A few quick thoughts on the insightful recent pieces from Joe Saxton at nfpSynergy, which lay out some of the bigger threats and opportunities currently facing fundraising.
The challenges are spot on. Very hard to argue that squeezed incomes, growing public debt, lower Government funding, disintermediation and new technologies allowing more public fundraising are anything else but facts of life fundraisers must learn to live with. Perhaps most concerning is the fall in incomes which, combined with growing debt, will probably reduce confidence to give among a broad swathe of families, especially as these trends are so widely reported that, reporting which could curb confidence to spend. To my mind, these threats deserve far more attention and deliberative discussion.
Great to see Rowenna Fielding use her comment to pick up on the fact that smaller databases need not be a synonym for shrinking income. She is absolutely right to say that “[r]educing database sizes so that they reflect high-quality engagement with supporters rather than large volumes of obsolete data is a good thing”. We now have many years of evidence to suggest that response rates for many charity marketing appeals are well below 1% in many cases. My own view is that sending appeal after appeal to largely unresponsive audiences has been one of the main reasons for the doubling of complaints about charity fundraising in four short years from 2012-2016. This model seems especially futile given that a tiny minority of donor provide a significant fraction of the income for many of our organisations. Many not-for-profit’s income base would look like an L-curve (with the L turned anticlockwise to lie on its long edge), with a third or more of all income coming from just one or two tenths of a per cent of the donor base (this trend also holds in the US, as the work of Peter Wylie has shown). Important to note too that since the 1970’s and 1980’s, when charities began to adopt database-driven marketing activities, the level of donations from private sources to UK not-for-profits has not risen at all (as far as data is available) and, as I wrote recently, has probably fallen as a proportion of economic activity far more quickly than many people realise. It also seems possible that the use of database-driven fundraising has increased inequality within the sector, with a small number of the very largest organisations reaping most of the benefits of marketing-led approaches. This links to Joe’s very pertinent point on mass affluence. Approaches to this group in recent years have often taken the form of ‘mid-value’ fundraising, where a combination of greater ask amounts, bespoke communications and dedicated relationship managers are employed with higher value donors to drive giving. Speeding up growth in this area, and exploring other methods to capitalise on the mass affluent market, will be an important part of solving the puzzle of how to grow overall giving in the coming years.
And while it is true that Legacies present a tremendous opportunity for fundraising, it is also the case that the ‘Bank of Mum and Dad’ is the 9th biggest mortgage lender in the country, and that unsecured credit is exploding (again) in the UK, leading to concern from the Bank of England and others that consumer credit growth is a risk to the economy. The estimated £6.8trn (trillion) value of UK homes does have extraordinary potential for to grow fundraising, this does I think have to be tempered by the fact that much of this value is either likely to be tie up in parents’ commitments to support their children to get on the property ladder. Having said this, it’s hard to see why the ‘giving while living’ model popularised for the wealthy by Chuck Feeney should not be rolled out more widely than it currently is, provided ways can be found to unlock value currently tied up in illiquid assets like real estate.
Joe and I share the same major concern, namely, who is going to guide charities towards the major structural changes needed to move from here to there. The ‘great waves’ of funding which have sustained UK not-for-profits over most of the last century originated (as far as I can see) in large measure from outside the not-for-profit sector. World War 2 drove many innovations in fundraising which are still with us today (including payroll giving, door-to-door collections, sponsored activities and selling goods to raise funds for charity). The establishment of the National Lottery was a Government initiative, driven personally by Sir John Major, with the huge increase in spending on and contracts to the Third Sector initiated by New Labour beginning in 1997. The fact that, as Joe says, the Institute of Fundraising, NCVO and other major bodies are showing rather little interest in nudging the sector towards a sustainable growth path should be of concern to all of us. Existing funding models are not in good health, yet the bodies who could help drive moves to new methods are not doing so. Will they ever?