Do Not Make this Big Error with Your Next Challenge Grant

I’ve seen it frequently. Fundraising professionals often make a big error when using a challenge grant. And they compound that error unethically by misleading prospective donors. It’s a common issue that is costing the nonprofit sector a fortune.

What’s the huge mistake? Fabrication of a bogus challenge grant.

True challenge grants are great. When a fundraising professional inspires a donor to provide a challenge grant, the nonprofit has a powerful tool to encourage greater contributions when making an appeal.

Typically, a challenge grant will match new and increased support to a charity. Oftentimes, the match will be dollar-for-dollar, though other multiples can also be arranged. In the case of a dollar-for-dollar challenge, if a new donor gives $100, the challenge-grant donor will give the charity $100. If a $50 donor from last year gives $75 this year, the challenge-grant donor will give $25. Typical challenge grants are not unlimited; the donor will set a maximum total amount.

Using a challenge grant can be an excellent fundraising tool for four reasons:

1.  It encourages donor support by increasing the value of donations. For example, with a one-to-one match, new donors have their contributions effectively doubled, thereby significantly magnifying the impact donors can have.

2. It encourages donor support because donors do not want the organization to lose money. If a donor makes a new or increased gift, the charity will receive additional money from the challenge-grant donor. However, the converse is also potentially true.

If a donor does not give, the charity could lose out on some of the challenge grant. Therefore, while a challenge grant can increase the value of a donor’s gift, it can also create the impression of a cost to the organization if the donor does not give. Some donors are motivated by the concern, “If I don’t give my $125, the organization could miss out on another $125 from the challenge-grant donor. I don’t want to cost the organization $125.”

3.  It creates a sense of urgency to give now. Typically, challenge grants must be fulfilled within a narrow time-frame. So, prospective donors are encouraged to act now rather than delay their philanthropic decision. The sooner someone gives in response to an appeal, the more likely they are to give. People who set an appeal aside thinking they’ll get to it later, often do not.

The urgency created by a challenge grant is also useful for planned giving campaigns encouraging donors to include the charity in their Will (Charitable Bequest). People do not like to think about end-of-life planning, so it’s easy for them to keep delaying until it’s too late. A challenge grant creates a sense of urgency that can overcome what social scientists call personal mortality salience.

You can read about a fantastic challenge-grant campaign for planned giving in my book, Donor-Centered Planned Gift Marketing, beginning on page 188.

6 Ways to Raise More Money without New Donors!

If you achieve your fundraising goal this year, your reward will likely be an increased goal next year. At most nonprofit organizations, the struggle to raise ever-increasing amounts of money never ends. This drives many nonprofits into a continuous donor-acquisition mode.

However, you don’t need a single new donor to raise more money.

Given that the cost to acquire a new donor is often $1, or more, for every $1 raised, finding a new donor does not even help most organizations with short-term mission fulfillment.

So, how can you raise significantly more money for mission fulfillment without acquiring new donors? Here are just six ideas:

1. Ask for More. I still receive direct mail appeals that say, “Whatever you can give will be appreciated.” Ugh! That’s not an ask. If you want people to give, and give more, you need to state your case for support. Then, you need to ask for that support in the correct way.

Many charities simply seek renewal gifts. If I gave $50, the charity will simply ask me to renew my $50 support. Sometimes, a charity will randomly ask me for an amount series (i.e.: $100, $250, or more) that has nothing to do with my previous level of support.

However, there is a better way. Try saying this:

I thank you for your gift of $50 last year that helped us achieve __________. This year, as we strive to __________, may I count on you to increase your support to $75 or $100?”

Thank the donor. Mention how the organization used her previous gift. Establish the current case for support. Ask for a modest increase linked to the amount of the previous gift. A hospital in New York state tested this approach against its traditional approach and saw a 68% increase in giving.

2. Second Gift Appeal. Just because someone has given your organization money does not mean you have to wait a year to ask for more. If you first properly thank the donor and report on how his gift has been put to use, you can then approach him for a second gift. However, you need to have a good case for going back to the well.

Most grassroots donors don’t think, “What’s my annual philanthropic sense of responsibility to this charity? Fine. That’s how much I’ll give.” Instead, most grassroots donors look at the charity they wish to support and then consider how much money they have left over after they pay the monthly bills. Then, they give from that reservoir of disposable income. Guess what? Next month, and every month thereafter, that reservoir usually gets replenished. So, going back to the donor for an additional gift can work, again, if you have a strong case for support. By the way, the replenishing disposable income reservoir is one reason why monthly donor programs can be effective (see below).

3. Recruit Monthly Donors. Way back in 1989, I wrote an article for Donor Developer in which I predicted that every nonprofit in America would have a monthly donor program within five years. Sadly, I was very mistaken. Even in 2013, too few charities host a monthly donor program.

There’s No Such Thing as Corporate Philanthropy!

Corporate Philanthropy does not, or at least should not exist.

While corporations may give to charitable causes, it is not or should not be out of an altruistic sense of corporate social responsibility. Instead, done properly, corporate giving is simply a marketing or research-and-development investment. Let me explain.

Several years ago, I moderated a panel of corporate giving officers for the Association of Fundraising Professionals Greater Philadelphia Chapter. One of the panelists was from a bank, at the time one of the nation’s largest credit card issuers. She told the group that there is no such thing as corporate philanthropy. I saw the mouths of about 100 people drop open. They were either surprised by this news or were shocked that a corporate giving officer would actually admit this. The giving officer from the bank went on to explain that corporations exist for only one reason: to enhance shareholder value. The bank contributed money only where a positive return on investment could somehow be expected.

Many people expect for-profit businesses to act with “Corporate Social Responsibility.” CSR is a term that came into use in the late 1960s. While there are many definitions for CSR, Wikipedia defines it as “a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms.” Today, many nonprofit professionals seem to think that one component of CSR should be corporate philanthropy; they think that corporations should “give back.” News media have even recently done reports on the role of corporate philanthropy.

However, that’s not why corporations exist. Again, they exist to make money for their shareholders, not to perform selfless acts of charity. As for “giving back,” corporations do this every time they pay taxes, provide jobs, pay employees well enough so they can also pay taxes and donate money. As for corporate giving, it needs to accomplish something not just for the charity, but also the corporation.

Marc Gunther, a senior writer for Fortune Magazine, wrote in 2008, “I’m not a big fan of corporate philanthropy. Too often, it’s a feel-good exercise, generating little value for a company’s shareholders. At its worst, it allows CEOs to use other people’s money to glorify themselves.”