The Earth Is Flat
March 16, 2010
For five centuries, from the Phoenicians to the global exploration of the 15th century Spaniards the conventional wisdom of navigation rested on the belief that the Earth was flat. Venture farther than the known oceans and you would fall off the edge of the Earth into the mouths of dragons, the arms of sea monsters, and heavens only know what else.
Today’s fundraising has its own ‘flat Earth’ beliefs, and as we look at the obstacles and changes fundraisers have faced in the past five years, perhaps it’s time for some changes in our navigational systems.
One of the most impressive navigational charts of the early 21st Century has been Target Analytics National Index of Fundraising Performance. The Index benchmarks 80 or so organizations and millions and millions of direct response gifts to show what’s up, what’s down; who’s acquiring, who’s retaining, and who’s not. The Index provides fundraisers with a year-over-year quarterly analysis of the state of direct response fundraising.
For several years The Agitator has been reporting on trends revealed by the Index. Among the most concerning trends is the steady decline in the number of active donors and the fact that despite increased average gifts on the part of the donors, that increase is no longer enough to make up for declining acquisition and retention rates. All this at a time when the U.S. population is growing.
It’s troubled me a great deal that we really can’t pin down why this is happening. I’ve tried to ascribe the dip to changes in demographics, to the economy, to online media, you name it. But none of these explanations really explained the phenomenon.
Now I know why.
David Lawson of DonorTrends and I have just completed a study to determine why the National Index of Fundraising Performance didn’t match with trends we were seeing elsewhere. It turns out that The Index comprises mostly old organizations and does not take into account the dramatic increase in the number of younger organizations and the donors and funds they are siphoning from the older organizations.
We analyzed the patterns of 46 million gifts contained in our TrueGivers database that covers giving to nearly 23,000 organizations over the past 10 years, and we looked in-depth at the IRS data on the revenue of all public charities. This is what we found:
- Of the 80 organizations in Target’s National Index, 52 were founded before 1970;
- The median age of organizations in Target’s National Index is 59;
- Of the total giving for all of 2007 we studied, two-thirds of that total giving — $311 billion– went to “new” or “younger” organizations founded since 1970;
- 81.5% of all active organizations listed by the IRS have been formed since 1970 with nearly 59% formed since 1990;
- New organizations with focused missions are attracting gifts from donors that have traditionally supported more established organizations with broad missions.
The phenomenon of ‘category competition’ is well-known in retail sales. For example, while the number of Pizza Hut customers may level out or even decline, the actual number of pizza buyers is increasing because of the number of small, independent pizza shops and takeouts.
This shift from the ‘old’ to the ‘new’ was dramatically illustrated 15 years ago when Montgomery Ward went out of business and Sears went on life support as the growing number of shopping malls with their myriad shops sucked business away from the incumbents.
The same dynamic is now occurring in the field of fundraising. We’ve labeled it “Mission Competition” and David and I are going to discuss what it means and what to do about it in a free DonorTrends Webinar titled, Mission Competition: What’s Your Giving Share? on Thursday, March 18th at 2pm Eastern.
Although most of the “old” non-profits are doing OK, the fact is that many of the newer or younger ones are doing better. What we’ve found shakes a lot of conventional wisdom and sheds light on some new strategies every fundraiser should be exploring. I hope you’ll join us as we explain our findings more fully.
We won’t let the dragons get you.
Roger
