them -- and, if they offer their own lists for rental, they'll receive far less list rental revenue.
It would be surprising if more than, say, five percent of an organization's donors would check a box to permit data about them to be exchanged. Yet no more than two or three percent of those donors will take the trouble to check a box requesting that information not be shared ("opt-out"). In other words, this is not a problem in the minds of most donors. It's much more of a problem in the minds of zealous -- I would say overzealous -- legislators and self-appointed privacy watchdogs.
Thank you very much for the question. I hope this was helpful!
How has Sept 11 affected nonprofits in terms of marketing and branding their services?
How has Sept. 11th affected how non-profits will need to look at marketing, positioning and branding their services?
Mal answers: I'm among the minority who feels that 9/11 has not in itself had any significant impact on the nonprofit sector. To the extent that nonprofits suffered revenue drops following the attack, I believe that was largely due to the stumbling U.S. economy -- and secondarily to the fear that led some nonprofit executives to curtail fundraising activities for far too long after 9/11.
The impact of that day's events was indirect, I believe. An outpouring of sympathy and concern led literally millions of Americans to contribute online for the first time. Presumably, many will be inclined to do so again. However, the $160 million raised after 9/11 by the American Red Cross represented *half* the online revenue contributed throughout the year to all U.S. nonprofits, so we'll have to suspend judgment on whether it will lead to an overall increase in giving online.
More to the point of your question, though, is the fallout from the "scandal" triggered by the Red Cross when it announced it would reserve some emergency funds to meet later crises. From both a financial and an ethical point of view, I think the Red Cross was right. However, the public -- including almost every visible commentator -- took them to task. And the whole sector is still apparently suffering something of a crisis of confidence among the donor public (or, at least, so the polls would suggest).
I'm convinced, though, that nonprofits will transcend the problems caused by this scandal, just as we have previous ones: greedy and lecherous televangelists, crooked United Way leaders, and all the rest. The generosity of the American public seems without limit. I'm betting on our future.
However, that leads me full circle back to the crux of your question: what should nonprofits be doing today to ensure that their "marketing, positioning and branding" are optimally effective? The answer, I believe, is that, more than ever, nonprofits must take a thoroughly professional approach to marketing, beginning with an intensive positioning exercise, and infusing all their communications and fundraising activities with an understanding of the power of branding. In this increasingly competitive world -- both before 9/11 and after -- this perspective is essential for any nonprofit that hopes to thrive.
Is September 11 still a date to avoid for events?
Is it appropriate for a non-September 11 organization to hold a fundraising event (e.g. golf tournament) on September 11 (2004)?
Mal answers: I don't think that's such a great idea. The date conjures up too many unpleasant memories. Even Sept. 10 or Sept. 12 would be far better. With that said, this is merely my opinion.
Should we postpone our mailings because of the war with Iraq?
I'm hoping you can give me an opinion about something. We are considering sending out our spring direct mail package in early February this year. What really worries me is this whole Iraq thing. The stock market dipped below 8,000 last Friday, which is really unsettling. One wonders whether to hold off because things are so unsettled right now, or if it will be even worse after war begins. I'd really like your opinion about whan you think would be the best time to mail when everything is so uncertain.
Mal answers: Uncertainty can play havoc with direct mail results. War or catastrophe is often even worse. The problem is, we live in such an inherently uncertain time that we hardly know what to expect from day to day, even in the best of times.
Sure, we can pull in our horns and sit out the current crisis, hoping for better circumstances. But who knows exactly when the war will start, or, more importantly, how long it'll last? We might find ourselves waiting . . . forever. And stopping our efforts to raise funds doesn't seem wise.
Here's another, more reassuring note: New York- and Washington-area charities were devastated by a dropoff in returns following the attacks of Septemer 11, 2001. But our clients' results were, in some cases, entirely unaffected. Despite the doom-and-gloom attitude that prevailed that fall, most nonprofits ended up doing quite well — certainly far, far better than they'd expected.
So, I counsel teeth-gritting. Stay the course. It's a judgment call, and I don't want to be sued if results go south next month. But I haven't advised a single client to slow down or cut back in the face of this crisis. In fact, none of them has asked!
How will the election affect nonprofit mail campaigns?
With this being an election year, what effect will that have on nonprofit mail campaigns?
Mal answers: In general, I believe, the impact on nonprofit fund appeals will be very limited. However, I do believe it would be unwise for any nonprofit to mail an appeal in time for it to arrive in mailboxes during the last two weeks of October and the first week of November. That's the period during which they'll already be chock full of unsolicited mail — from political candidates and committees. That goes doubly for the so-called "swing states," which are contested even more hotly.
For politically-oriented advocacy appeals, of course, the impact may well be greater. Anecdotal evidence suggests that, in this watershed election year, many donors are devoting most or all of their available funds to the Presidential contest and are pulling back (or entirely removing themselves) from the nonprofit market. But I have yet to see that this phenomenon is significantly affecting even those organizations.
What is the effect of nonstop electoral fundraising on the rest of us?
I was wondering what you were telling your clients about the effect of this nonstop electoral fundraising on the rest of us this year and next? Seems like the big donors are being asked to max out now. But there will be multiple campaigns and races. More impact on the lower dollar side, maybe? Or is the stock market and this subprime mortgage mess the real problem? Thanks!
Mal answers: Good questions. Last one first: yes, the subprime lending mess, a gathering storm that threatens to become a hurricane, is indeed the biggest concern. Clearly, if the economy goes south as a result, always a possibility, that will have an impact on giving, and not a good one. When people feel well off, they give. When they feel economically fragile - not so much.
The impact of election fundraising on philanthropy is an urban myth, in my opinion. As you know, the last, best estimate for total giving in the USA was just shy of $300 billion for 2006, the most recent year. All political fundraising in an election cycle - federal, state, and local, for every office - *might* draw a total of $3 billion. Since your arithmetic skills are quite as good as mine, you can see that that's only about 1% of all giving.
There are two further factors to consider:
** Though there is undoubtedly some overlap, political donors tend not to be philanthropic donors. Nearly three-quarters of the adult U.S. population gives to "charity" each year. The percentage of people who give to political parties, committees, and candidates is minuscule by comparison.
** The only impact I've discerned from the political process on philanthropic giving is that, in election years, there is often a flood of voter-persuasion mail in the last 10-15 days before an election, followed for a few days by exhaustion and disgust with the sorry scene it portrays. I advise clients to avoid mailing during those periods simply because it's harder for them to gain attention then.
There you have it.
Good luck, and thank you for writing!
How does a Presidential election factor in to the timing for a Fall appeal?
We are a fairly progressive organization with fewer than 700 individual donors (70% of our budget comes from foundations.) I am eager to begin an aggressive acquisition campaign. However, our constituents are active in the presidential campaign and I surmise the same is true of our prospect base. I'm concerned that if we do a major acquisition in October it will get lost in a sea of appeals from the Democrats and will get a very poor return (and scare off my Director from doing acquisitions in the future). I read your response to another question that an organization can avoid competition by mailing in February. Are you advising your progressive clients to avoid mailing in the Fall?
Mal answers: Not exactly. However, I think you're on the right track to avoid October for launching a new effort. Why buy trouble, after all? In the case of any new or marginal program, I would almost certainly advise the same. But that's not to say a mailing in September would pose the same risks. And February isn't the only other alternative, by any means. I wouldn't be averse to mailing (via bulk rate) at the end of December, for delivery in January. For that matter, at this juncture, I see no reason to avoid any maildate in the first three months of 2005.
In the case of an ongoing program, I might still try to avoid dropping acquisition mail the last couple of weeks of October. But I would be less wary of competition from political mail at other times. In acquisition, the most important thing is to keep mailing steadily. Opportunities lost are lost forever.
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