Who Gives and Why:Understanding our Donors

Thomas P. Holland, Ph.D., Professor

UGA Institute for Nonprofit Organizations

Major Sources of Income for Nonprofit Organizations

1. Individuals with particular interest in the mission of this organization

2. Foundations and corporations– Independent foundations– Corporations and corporate foundations– Community foundations– Operating foundations

3. Public Sources (federal, state, local)

Category #1: Individuals

Types of Individually Contributed Income

• Annual gifts (unrestricted)• Telephone and mail campaigns (unrestricted)• Special Events (unrestricted)• Capital funds (restricted)• Bequests, wills, trusts, endowments• In-kind contributions

Characteristics of Donors

• Individuals make up largest share of contributions to nonprofits

• Givers tend to be– Wealthier: A few wealthy individuals give over half of nonprofits’

income– As % of income, wealthy people tend to give more than others– Religious– People who volunteer– Men (control family budget) but women leave $ in wills (live

longer)– Married– Well educated

Over 80% of All Adults Give AnnuallyReasons why they do, in rank order:

1. I was asked to give by someone I trust for a cause I believe in.

2. I believe those with more resources should help those with less.

3. I get personal satisfaction from giving.

4. Because of my religious beliefs or commitments.

5. I feel that I benefit when I help others.

6. Sustaining a family tradition.

7. Giving sets a good example for others.

8. Giving helps my community.

9. Gift in remembrance of a loved one.

10. Gift is tax deductible.

11. Giving is encouraged by my employer.

Most Productive Method:

IN-PERSON SOLICITATION• 84% of contributed funds for most nonprofits come from

individuals• 90% of households make contributions, averaging ~$1,500

per year.• 90% of all gifts come from 10% of donors• Identify people with means through research• Then find people who know them and who will introduce

you to them• Invite them to get acquainted with your organization, attend

events, volunteer• Listen to their interests and increase their involvement

accordingly• Invite them to help sponsor activities• Thank them

Giving and Asking

• People give money because they want to.• People don’t give unless they are asked.• People give money to people, not programs.• People give money to opportunities, not deficits.• People give to successful organizations, not to

distressed ones.• People give money to make a change for the

good.• People give on their timetable, not yours.

Motivations differ, so you must

• Learn each potential donor’s interests• Engage them with your program• Demonstrate accountability• Build involvement and trust• Offer them opportunities to provide input

and support• Ask what form of recognition is best for

them• Be careful not to make unsupported

assumptions anywhere in the process

Types of motivations in rank order by percentage of donors

• Communitarians: I give to help my community.• Religious: I give because of my beliefs.• Investors: I give for tax reductions.• Socialites: I enjoy being engaged socially with

worthwhile projects.• Repayers: Someone benefited me, so I want to

pass it along to others.• Altruists: This program is consistent with my

life values.• Dynasts: Our family has always been involved

with organizations like this.

Relationships and Emotional Engagement are Primary

for Any Approach• Concentric circles of engagement• Begin with friends, volunteers, former users of

services, alumni, and any others with history of engagement with your organization.

• Do not waste time or money buying lists from vendors. You won’t raise much money by calling or writing to people who don’t already know you or the organization.

• There is no substitute for relationships.• Share your excitement and satisfaction with others. • Invite them to participate in ways that interest them,

and listen to their responses.• Nurture involvement and trust.

Never Damage Relationships

• Guard against anything that might damage trust, such as misuse of money or negative publicity.

• Move quickly to deal with potential problems.• Don’t cheapen relationships with gimmicks (such

as penny in letter or return address stamps)• Continue to ask and listen to people regarding

organization and gifts.• Find multiple ways to say Thank You.

The Ladder of Effective Communication

• Two-way communication is most effective.

In order of effectiveness:

1. Face to face conversation

2. Small group discussions

3. Telephone conversations

4. Handwritten letter, inviting response

5. Large group discussion

The Ladder of Effective Communication

• One-way methods are far less effective.

In order of effectiveness:

6. Videotape

7. Mass-produced letter

8. Newsletter

9. Brochure

10. News item

11. Advertisements

Preparation: Develop the Case for Giving

• Begin with the why: what is our mission?• Then state the what: what do we want to achieve?• Then state the how: how will this new project

meet a need and fulfill mission?• Then who: who we are and how well we have

been serving our constituencies.• Finally, what specific action do you want the

reader or listener to take?• Do all this in one page.• Task: ask your organization for a copy of its case

material or search Internet for others.

People have different means, so ask for appropriate gifts

• Benefactor• Patron• Sponsor• Donor• Contributor• Friend

• Senior Associate• Associate• Sponsoring Member• Sustaining Member• Contributing Member• Member

Giving Levels: Two Examples

Sustain relationship by good stewardship of gifts

• Thank the donor (you can’t do this too often)• Find appropriate ways to recognize and publicize the

gift. Ask their preferences.• Use the money as the donor intended• Report to donor periodically• Continue to engage him/her with organization• Nurture long-term relationships of involvement and

trust (Any gift should be the first of many, so avoid anything that seems like “take the money and run.”)

• Past gift is best predictor of giving

Special Events: Doorways to Friendships

• All types of special events require extensive work by board and staff, often with modest returns

• Use for public awareness more than fundraising• Think creatively. Banquets, golf tournaments, marathons

have been overdone and lack appeal.• Invite local companies to co-sponsor events in

exchange for publicity.• Plan to build on early events and grow to larger

attendance and income later• Maintain data base on all givers• Thank everyone for their efforts and gifts

Sales and User Fees

• People expect to pay for useful services (ask)• Use sliding scale for service fees, with top end

offsetting losses at bottom end• Build larger income over time• Add direct sales of goods or services• For-profit subsidiaries (museum gift shop)• Begin with market research on consumers’ and

donors’ views of sales or fees

Planned Giving

• Money coming from the donor’s capital holdings (savings, rather than current income)

• Examples: bequests, insurance, gifts or property or income, trusts, endowments

• They may be deferred gifts (most common: pledge in a will) or current (interest from a trust)

• Donors may gain by tax benefits• Needs specialized skills for more complex

forms

Support Category #2: Foundations

• Independent foundations– Private single source of money– Public charitable multiple sources

• Corporate foundations– Funded by a specific company

• Community foundations– Multiple donors– Serves identified geographic region

• Operating foundations– Funds restricted to identified organizations– No grant proposals considered

Independent Foundations• 88% of total number of foundations• 78% of funds granted by all foundations• Private: Usually begun by a family (Ford, Lilly, Carnegie,

Mott, Kellogg, MacArthur, Packard, Mellon)• Family puts money into foundation for tax benefits• Public foundations receive donations from multiple

contributors.• Funds invested and grants paid from interest• Board sets funding priorities (often very specific);

staff screens applications and makes recommendations to board

• I.R.S.: Foundations must give away minimum of 5% of total assets every year to keep their nonprofit status.

Corporations and Corporate Foundations

• ~2,000 U.S. companies have their own foundations (including UPS, AT&T, IBM, Home Depot, SunTrust Bank,)

• Company gives money to foundation, gets tax deduction, appoints officers to admin.

• Priorities identified for grants• Usually make grants only in those

communities where the company has stores or services

Corporate donations• Companies sometimes also make larger

donations out of own operating budget• “Cause-related marketing”• Collaborative activities or sponsorships for

nonprofit organizations, linked with corporate goals (such as a publishing co. sponsoring a literacy program or a computer co. donating equipment to schools)

• Seek to gain positive public image by association with good causes in community

• May involve altruistic motivations

Community Foundations

• Recent development but rapidly spreading• Example: Metro Atlanta Community Foundation• Money comes from multiple local donors• Pooled funds for endowment• Grants made from interest income• Board drawn from donors and community

leaders• Staff screen applications and present

recommendations to board for decisions• Grants made in designated geographic area only• May have some donor-designated funds

Information about Foundations

• Larger foundations have own web sites for initial screening about funding interests and priorities, how to apply

• No substitute for direct relationship

• Central resource: The Foundation Center– Web site: fdncenter.org– Libraries: Both UGA and Foundation Center Library

(50 Hurt Plaza) in Atlanta have printed copies of the Foundation Center Directory.

– Magazine: Foundation News & Commentary– Newspaper: Chronicle of Philanthropy

Cultivating Foundations• Research to identify foundations with priorities

that match your organization’s interests• Call to discuss specifics of their priorities and

preferred forms of interaction• Draft 2-3 page letter of interest and inquiry• Ask for direct interview• Prepare full proposal (only if invited)• Make revisions as requested• Foundation staff submits to board for decision• If your proposal is not funded, ask for feedback

and whether you should re-apply• Thank them, regardless of outcome, as you may

be back later with another inquiry

Grant Proposals• Must follow specific guidelines from foundation• Success depends more on relationship than on

word-crafting• Typical components

– Overview or executive summary– Statement of problem to be addressed– Goals and objectives to be attained– Description of program activities to be conducted– How results will be evaluated– Experience and capabilities of your organization– Plans for funding after grant expires– Budget– Letters of support/ endorsement

Support Category #3: Governmental grant sources

• Federal, state, local departments make grants and contracts

• Fed. offices often have web sites to announce R.F.P.s and funding priorities (issue of time)

• State and local sources often do not, hence require personal visits (ex. Community Development Block Grants)

• Most depend more on relationships than on highly crafted proposals

• Fed. competition extremely demanding• Expert panels review proposals for quality and

reputation of applicants• Political reviews trump everything

Federal Grants and Contracts

• High competition, relatively low yield for effort• Require good writing skills• Directed at special programs, not ongoing

operations (leaves you hanging when $ runs out!)• Ask local public officials about community

development block grants that might match your programs (if you serve low-income population)

• Search directories and web sites for those departments interested in your programs and goals

• Spend time with grant officer, develop relationships, get to know their interests

• Follow their guidelines for proposal

Finding out about Federal Grants

• U.S. Dept. of Health and Human Services www.hhs.gov

• Catalog of Federal Domestic Assistance www.cfda.gov

• Centers for Disease Control and Prevention www/cdc/gov/funding.htm

• U. S. Dept. of Education www.ed.gov• National Institutes of Health www.nih.gov• U.S. Dept. of Justice www.usdoj.gov• U.S. Environmental Protection Agency

www.epa.gov/ogd• Substance Abuse and Mental Health Services

Administration www.samhsa.gov

Proposals to Governmental Sources

• Most have VERY specific guidelines for proposals plus numerous forms, so ask them for copies and follow instructions.

• Word-crafting more important, but relationships essential too

• Typical components of proposals are similar to the outline for foundations

• Proposals reviewed by expert peer panel• Political reviews often override experts

A Marketing Perspective on Funding Nonprofits

Marketing perspective on fundraising for nonprofit organizations

• We are accustomed to thinking of actual and potential consumers of our programs in terms of market segments.

• Donors are another whole area of essential constituents of our organization.

• Applying basic concepts of marketing to donor audiences can open up fresh perspectives and steps.

Most nonprofits have two key constituencies

• Clients or consumers for whom the organization exists and to whom goods and services are provided, and

• Donors (and volunteers) who provide the majority of resources necessary for the organization’s services to take place.

• Sometimes these overlap (membership association) but more often they do not (homeless shelter).

• Dual constituencies make marketing complex, as the needs and interests of both must be addressed.

Marketing is an external orientation• Most staff are internally focused, concerned with quality of

projects and programs.• The external environment is increasingly complex,

competitive, and demanding about accountability and responsiveness.

• Our intended supporters’ points of view, needs & interests are vital to our success.

• Other organizations that are more attentive and responsive will successfully compete for our donors and their resources.

• So we must identify our specific donor audiences and then find out what each wants, in what forms and ways of delivery. Ask them.

Market segmentation• Look for natural groupings among possible donors,

based on needs & interests (such as age, sex, geographic location, status, employment, income, marital status, developmental stage, motivations)

• Who is involved with us? Why? How often? In what ways? What motivates them to do so (quality, benefits, contacts, specialty, variety, recognition)? Think in terms of concentric circles of levels of engagement.

• For each segment, How do they evaluate their involvement? What alternatives are available to them? What should we do to expand their involvement with us?

• Identify the most relevant targets and approaches to each group, and then tailor our approaches to the relevant characteristics of each individual.

• Get their views and input early; don’t make assumptions that you already know anything about their views.

Major Segments of Nonprofits’ Markets

• Terms: segments, audiences, publics

• Public: federal, state, local

• Foundations: charitable, private, community, corporate

• Individuals: categories by gender, age, education, prior interests, motivations

• Must get to know the interests of any segment before asking for money

Supporters and organization must share in the mission

• If it is based upon donor concerns and interests, there will be energy and resources to achieve shared goals.

• The organization must know what criteria actual and potential donors are using to judge the success of its performance.

• Activities must be consistent with shared core values or there will be little chance of achieving donor satisfaction.

Aspects of effective reciprocal relationships with sponsors

• Each group is necessary for the other to succeed. Both must receive adequate benefits in order to be successful.

• Organization must involve donors to accomplish its goals. Forms of engagement must be tailored to their identified interests.

• Messages of encouragement, solicitation, and benefit are sent by those inside the organization to those outside, while messages of acceptance, displeasure, and encouragement are sent from those outside to those within the organization.

Appealing to donors• There must be some degree of current interest in the topic

for people to respond to overtures from the organization• Information presented by the organization must be

compatible with listeners’ prior values & attitudes for them to be receptive

• People respond in differing ways to same material, and their response depends on their beliefs and attitudes.

• We must understand each potential sponsor’s interests and tailor our approaches to match.

• Example: packaging aspects of the organization to appeal for donor support (naming opportunities)

Understanding sponsors’ needs and interests

• Who are our targets? Specific groups and individuals.• What are the key segments (sub-groups) and persons of

influence within those groups?• What are the needs/ interests of each? Ask.• What business do they think we’re in?• How much interest or awareness do our activities generate

among them?• How satisfied are they with our output? Good fit?• What are our competitors doing about these issues?• Do we have any distinctions that allow us to be in a more

attractive position than our competitors to appeal to potential sponsors?

Trends in donor markets influencing their views of us

• The external environment is increasingly turbulent, unstable, changing

• Supporters want more control, and loyalty cannot be assumed

• Informal networking is less reliable as source for money, volunteers, publicity

• Public policies are changing• Demands for accountability are rising• While some nonprofits are paying attention to such

changes, most are not

More trends relevant to donors

• People are less loyal to old, familiar organizations; brand loyalty diminishing

• People have fewer close friends or long-term commitments; more transience

• Average age is increasing• People distrust large organizations, and interest in joining

organizations as formal member is declining• Investment in civic activities has diminished• Technology emphasizes quick responses• Choices among options, brief engagement, and privacy

are valued

To respond, we must be clear about

• What exactly is our mission, and how should we carry it out? • How do our actual and potential supporters view our mission?

Will they support it? Why?• How will we identify and communicate our goals?• What approaches to supporters will best fit with our mission

and best appeal to them? Ask them.• How will we present the organization in ways that are positively

noticed and valued by them?• How will we organize our efforts to engage them so we will be

successful in accomplishing our goals?• How will we make best use of their resources to sustain our

programs? Ask them.

The self-interest aspect: Exchange

• Marketing involves identifying how to get the desired response from those people the organization has targeted for involvement.

• People voluntarily give up something (time, money) in exchange for benefits they see as more valuable (recognition, involvement, friendship, worthiness).

• There are costs & benefits on both sides. They must be in balance to create satisfied sponsors and a successful organization.

Aspects of successful exchanges

• Each party in the transaction should sense that they are receiving more than they are giving up.

• The nonprofit must understand what supporters want and how it truly provides them their expected benefits.

• The nonprofit must satisfy efficiently and effectively its half of the transaction.

• Are we truly adding value for them?• By building on its strengths, the organization can

better engage sponsors and strengthen their loyalty.

13 key questions for developing a strong marketing strategy

• 1. What services does this organization provide? How clearly are they grounded in our mission?

• 2. Who are our intended sponsors? What segments (interest groups) are there among them? How well do we know the specific needs and interests of each?

• 3. What characteristics and interests of our sponsors are most relevant to the design of steps to engage them?

Key questions continued

• 4. Who are our sources of income? Who do we want to become sources?

• 5. What steps are necessary to secure, diversify, and sustain support from each of them?

• 6. What are the best ways to understand the interests of actual and potential sponsors? Answer: by asking them.

• 7. What factors are relevant to deciding what benefits we offer them? What impacts do those answers have on success of recruitment efforts?

More key questions

• 8. What are their preferred ways for us to communicate with them and keep them informed about our programs?

• 9. What influences our intended supporters’ motivations to become and then stay engaged with this organization? Their criteria?

• 10. How can we package aspects of our organization so they appeal to donors?

• 11. What alternative sources for engagement are available to them, and how do those sources influence the appeal of our organization?

Key questions concluded

• 12. Are our sponsors satisfied with what they are getting from their engagement with this organization? (periodic assessments)

• 13. What steps should we take to improve and enlarge their engagement with us? Such as:

– Fine-tune and tailor efforts, diversify them with horizontal or vertical additions, improve quality, reduce costs, change location, heighten attraction

– reach people earlier or in more effective ways– anticipate future interests and prepare to address

them before our competitors do

Components of marketing strategy

• 1. Mission, purposes of organization’s existence, must guide all our actions

• 2. Programs depend on supporters’ interests (requiring market research using demographic analysis, focus groups, individual conversations)

• 3. Knowledge of competition: what are they doing and how do those actions impact us and our actual and potential sponsors?

• 4. Identify and use our competitive advantages: Are we distinctive because of highest quality, best networking opportunities, most appropriate forms of recognition, lowest costs for them, most respected staff, most highly endorsed programs?

Steps to a competitive strategy• Gather information on market conditions and supporters’ interests• Identify avenues to donor acceptance by asking them for input,

suggestions.• Every member of our organization must approach work in terms of

engaging supporters.• Emphasize that accomplishments of this organization are due to

supporters’ efforts• Specify goals and action steps for engaging them• Monitor results and publicize them• Use appropriate and tailored forms of recognition• Modify programs (and people) that do not engage sponsors and

produce results

Commitment is crucial• Everyone must be fully committed to meeting supporters’

interests, from board and top management on down through all staff

• Articulate our strengths and weaknesses• Always tell the absolute truth about the organization and its

programs. Integrity builds trust.• Explain actions in light of mission and goals• Put our explanations in supporters’ terms• Focus on the key donor issues critical to the organization’s

success• Communicate with them in their preferred approaches and

media

Application ExercisesAsk nonprofit leaders to identify major categories of support

sources and amounts from each. What are the ways each source is approached?

Examine case statements from nonprofits: are they clear and persuasive?

See material on Internet resources for web sites to use in research on potential donors and grant-making organizations.

Explore foundation and governmental web sites and see what you find that may be relevant to your selected nonprofit.

Also run Google searches on some public or corporate leaders to identify their possible interests in types of nonprofit programs.