Ten years ago, in Danger Ahead, Tom and I warned of steady decline in the overall number of smaller gift donors. Although many heard the warning, few apparently did anything about it.

Today, a decade later the downward spiral continues. The cumulative effects of this ten year 25% decline are real and frightening.

Fundraisers and organizations who rely heavily on gifts under $250 via direct response channels should be especially alarmed.

Here’s the BIG PROBLEM in a nutshell:

Per a must-read report — Gilded Giving — published by the Institute of Policy Studies, American households earning $100,000+ increased their donation budgets by 40% between 2003 and 2013 while household earning less than $100,000 decreased their donation budgets by 34%.

You can download the full report here.

Why care?

After all, year after year Americans give more and more money. Record breaking amounts in fact.

Before I get specific about why direct response fundraisers should care, here’s what this 34% decline in small gifts means to the nonprofit sector generally, and more importantly to society overall.

Nonprofits normally seek funds from obvious sources. Attracting donors involves work and investment. Consequently, return-oriented charities will generally seek to optimize income while minimizing effort to raise it.

And so, the reliance on major donors increases year after year for many nonprofits, while the base of givers under $250 is left to erode in favor of the Big Gift.

Problem is that the giving of many major donors is erratic, leaving many organizations vulnerable to big income swings. On top of that many major gifts come (rightly so) with strings and conditions attached. At some point for many nonprofits, the proportion of restricted major gifts begins causing problems for the nonprofit that has neglected small gift fundraising. It finds itself strapped for unrestricted income to pay the electric bill, some staff salaries and provide essential operating flexibility.

From a broader societal standpoint, there are good reasons to be concerned about the endangered population of under $250 donors. You can read the dire warnings in Gilded Giving, and they range from an increasing number of Koch Brothers-like charities on both the right and the left all too capable of affecting public policy, to the ultimate damage done to local nonprofits like food banks, schools and local cultural organizations who tend to be the biggest losers from this trend.

My reason for calling all this to the special attention of direct response fundraisers is that the steady erosion of small gift donors is the direct response fundraising equivalent of climate change.

The loss of small gift donors dries up the well-spring for mid-level and some major donor giving … limits the growth of sustainer giving … shrinks vital unrestricted income … and plays havoc with the values of diversity and community building essential to healthy organizations.

Like climate change, we can either heed and act on this inexorable trend that has been apparent for more than a decade. Or we can remain in denial, refusing to take the known steps needed to retain donors, build loyalty and commitment and ensure the future by building greater value in our bases of small donors.

The signs of danger and demise are clear. The remedies and practices for avoiding catastrophe and holding on to small gift donors are clear.

So, why do so many fundraisers continue merrily on with heads stuck in the sands of denial?

Roger

 

 

This article was posted in: Breaking Out of the Status Quo, Demographics, Donor retention / loyalty / commitment, Fundraising philosophy/profession, Major donors, Nonprofit management, Research.
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