The landscape has shifted for charitable giving. As individuals feel the effect of the Tax Cut and Jobs Act (TCJA) of 2017 on their personal tax situation, charities making requests for donations will need to respond in kind. Development departments are having to adjust their “ask” to meet the challenges brought on by the reduced tax incentive to make charitable gifts. Donors often respond with their hearts and minds when giving to their favorite causes, but financial reality will play an important role when deciding where to spend their limited charitable dollars.
Not-for-profits that rely on a significant volume of contributions usually keep an eye on donor giving trends so that they can reduce the risks associated with changing giving patterns, economic volatility, and competition for charitable dollars. Current indicators do not paint a promising picture for donation results in 2019 or for 2020.
The recently released 2019 Giving USA report showed overall 2018 giving was down 1.7% compared to 2017 (when adjusted for inflation). In addition, according to the Fundraising Effectiveness Project (a collaboration of the Association of Fundraising Professionals, Philanthropic Service for Institutions, and the Urban Institute), the number of people who gave in 2018 fell by 4.5% and the acquisition of new donors fell by 7.3%.
Early results for 2019 are also trending downward. The Fundraising Effectiveness Project’s 2019 Second Quarter Fundraising Report shows a 5.8% decline in number of donors, a 7.3% decline in dollars raised, as well as reduced donor retention rates and gift sizes. Economic indicators show some cause for concern as well. While some experts believe the American economy will continue to grow by 2.1% next year, many economic experts believe a recession is possible in 2020.
Reporting about economic and charitable giving trends underscores the need for not-for-profit organizations to strengthen 2020 fundraising plans to improve resiliency and minimize external threats. The following are some strategies your organization can consider for 2020 to help navigate a potential charitable giving slowdown.
1. Revisit Your Key Performance Indicators
Assess your measurement strategy in light of the challenging economic and giving forecast. Key Performance Indicators (KPIs) are a means of identifying trends in donors, donation and gift size growth, donor retention, and pledge fulfillment percentage. For example, total giving numbers may be hiding a success in medium-sized gifts, or a weakness in new donor retention. Monitoring the right KPIs not only helps with forecasting and budgeting, but also helps identify short-term program adjustments that should be considered.
2. Strengthen Retention Efforts
With the 2019 average donor retention rate hovering around 49%, there is an opportunity to improve retention in 2020 by addressing common sources of donor dissatisfaction. Individual donors and foundations report similar issues with communication. In both cases, donors are unlikely to give again if they didn’t receive a thank you, don’t understand how their gift was used, or felt they received poor service from the organization.
Not-for-profits should also review all data sources to identify potential improvements:
- Consider program reviews, surveys, donor interviews, and staff input.
- Evaluate retention rate trends by donor type and gift size.
- Review effectiveness of follow-up activities, for example, phone call, email, executive connection, etc. For critical donor segments, identify who is asking for the next gift.
- Consider volunteer retention efforts in your planning. How can you improve the volunteer experience and invite these valuable partners to be donors, influencers, and advocates?
3. Segment Donor Communications
If you are not segmenting your communications, this is a great opportunity to strengthen donor relationships through relevant content, offers, and follow-up. Research by Salesforce showed only 53% of nonprofit organizations segment their emails consistently. While many organizations are sending the same email blast to their entire audience, donors and fans expect a personal experience and communication that reflects their relationship with the organization.
4. Benchmark Against Similar Organizations
Make research a regular part of your planning process. Use your KPIs to measure your performance against similar organizations in your industry. Consider looking beyond the tax exempt industry for “best practices” in the performance of particular processes or functions that are being used successfully in for profit industries. Look for trends and practices that, if implemented by your organization, will improve areas of weakness in your organization. Research similar organizations to assess their strengths and weaknesses. Check out their events and program schedule for ideas you can use in your organization.
With the rise of alternative fundraising tools like GoFundMe, it’s important to clearly articulate the unique value and impact of your not-for-profit organization in the community.
5. Donor Research and Data Modeling
There’s a lot of talk about the future of artificial intelligence (AI) in not-for-profit organizations. If you’re not ready for AI, get started by using existing information from your customer relationship management (CRM) system. Use donor research to set goals and prioritize the efforts of your development staff. External data, available on tools like Donor Search, in conjunction with key variables from your database (e.g., volunteer or event participation), can help identify high potential donors.
6. Improve Social Media Use
Social media provides opportunities to engage with a wide variety of constituents including volunteers, community partners, donors, employees, and program participants. Yet ActionSprout’s research showed 52% of not-for-profits post to social media accounts less than once a week. Consider daily posts, and evaluate your use of photography, graphics, and video to showcase your events, activities, staff, volunteers, and impact stories. Post similar content on your Google My Business listing to improve search results.
To learn more about reducing your risk and meeting your fundraising goals in 2020, please contact us.
Amy O’Loughlin is a Tax Director and member of the Not-For-Profit Practice. She is located in the CBIZ Phoenix office. She can be reached at AOloughlin@cbiz.com or 602.650.6233.