Does High Inflation Make You Fear for Your Fundraising Efforts?

There’s no doubt. Nonprofit organizations face fundraising challenges that they have not seen for decades. Nevertheless, opportunities remain even as the latest economic news has not been good:

Consumer Sentiment: The University of Michigan Consumer Sentiment Index for March 2022 reveals that consumer confidence has plummeted 25.5 percentage points compared with March 2021. At 59.4 percent, the consumer sentiment index now stands at the lowest point in two decades. This is not surprising given economic conditions. Unfortunately, it means people will now be especially careful with their personal finances.

Uncomfortable Inflation: Treasury Secretary Janet Yellen predicts another year of “very uncomfortably high” inflation. In March 2022, the annualized inflation rate stands at 7.9 percent, a 40-year high. What’s even more troubling is that by calculating the Consumer Price Index now, using the same formula used in 1980, the inflation rate would stand at over 15 percent! The following chart from Shadow Stats illustrates this point:

Consumers Face Increased Expenses: The average American household is facing nearly $300 in higher monthly expenses due to inflation, according to Moody Analytics. Households in rural areas may face even greater monthly costs as fuel prices rise. This will likely negatively affect current philanthropic giving. While individual charitable giving usually comes in around two percent of disposable income, according to Giving USA, we’re now seeing the erosion of household disposable income.

Inflation May Not be Our Only Problem: Inflation is not our only reason for economic concern. Former US Treasury Secretary Lawrence Summers has not just expressed concern about inflation, he’s worried that US Federal Reserve policies dealing with inflation could lead the economy into a recession.

Despite all of the bad economic news lately, we’re fortunate that not all of the news is bad:

To Raise More Money, Look for More Engagement Opportunities

Smart nonprofit professionals know that fundraising success involves much more than simply asking for money. You need to identify prospective supporters, educate them, cultivate them, then ask for support, and finally steward your donors. An essential, often neglected, aspect of cultivation is engagement.

Sadly, many nonprofit organizations think of donors as piggy banks or ATMs dispensing money. Those charities tend to assume that charitable giving is, by its very nature, transactional. They further assume that low donor retention rates are just the way things are. Those organizations are correct … regarding themselves.

By contrast, nonprofits that treat prospects and donors as partners are more likely to attract support. Furthermore, they are more likely to retain and upgrade donors over time. One way to establish a partnership with people is to engage them in meaningful ways.

So, what does meaningful engagement look like?

PTC’s See & Be Scene Event.

For decades, I’ve been a fan and supporter of the Philadelphia Theatre Company. Recently, my wife and I were invited to attend “See & Be Scene: A Sneak Peek at the 2020/21 Season.” The event involved readings from eight plays under consideration for the upcoming four-play season. Subscribers and donors were invited to attend for free while the general public could purchase tickets at $15 each.

Through the event, PTC accomplished three important things:

1. PTC expressed gratitude to its ticket subscribers and donors.
2. Staff gained useful audience feedback that will help them select the plays of greatest potential interest to PTC’s audience.
3. By giving them a real voice, PTC made its supporters feel like partners.

At intermission, I had the chance to quietly ask Paige Price, Producing Artistic Director, what she and the staff were hoping to get out of the program. She told me that they were interested in audience feedback. They wanted to know what people thought of each option, what they liked and didn’t like. They also wanted to be able to address any questions the audience might have about the upcoming season or the theatre company itself.

I also had the opportunity to speak privately with one of PTC’s board members. I asked him the same question I asked Ms. Price. He gave me a similar answer. Then, I mentioned that the event was a great way to cultivate ticket subscribers and donors. While he acknowledged it was, he told me that the primary purpose of the gathering was the opportunity to engage the audience and learn their thoughts about plans for the upcoming season.

I believe what I was told. PTC used the program to build a genuine partnership with people. Judging from the audience response, PTC succeeded with those in attendance. During the discussion session following the readings, one audience member said, “I think next season we should perform…” Someone else began her comment by saying, “As a member…” Clearly, at least some people in the audience did indeed see themselves as partners with PTC.

Another way that PTC seeks to engage theatregoers can be found in the lobby. A large sign invites people to make suggestions:

Have an idea? We want to hear from you.”

PTC’s Call for Suggestions.

People can take a card or use their ticket to write down their suggestion. They can submit it anonymously or include their phone number or email address so that PTC can respond.

With the “See & be Scene” program and with the request for feedback and suggestions, PTC engages people. Even those who do not take advantage of either opportunity will appreciate having had the opportunity to be heard.

Part of what makes the PTC engagement initiatives effective is that they are sincere efforts to build partnerships rather than cynical, manipulative gestures. By building meaningful partnerships, PTC will likely continue to develop a loyal base of ticket buyers and donors.

Engagement efforts that are sincere and true to an organization’s mission are most likely to be seen as meaningful. And they are most likely to build partnerships that lead to loyal support. While performing arts organizations have a number of obvious ways they can engage people, other types of nonprofit organizations may find it more challenging to do so.

Surprise! You’re Most Likely Part of the Top One Percent.

As you begin to make plans for year-end appeals, let’s spend a few moments considering the idea of entitlement. I’m talking about the idea that wealthy individuals and corporations should, perhaps must, “give back” simply because they have a lot of money.

Do you think the top one percent income earners should pay higher taxes? Do you think they should donate more money to charity?

You might feel a bit differently after I share some news with you. If you earn at least $32,400 a year (or approximately 30,250 Euros, 2 million Indian Rupees, or 223,000 Chinese Yuan), you are part of the top one percent of income earners in the world, according to a new report in Investopedia. If you’re reading this post, I’ll bet the odds are that you’re a one-percenter. Congratulations!

So, as a global one-percenter, do you feel under-taxed? Do you feel cheap and that you don’t contribute enough to charities, particularly global non-governmental organizations? Should fundraising professionals in the USA and around the world expect, perhaps even demand, that you donate more? Should they shame you for not giving enough? Are charities entitled to more of your money just because you’re a one-percenter?

You might think so. I do not.

I believe that charities must behave ethically, provide great services, develop a meaningful case for support, and inspire people, foundations, and corporations to give. Charities must partner with donors, report to them, engage them. Simply thinking that the rich, or anyone for that matter, should do more is not going to get the job done.

I want to share a bizarre story with you that would be funny if it were not true. It’s about fundraising for a wedding. It nicely illustrates my point regarding the failure of an entitlement mindset.

Susan and her fiancé were childhood sweethearts. The couple worked on her family’s farm before attending community college. Then, they went to work to “become financially stable.” The couple continued working hard and eventually saved $15,000 for a wedding. Unfortunately, that wasn’t enough money for the “extravagant blow-out wedding” Susan wanted in order to properly celebrate their “fairy-tale” relationship.

Susan figured her ideal wedding would cost $60,000. So, she decided to look for financial help. She says, “All we asked was for a little help from our friends and family to make it happen.” Specifically, the-bride-to-be sought cash gifts. “How could we have our wedding that we dreamed of without proper funding? We’d sacrificed so much and only asked each guest for around $1,500.” As Fox News reported, Susan also said she “made it clear. If you couldn’t contribute, you weren’t invited to our exclusive wedding. It’s a once and a lifetime [sic] party.”

Fantastic News and Opportunity for the Nonprofit Sector!

The nonprofit sector received a major piece of good news at the end of July. American Gross Domestic Product in the second quarter of 2018 grew at the annualized rate of 4.1 percent. This represents the economy’s fastest growth rate since 2014. GDP growth in the first-quarter was a healthy, though unremarkable, 2.2 percent.

I don’t really care if you love or hate President Donald Trump. I’m not making a political statement. I’m simply reporting on an economic fact that has profound implications for nonprofit organizations.

The news is fantastic for charities because overall-philanthropy correlates with GDP. For more than four decades, philanthropy has been between 1.6 and 2.2 percent of GDP. In 2017, philanthropy was once again at 2.1 percent (Giving USA). This means that when the economy grows, we can expect growth in charitable giving.

Think of it this way: For more than 40 years, the nonprofit sector has received about a two percent slice of the economic pie. It’s safe to say that that approximate proportion will continue. So, if the economic pie becomes larger, that two percent slice becomes larger as well.

While I’m oversimplifying, my fundamental point is sound: When the economy grows, so does philanthropy.

Some economists and commentators believe the robust GDP growth rate is not sustainable. However, if the impressive economic growth continues, or even if growth continues at a more moderate pace, we can still expect 2018 to be a good year for charitable fundraising.

Given the positive economic environment, you have an opportunity to successfully raise money for your organization. But, it’s up to you to seize that opportunity while the positive economic environment lasts.

Here are 10 things you can do to raise more money while the economy is good:

1. Hug your donors. Ok, maybe not literally. However, you do need to let your donors know you love and appreciate them. Do you quickly acknowledge gifts? You should do so within 48 hours. Do you effectively thank donors? You should do so in at least seven different ways. You should review your thank-you letters to ensure they are heartfelt, meaningful, and effective. Have board members call donors to thank them in addition to your standard thank-you letter.

2. Tell donors about the impact of their gifts. Donors want to know that their giving is making a difference. If their giving isn’t making a difference or they aren’t sure, they’re more likely to give elsewhere. So, report to your donors. Tell them what their giving is achieving and that their support is being used efficiently.

3. Start a new recognition program. One small nonprofit organization I know started a new, special corporate giving club. CEOs of the corporate members are placed on an advisory board, receive special recognition, and are provided with networking opportunities. This new recognition program generated over $50,000 in just a few months. While enhancing existing recognition efforts is beneficial, starting a new recognition program can yield significant results.

4. Ask. Your organization is providing important services. It needs money. Give people the opportunity to support your worthy mission. When you ask for support, just be certain not to limit the ask to cash gifts. Research shows that organizations that receive non-monetary donations (e.g., stocks, bonds, personal property, real estate, etc.) grow significantly more than organizations that receive only cash contributions. Partly as a result of the new income tax code, the number of Donor-Advised Funds has grown significantly. So, make it easy for your supporters to give from their DAFs.