The numbers are out.
Charitable giving grew by 2.1 percent in 2014, according to the newly-released 2014 Charitable Giving Report from Blackbaud, and this modest growth will no doubt prompt nonprofit fundraisers and executives to take a step back and evaluate their own fundraising results from the past year. But behind this solitary, lackluster statistic, there’s a more complex and profound transformation taking place in the U.S. charitable giving environment.
Above all, nonprofits currently face a challenging combination of longstanding norms and evolving trends. Nonprofit trade journals are full of articles about online giving trends, social media tactics and crowdfunding triumphs that provide resounding success stories and helpful tips around improving fundraising effectiveness. These newer fundraising models are critical, and will only become more important over time, but they are just one piece of the puzzle. Online donations accounted for only 6.7 percent of all U.S. giving in 2014, according to Blackbaud, and nonprofits are still largely working to secure donations via traditional channels, attract and retain new donors, and encourage affluent donors to extend their generosity through large gifts. To be sure, these perennial challenges are not going anywhere, but in the face of evolving donor behavior, nonprofits must evolve, as well.
Consider, for example, what’s occurring among the largest charities in the United States. According to The Chronicle’s Philanthropy 400 index, these top organizations saw an 11 percent boost in donations during 2013, driven largely by affluent donors. Despite this growth, donor preferences shifted notably, and the affluent donors that contributed the lion’s share of revenue to the 25 largest nonprofits increasingly gave to donor-advised funds (DAFs). In fact, four of the top 10 nonprofits by revenue were DAFs last year, and a growing number of these funds continue to move up the ranks. For traditional large charities (which saw 1.3 percent growth in donations during 2014), as DAFs receive a greater share of contributions from America’s philanthropists, the ongoing challenge of attracting and retaining donors is only further intensified.
This is just one of many major shifts in donor behavior, but its impact and ramifications are clear: Even the sector’s behemoths face competitive threats and the draining effects of donor abandonment. Charities of all sizes and across all segments rely on large bases of generous givers. But as new generations of donors gain financial means, and as the interests and giving preferences of existing donors transform, so must charities’ fundraising strategies.
What remains constant is the need for engagement. However, shifts in technology mean that connecting with donors requires new mediums of engagement that are accessible, relevant and appealing. For most organizations, antiquated tactics like telethons, telephone solicitation and direct mail campaigns no longer suffice. Effectively competing for funds now demands an adaptive and strategic approach—one that clearly and creatively communicates outcomes; one that creates an impassioned community of advocates; and one that, ultimately, transforms these advocates into a strong base of donors for sustained fundraising growth.
Moving forward, savvy and successful organizations will be those that not only adapt strategically, but also tactically. Digital platforms—online donation portals, mobile-friendly sites, text and email campaigns, social media campaigns—offer the ability to constantly and creatively engage existing and potential donors, as well as build online communities of advocates and financial supporters. Just as importantly, they provide donors with ease and accessibility for actually making donations. With 8.9 percent growth in overall online donations during 2014, a strong online presence is now essential for nonprofits.
Still, staying relevant in today’s highly competitive environment requires constant tactical innovation. From fun and engaging social media campaigns like the ALS Ice Bucket Challenge, to the rise of community-building giving days like #GivingTuesday, organizations are starting to realize that aside from large gifts, big results can come from outside-the-box fundraising initiatives that encourage peer-to-peer giving. Expect to see more nonprofits pushing the creative bounds and achieving new levels of success in the year ahead.
Article reprinted from the BDO Nonprofit Standard blog and “Nonprofit Standard” newsletter (Spring 2015). Written by Laurie De Armond, CPA, Partner. Copyright © 2015 BDO USA, LLP. All rights reserved. www.bdo.com.