This article is the English version of the article published by the CAFP China Association of Fundraising Professionals:
Many smaller charities struggle to gain long term financial sustainability because they have not diversified their sources of donation income. This is understandable as charities are frequently established and started by relying on single or just a few sources of funding be it grants from Government, Foundation, Corporate, High Net Worth Individuals or with funds raised from an Event.
In time, for the charity’s cause to have a bigger impact, it must grow to help more people by having a larger program footprint. Not only does this mean it needs to increase the scale of funding but frequently it also means the cause need to get wider support from the community to increase awareness of its work. Many may find relying on a small number of large grants to sustain their work creates some operational risks. This is because losing just one major grant may mean the charity need to cut a key program due to the loss of that funding.
Therefore to reduce operational risk, gain wider recognition, diversify sources of funding and scale up impact, many charities eventually seek to broaden support from a large base of individual donors recruited from the general public, also known as Individual Fundraising. Due to these factors, it eventually becomes an inevitable eventuality for most charities to diversify into Individual Fundraising should they seek long term financial sustainability, help more people/beneficiaries and gain wider community acceptance of their cause.
How would a small charity start in their journey to broaden their base of support from the general public? It is important for charities looking to do so to realize that this endeavour will require ambition, an expectation of risk taking, need for professional expertise/guidance, capacity to invest in marketing/fundraising and an understanding that the process is a long term exercise stretched over 3 to 5 years upwards. Gaining support from individuals who are members of the public need to be part of the longer term strategic plan for the whole charity, with the commitment to operate this fundraising model as an integral part of the charity’s operation.
Therefore, starting this endeavour requires agreement and adoption from the very top of the organisation, namely Board/Governance level, then Senior Management Team before filtering down to the Fundraising and Programs Department for execution. Indeed, support from Program teams are also required due to the need for marketing content to be derived from initiatives which the Program team undertakes. Once the organisation is in agreement of the approach, then the Fundraising team can look into taking the first steps to fundraise from individuals.
Initial steps to consider: Administration backend
As individual fundraising means building out a large base of donors up to thousands to tens of thousands of individuals, this necessitates a solid platform to keep donor’s data which would help with tracking the individual donors’ engagement information with the charity.
Frequently this means it is necessary to have in place a good database platform to house all donor’s data. Historically, charities would need to hire an IT team to build and develop database hardware and software to support all the functions needed, but today’s cloud technologies have enabled easy adoption of databases with excellent functionality without needing to rely on an IT team. This means it is no longer necessary to incur the costs of IT team salaries and computer hardware for maintaining a database. Costs and complexity is significantly lowered, meaning many smaller charities can also start to build out their Individual Donors fundraising initiatives.
Ideally, having an integrated all in one CRM platform would be best to increase efficiencies and there are off-the shelf solutions out there which has all these functions consolidated, making it easy for small charities to adopt. However, if affordability is an issue, smaller charities can use a number of free to use or function specific cloud software platforms to perform each functionality, albeit without the advantage of having everything integrated into one place. The cost of this approach is higher administration workload but the cost of software solution would be very low.
Getting ready to market to and fundraise from the general public
When the administration backend is ready, it will then be time to consider the best approach to take with regards to fundraising and pushing out the charity’s message to the general public. Key factors to consider are suitability of your cause to go to a wider audience, the approach to take and the available expertise to guide you in using that approach and the charity’s affordability or capacity to invest.
Promoting your charity’s message to a wider audience necessitates usage of available promotion channels, be it via digital, mail, television or in-person means. Utilising any of these promotion channels will incur media costs and requires different budget considerations. Many charities have attempted to utilize donated media spaces to promote i.e. free media such as in-kind billboards, magazine advertising and other donated advertising such as Google grants) in order to save costs. Whilst these free media are useful tools to gain marginal increase in awareness, most of these in-kind donated media space are “filler spots” or comes with limitations as to how they can be used. These limitations or “filler spots” frequently underperform significantly versus paid spots.
On their own, it is difficult to produce the desired effect that the charity is looking for, especially when it comes to raising funds. To achieve the charity’s objectives, it is frequently necessary to operate with the commercial reality that for their campaign to be effective, charities need to be able to invest in paying for effective promotion of their respective campaigns.
Secondly, the messaging of the promotion campaign can make or break the campaign. Each channel be it digital, mail, television or in-person requires specific expertise for it to be efficiently and strategically utilized. Without technical know-how, even if the charity is able to invest in the channel, the efficacy of the campaign can be much lower than if executed by an experienced channel expert. Much of the investment budget might be wasted as a result.
The level of technical proficiency is compounded further when requiring promotions to generate donations for the charity rather than just general awareness, i.e. using respective channels to fundraise. Charitable fundraising is distinctly different from commercial marketing in that it is not a traditional promotion of an exchange of goods or services relationship. In fact, the objectives are the opposite - the promotion of a non-exchange of goods and services as the “buyer” does not receive anything tangible in return. The objective is an altruistic rather than for a demand generation aim. This relationship between the donor, charity and its beneficiaries requires an approach that is distinct from general commercial marketing and promotion approaches. Frequently, we see charities’ campaigns underperforming due to adoption of a generalist commercial marketing approach rather than a fundraising specific approach per se.
With the right expertise guiding the charity, there can then be a discussion on the best approach to be taken vis-a-vis the charity’s budget, internal resources, capability, financial and other goals. Each channel be it digital, mail, television or in-person have different performance parameters and returns on investment. Therefore without a strategic approach to Individual Fundraising, many charities are confused when they attempt to do it on their own and wonder why it doesn’t perform as expected.
What fundraising strategy and channels should you use? What are the performance metrics?
It is difficult to provide a summary of which channel would best suit a particular charity as each charity’s context, situation and subject matter can be very different. Generally speaking, almost all channels for Individual Fundraising produces returns on investment over a 5 year time period, with the initial timeframe needing to recoup the costs of the media buy (advertising, printing, production), staff costs, creative and professional fees. These factors therefore determine how costly each channel can be, and each channel have different cost parameters.
The next question would be what would be the returns parameters that is to be expected from each respective channel. This also varies significantly across each channel due to specific channel performance as well as what type of donation is being asked for. There are initiatives to acquire one-off cash givers whilst other initiatives attempt to acquire regular subscribers e.g. monthly donors. One-off cash gifts vs monthly subscribers have different financial models and performance parameters. Again generally speaking, metrics to look at would include conversion rates, average gifts, donation frequency, upgrade rates, attrition rates, lifetime value amongst many others. These core metrics are frequently distinct from metrics traditional advertising agencies uses.
Should you choose face to face (F2F) fundraising over digital fundraising, additional metrics would come into play, for example, the performance of each F2F fundraiser, the cost of training and support, location metrics plus other tactical and execution data which can affect performance. Digital fundraising will have its own set of relevant parameters. Suffice to say that this article alone will not be able to cover the skills needed on each channel due to complexity of each.
How should you go about working with consultants/agencies to guide you in this area?
Many new charities without in-house experienced professional staff may expect that when employing consultants or fundraising agencies, the expectation is for the agencies to bear all the risks/cost of the endeavour so the charity can minimise the cost/risk outlay. It is important for charities new to Individual Fundraising to realize that the largest proportion of cost outlay goes towards media costs first, and then only after to production man-hours as the secondary smaller portion. Therefore the cost of the program is not fully controlled by the consultant/fundraising agency.
Digital, off-line, print, mail or F2F costs are set by commercial market forces, therefore it is not realistic for the agency to bear all the costs upfront on behalf of the charity. Whilst the agency or consultant may have the capability to defer or have a phased payment arrangement with the charity on their own professional fees, the external media costs not within the control of the agency will still need to be taken up by the charity. It is therefore important that charities understand operational realities so as not to be disappointed in their cost reduction expectations.
©Rodney Heng, Catalyst for Social Good