Like many sectors of the economy, nonprofits are contending with issues related to income inequality — or as I call it, “Donor Inequality.”
Total contributions to charities have been growing for the past few years. Yet this growth has been largely driven by major donors. On average, less affluent donors are not contributing as much. In fact, one study found that low-dollar and mid-level donors have declined by as much as 25% in the last 10 years.
This phenomenon is understandable — at least in most of the Western world where the middle class has been shrinking. (Note: we see a different trend in India and China where the middle class is increasing.)
So the question I’m being asked frequently is, “What should my nonprofit do to grow our fundraising results in this new environment?” Here are a few basic answers:
1. Redouble your efforts to attract top-tier donors – This notion should be obvious, but surprisingly not all organizations have embraced it from a program, targeting, or organizational basis.
2. Identify your affluent donors – Most NPOs have underleveraged affluent donors in their normal donor pool who receive the organization’s normal treatment and communications. While the universe of prospective major donors is usually small – often under 5% – these donors should be flagged and treated differently, based on a combination of their actual and potential donor value.
3. Focus on mid-level donors – Mid-level donors are frequently your best source for future major donors. If you don’t have a special program for these donors, you’re probably missing out on important fundraising growth opportunities.
4. Leverage machine-learning modeling techniques – In this new environment, NPOs need every advantage to win. We are finding a high degree of success with our machine-learning models. By using these models, there is virtually no limit to the amount of data you can examine… you’re not running hypotheses as to which variable will drive a step-change in performance… and your insights are continuously refined and updated. If your models are not leveraging the latest in machine-learning, you should explore a new alternative.
5. Think about your wallet-share – Lastly, with less money available in totality from less affluent donors, NPOs need to recognize that they’re in a continuous struggle for wallet-share among potential donors. To ensure that you secure a greater share of a declining pool, we suggest leveraging cutting-edge personalization techniques and building a more compelling sustainer value proposition and conversion strategy.
While it’s clear that all donors are not created equal, using smart strategies to combat donor inequality can help ensure that your organization continues to succeed in 2017 and beyond.
Mark Schulhof is Chief Executive Officer of Innovairre Communications, which supports more than 500 nonprofit organizations around the world. Contact us at Answers@Innovairre.com, and follow us on LinkedIn and Twitter.