Craig Linton’s excellent and timely post over at Fundraising Detective got me thinking, especially his points about seeking market share with no growth overall.  For context, this chart from a recent NCVO report neatly illustrates the dominance of ‘big charity’ in raising funds:

Now compare this with the increases in individual giving of six of the largest national charities in the UK:

• CRUK Individual Giving income 2008/9: £90.9m: 2013/14; £123.4m
• Save the Children Individual Giving income 2008/9: £28.1m; 2013/14: £43.5m
• Macmillan Individual Giving income 2008/9; £16.1m: 2013/14: £38.5m
• BHF Individual Giving income 2008/9; £18.6m (donations): 2013/14: £22.7m (IG not split out; this covers ‘donations’)
• NSPCC Individual Giving income 2008/9: £48m; 2013/14: £68.1m
• Red Cross Individual Giving income 2008/9: £19.5m; 2013/14: £48.5m

Combined gains of £123m in five years; pretty chunky in a low-growth sector where most organisations have 10 or fewer employees.  Craig cites the £18m increase in individual giving expenditure by six large charities last year, and declining ROI.  From the figures above though, (our lists don’t exactly match, but Macmillan and British Red Cross, not included in his expenditure figures, must be at the high end of spenders), ‘big charity’ was spending on the basis of success — their IG income has grown hugely, if expensively.  It’s plausible that the ripple effect of this costly growth was for other smaller charities also to turn up the volume on acquisition.  I’ve not been through the accounts so can’t definitively say this, though in the comments to the article Mark Phillips, Founder of agency BlueFrog, does say that, according to his analysis of accounts, this trend prevails outside the top ten biggest charities.

To me, these gains present the sector with what economists call ‘collective action problems‘, where individuals’ incentives differ from those of the collective.  So, individually, it made business sense in 2008 for ‘big charity’ to (aggressively) pursue market share through existing channels.  But, collectively, this race often took the (ultimately damaging) form of higher ask rates and more acquisition without a matching focus on retention.  When I interviewed  Macmillan’s Head of Insight earlier this year, one of the questions was ‘if you could choose to have one piece of data/information about your suporters, what would it be?’.  Answer: supporters’ ask tolerance level, ie, how often can we ask before their patience snaps.  Just a straw in the wind but telling nonetheless.

This speaks to a similar, but bigger, issue, namely a lack of disruptive innovation.  As Craig says: “if the market isn’t growing, then the only way you can grow is by taking market share from your competitors”.  But as it stands there is little ‘first mover advantage’ for many charities to strike out with a really big, but risky, initiative which may not pay off, and which can be co-opted if it does.  But not creating new types of products (not just versions of existing products or appeals) harms the collective in stunting overall growth.  This is a classic collective action problem, the tricky bit being that such problems are often solved by the (Enrepreneurial) State stepping in to do basic, blue-sky research that moves things forward; as this now-classic chart from Mariana Mazzucato’s book of the same name shows, the iPod and iPhone is almost entirely derived from Government-funded technology:

So, of course, market growth via product innovation is possible, and we do have great initiatives like SOFII and Innovation in Giving (to name but two).  But the the current Government is unlikely to ramp these up anytime soon, and we can’t wait for A. N. Other Government.  Karl Wilding, Director of Public Policy at the NCVO, flags the important example of ethical products, UK sales of which have quintupled since 1999, as this graph shows:

He’s right to raise the example: this growth is both a promise and a threat; promising because it shows that demand is there for ethical products, a threat because how long before this growth subsumes our own?

“If something cannot go on forever, it will stop“, and after the last few months, it’s pretty clear that growing by turbo-charging acquisition again will not fly, and new markets have to be created for charitable giving.  Creative destruction is real; without growth, fundraising will be overtaken.  Craig and Mark nail the issue (I think) in pointing out that the wealthiest 20% of British society donate a smaller fraction of their income to charity than everyone else, and raising the question “[which charity] is going to make the break and try and establish a more ‘luxury’ giving brand?”. 

I’m off to buy a crystal ball…