Great Waves and L-Curves: Some Thoughts on the nfpSynergy Blogs

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.


Just 0.1% of the supporter base often give 30%-60% of total donations, as Peter Wylie’s work has shown. See:

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?



First, let me thank Helen for taking the initiative to start #ResearchPride (and also defining what should come after).  It’s a great and timely idea – I think for a number of reasons:
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  • Fundraised income in the UK and elsewhere will struggle to grow until prospect research is more incorporated into fundraisers work and until senior leadership take it more seriously as a strategic proposition.  Prospect research’s raison d’être is to help fundraisers go where the money is, and go there often.  Yet, too often we find conference agenda lacking prospect research content, and thought leaders not discussing prospect research.  #ResearchPride is our chance to change this and tell the world how important prospect research is to funding more of the vital work our organisations do
  • We cannot escape the fact that wealth an income in many countries is now more unequal than was the case 20 or 30 years ago.  This means we cannot trust our fundraising approaches to chance.  Those able to offer truly major support are a very elite group – and we must be directed in finding them among our supporter base.  Even a brief reading of the Sunday Times Rich List shows that 2% of the value of members of the list (in 2015 valued at £587bn) would double to amount of directly donated income going to UK Charities.  And the Coutts £m Report shows that the link between wealth creation and philanthropy in Britain is weak to the point of not existing. UK GDP is £1.5trn (trillion) per year, yet £m+ philanthropy is valued at £1.3bn.  The Big Society has failed to budge this trend – while the UK is by some measures the most generous society in the world, prospect research can and should help fundraising be strategically directed toward key areas of potential growth, including high-value giving.  Important within this is ensuring charities change their habit of not asking for enough, again, something prospect research can help to change
  • Researchers give the sector space to consider new ideas and cross-pollinate.  In an industry where the next deadline is never far away, we can also help our advancement offices to lift their heads, take a look beyond within-year targets to scan the horizon for trends and innovations.  In doing so, researchers can enable fundraising to move from being a short order cook to Feran Adria.  As we’ve seen from recent developments in the UK, this is invaluable – a week (or a couple of months) is a long time in fundraising, and inertia is often not an option.  We must respond to events, and prospect research should be central to this response.
  • Finally I’m hugely proud that researchers help to make the most of donor contributions.  The ROI for investments in prospect research often exceed 10:1, a truly outstanding return.  If nonprofits are ever to overcome perennial donor concerns over admin costs and impact effectiveness, prospect research will surely be at the heart of the answer.
I’ll leave it at that.  However, many others have blogged/ tweeted and commented this month as part of #ResearchPride – some of the relevant links are here, do check them out:

Looking forward to #ResearchPride 2017!

Preferences, Hidden and Revealed

That it is possible to choose one thing yet prefer another is a very ordinary idea.  Perhaps because it is so ordinary, choice and preference are often mistaken as the same thing, when they are in fact entirely different.  This confusion has crept into fundraising via the fallacy of ‘revealed preference’ where choices are seen as the enactment of preferences. This makes the idea relevant in several respects:
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First, revealed preference is partly responsible for trapping charities in a low income/low reward/low commitment cycle, the endgame of which were the acquisition-based donor strategies which precipitated last years fundraising crisis.  During the ‘marketing revolution’ of the 1970’s and 1980’s, charities came to see fundraising as a branch of marketing, and revealed preference encouraged them to believe that they were mostly giving donors what was being asked for (choice, remember, here being the enactment of preferences).  But the ‘£3 to save the world‘ business model   (h/t Mark Phillips) has long been deficient, if only because the economics of cost-per-acquisition fundraising have been becoming more and more challenging for a number of years.  However, a revealed preference mindset enabled charities to convince themselves they were selling what donors wanted to buy.  This, in turn, led to an acquisition arms race played out in a war room of ever more elaborate and intricate customer journeys, spanning ever more channels and encompassing ever more consumer insights.  This has not ended well.
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Second, revealed preference encourages the view that as donors reveal their judgement through the act of giving, we should be happy with what is offered and not push the envelope too much.  The customer is always right, and markets incorporate all the information you need, right?  And besides, £10bn-£12bn total donations from the public to UK charities is a big deal.  That’s good going, isn’t it?  Well…yes, but.  £10bn-£12bn is no-one’s idea of loose change, but what’s the comparator?  The UK produces goods and services totaling £1.5trn (trillion) each year; at £734bn, Government spending is hundreds of times larger than charitable donations.  British consumer spending, at £378bn in 2014, is also many times greater.  Indeed, increasing the amount donated by the British public from that spent on cheese to that spent on alcohol would be no mean feat.  Current donation levels make the UK by some measures the world’s most generous nation.  But should we take this to mean the British public have somehow found their natural donation limit?  Probably not.
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Third, many organisations – charities included – now use data analysis to try to understand who is most likely to be sympathetic to their cause in the future.  But donor choices often result from ‘satisficing‘, or muddling through, rather than holding out for perfect.  This is why Steve Jobs famously had no time for market research; as he said, “people don’t know what they want until you show it to them”.  Admittedly, qualitative methods are used both offline – in the form of focus groups, donor surveys and capturing other feedback – and online – in sentiment analysis, word clouds, web scraping and other techniques, to counterbalance quantitative methods’ need to extrapolate from past choices.  But quantitative techniques are still dominated by transaction analysis; which is a brake on aiming for ambitious change, as the goal tends to be ‘a bit better than last year’ or ‘a bit better than they are doing’.  Quantitative methods also often do not incorporate granular ratings of wealth or capacity, important as wealth has become more unequal and those able to offer major gifts lie well within the top 1%:
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guardian ons wealth graph
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Finally, and related to the last point, revealed preference can lead to bad strategy.  Availability drives choice – and if the charity you want to support ask for a certain amount by way of a donation, for example, chances are you will anchor your offer around that level.  But this is a choice, not a preference – the supporter is choosing from available options, not those they would most like.  These choices then feed back into available options, and the feedback cycle continues, assisted and amplified by benchmarking, a tool apparently designed to ensure no-one ever tries anything new, ever.  Another facet of this bad strategy is seen the lack of responsiveness to changes in wealth held by Britons.  UK top wealth has grown hugely in recent decades, but many British charities have not aligned their expectation of major giving accordingly.  In a sector where more than 70% of organisations employ two or fewer people this is perhaps understandable.  But a certain lack of ambition holds charities back.  A 2009 Barclays Wealth/Ledbury Research report sums this up in setting the bar for a major gift at £10,000, (see graphic below), even for HNWI’s.  We can and should aim higher than this – indeed we will have to in order to raise more in total than we currently do, rather than cannibalising income from elsewhere in the sector.  Charities represent the best causes imaginable, and should aim to raise more than 0.02% of the money spent each year on consumables.
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Barckays Ledbury graph
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There is urgency in all of this, as marketing becomes more difficult, incomes continue to polarise, the ‘gig economy‘ eats into previously solid professions, the ‘civic core‘ dwindles, and the expectations of younger donors make our existing operations obsolete.  Many charities are pretty good at explaining the ‘what’ of donor behaviour.  However, they are often less good at explaining the ‘why‘.  To get better at this we must escape the trap of believing we can explain behaviour without referring to anything but behaviour, and begin to respect, understand and operationalise the nature and scope of donor preferences, both hidden and revealed.

Craig Linton interview: “the market for something to believe in is infinite”

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Craig outlines his thinking around the recent Rogare/Professor Adrian Sargeant review of relationship fundraising, why the donor journey needs a rethink, and the enormous challenge facing big charities in breaking down silos in order to put the needs of the donor first.  Craig tweets @frdetective, and you can find his blog on the Rogare review here.  The interview is available to download here.

Also, another (Fund) Raising Voices interviewee, Ken Burnett, blogged recently on the relationship fundraising phenomenon his 1992 book began, and why the subtitle is more important than the title.  Ken’s blog is available here; he tweets @kenburnett1.

Craig Dearden-Phillips MBE: “Charities must adapt or die”

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I was delighted to interview Craig recently – his Third Sector articles on charities’ needing to adapt to new funding realities and what went wrong at Kids Company were, for me, among the best of 2015.  He tweets @DeardenPhillips.

His message for charities is clear – that the golden days of (mainly Government) funding are over and we must think hard about the best way our organisations can make the most impact.  This fits with my theory that the three big income streams which have propelled British charities since WWII (50’s/60’s the rise of the generous baby boomers, 70’s/80’s the CRM revolution and ‘fundraising as marketing’, 90’s/00’s New Labour/central Government grants/spending) are, for very different reasons and in very different ways, all ending.  The challenge this presents to British charities should not be underestimated.  In the interview, Craig explains the reasons behind his thinking and gives some predictions about how these will play out among charities over the coming year.  Enjoy.

The interview can be downloaded here, along with all the others from the site.  Apologies for the slightly crackly sound quality in parts of the recording.


Oceans of ink have been spilt in recent weeks to describe and explain the causes and likely consequences of the review of fundraising regulation led by Sir Stuart Etherington.  But the fundamental issue has not received the attention it deserves.  This is not the relative (de)merits of a Fundraising Preference Service, the bonfire of the regulators, or even the need for greater trustee awareness of fundraising, necessary as that is.  Rather the key is, I think, a culture of short-termism in parts of the industry.  This is not directly addressed in the report in any length, and, in terms of proposed solutions,  only perhaps greater trustee oversight will help to remedy it.  Neither a FPS nor extra regulatory muscle will make the slightest headway with short-sighted management, nor the confusion of donations for affinity, where these things exist.  Short-termism is not only a problem for fundraising; far from it.  Al Gore, Prince Charles, the Chief Economist of the Bank of England, and US Presidential candidate Hillary Clinton have all commented recently on the perils of ‘quarterly capitalism’, where organisations sole focus is the next quarterly profit statement.  But an important question is whether the Etherington proposals will have traction on thinking that says ‘as long as this appeal washes it’s face, it’s fine. We’ll cross the next bridge when it comes’.  Because the next bridge has arrived and, as the best Prime Minister Britain never had once said, ‘the first rule is: when you’re in a hole, stop digging‘.

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Let’s be clear. Larger and more prominent sectors than our own have struggled with the slippery issue of culture change in recent years, not least financial services and media. Neither, as I write, has resolved the serious cultural issues they sought to change following various scandals and crises. In finance, ‘too big to fail’ is still with us, and, were Lehman 2.0 ever to transpire, the resolution would be no less messy than first time around.  And in media, reforms proposed by Lord Leveson are still far from effecting a paradigm shift in culture.  These major, systemically important industries have spent millions of pounds and thousands of man-hours trying to understand how to regulate away toxic cultures existing in parts of their industries.  And they have failed in important respects.  That failure stands testament to the fact that changing culture is hard because measuring it is impossible. The nearest we have to a unit of culture is a ‘meme’, and no one even pretends to know how to use memes as a working metric, even forty years after the idea was introduced by Professor Richard Dawkins in The Selfish Gene. But it is a modern axiom that ‘what gets measured gets done’. So how to fix a culture which we cannot measure in any meaningful way?

Two works by Professor John Kay could hold some of the answers for fundraising.  First is the report, commissioned in 2011 by the Coalition Government and published the following year, on tackling short-termism in finance. Of the 17 recomendations made in the report, most relevant for short-termism are the abolition of quarterly profit reporting; the development introducing a broader stewardship responsibilities for directors; consulting major, long-term investors in board appointments; and the recommendation that companies “should structure directors’ remuneration to relate incentives to sustainable long-term business performance”.  For fundraising, the takeaways are that management reporting should include metrics on the long-term wellbeing of the organisation, not just short-term financial returns, that investment must be aligned with long-term priorities of innovation and new product development, and that risk analysis should be both granular and broad-view, incorporating current, as well as planned, activity. Using these measures would have a demonstrable effect on the ways our organisations set their priorities and structure their activities, and would help to remedy charity short-termism as it has begun to with business, although there is still obviously more to do.

Another of Kay’s works may be even more relevant.  In his 2010 book ‘Obliquity‘, Kay lays out a convincing case that achieving objectives is often best done by working obliquely.  He lists example after example of businesses focused ruthlessly on quality and innovation being massively profitable, often leading their respective fields for decades.   He also highlights the ‘profit-seeking paradox’, whereby firms, (most notoriously Enron, Parmalat and WorldCom, but also stalwarts like ICI who lost their way), whose explicit focus was profits and growth, failed, often spectacularly.  Fundraising would be wise to heed these lessons.  As an industry whose raison d’etre is profit, the message is loud and clear: focusing only on money will not raise more money.  To grow giving, the industry focus must move to incorporate much more than pound signs, and should, where it does focus on income, use a broader range of more nuanced measures.  Fundraising consultant Nick Mason has spoken persuasively of the need for charities to focus less on a narrow toolkit of ROI/cost per acquisition plus one or two other measures, and to take a broader view of the metrics used in guiding strategy.  These include the Internal Rate of Return, Net Present Value and the Hurdle Rate, all commonly used indicators in other sectors.  This is partly in recognition that income targets alone do not beget income; building donor relationships is vital.  As Kevin Schulman has said, the first not-for-profit who can make each and every donor interaction a joy will clear up pretty quickly in a field where customer service levels are often mixed.  The sooner this happens the better, as stronger donor relationships will enable charities to build a true ‘value proposition’, and move the business model from Primark to Waitrose. This will in turn engage whole new segments of society, for example those neglected groups in middle England who could pretty comfortably donate in the neighbourhood of £2,000-£20,000 on a regular basis, but at the moment are not solicited for those amounts, or not stewarded to at the appropriate level for those sums.  Focusing on relationships could, obliquely, be the direct way to raising more.

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In all this, it is important to consider the role of regulation. Whatever form it takes, the new regulator will be an essentially reactive institution. Cf. the Charity Commission who, as a body, can barely keep up with major regulatory events such as the Cup Trust saga.  The handling of this episode led a scathing National Audit Office to conclude that the Commission “makes little use of its enforcement powers, for example suspending only two trustees and removing none in 2012-13”, adding that “[the CC can also] be slow to act when investigating regulatory concerns…Furthermore, the [CC] does not take tough enough action in some of the most serious regulatory cases. It is…reactive rather than proactive, making insufficient use of the information it holds to identify risk”.  Margaret Hodge MP, then-Chair of the Parliamentary Public Affairs Committee was more blunt in saying that the Charity Commission “[obviously] has no coherent strategy and has been simply buffeted by external events” adding that “[i]t is clear that the Charity Commission is not fit for purpose.”  Even with a smaller remit, the new regulator will be at or close to capacity from day one.  We must recognise, therefore, that culture change among not-for-profits will come not from an army of regulators monitoring our every move.  It will come from performance management and incentives set by the sector itself. The new regulator will be a fire service, (and not a particularly well-funded one), called out to the deal with the most serious accidents or offences, not a police force patrolling the beat.  In important senses, we have to fix our own mess.

How we define and measure success will be at the heart of achieving this.  Internal reporting, governance and performance measurement to prioritise donor satisfaction, engagement and affinity, and to dethrone ROI and  RFV, (indeed, to ensure that “no one metric is sovereign“), will be critical in moving from ‘has this appeal covered its costs?’ to proper relationship fundraising.  Developing governance, management and methdologies to ensure donor relationships are at the heart of what we do will be the oblique, but also the most direct, way to growth.  The proposed Etherington reforms do not address this issue, and they will not cure the myopia suffered by bits of the sector.  The solutions will come from not-for-profits themselves recognising the need to change.  Hopefully, oceans more ink will not be needed before that happens.