Research from the Urban Institute and the Association of Fundraising Professionals suggests small and midsize organizations are losing donors at an alarming clip.
Thanks to social media and the evolution of technology, nonprofit organizations have more resources than ever at their disposal to identify and build lasting relationships with potential donors.
That might sound like it would translate into more money. But, as a recent study [PDF] from the Urban Institute and the Association of Fundraising Professionals suggests, having all the resources in the world doesn’t make people give—or convince them to keep giving—when budgets are tight.
The challenges are especially acute at small and midsize organizations.
While overall nonprofit giving was up a modest 2.6 percent in 2011-2012 compared with the prior year, the “2013 Fundraising Effectiveness Survey Report” found that for every 100 nonprofit donors gained in 2011-2012, 105 donors were lost through attrition.
Overall, the study, which considered responses from 2,840 organizations with an average of $469,050 in yearly donations, found that larger organizations—those raising more than $500,000 a year—reported a 16.6 percent net gain in giving over the previous year, while those raising $100,000 to $500,000 reported a net loss of 5.1 percent and organizations that raised less than $100,000 reported a net loss of 13.5 percent.
Although the report’s authors point out that the data does not represent the entire nonprofit sector—the lion’s share of respondents represent small and midsize organizations—a recent article in Nonprofit Quarterly suggests the findings are enough to raise serious doubts about organizations’ ability to recruit and retain viable donors. In it, NPQ Editor-in-Chief Ruth McCambridge recalls a prediction made by nonprofit management expert Paul Light in December 2008, at the outset of the recession.
In his article “Four Futures,” Light predicted that the economic climate would continue to favor large organizations. “Well-known organizations will survive through more aggressive fundraising appeals, while some small nonprofits will survive through sheer will or because their communities are used to supporting them,” he wrote. “Others will merge, be acquired, or simply melt away.”
The result would be a “rebalancing” of the sector toward larger, “richer” organizations, he predicted.
Gains and Losses
Organizations tend to focus on donor gains when benchmarking the effectiveness of their fundraising programs from one year to the next, but the report’s authors suggest a more holistic approach.
“Looking only at the overall net performance (the ‘bottom line’) does not tell management and boards what is really happening in their fundraising or where to invest additional resources to improve fundraising effectiveness,” they write. ” Neither is it sufficient to look only at the new gifts coming in.”
To get a true picture of fundraising within your organization, it’s important to consider fundraising gains as well as losses.
“Significant losses can substantially reduce or eliminate the gains,” the study states. “For example, an organization that has gains in annual giving (new donors) of 65 percent from one year to the next but has annual giving losses (donors who stopped giving for some reason) of 55 percent, achieves a net growth-in-giving of only 10 percent.”
The report on fundraising effectiveness also notes it often costs organizations less “to retain and motivate an existing donor than to attract a new one,” which is why hanging on to those repeat donors is so important.
How does your organization measure fundraising success?