fundraising

Gala Going

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Seth Godin recently linked back to a post he wrote in 2011 about the economics of fund raising galas. To heavily summarize what many of us already know, he points out that it is difficult to get someone to give money to a cause, but if you wrap it in a social occasion, people are willing to spend a large amount of money with the knowledge that some of it will go to a good cause.

Of course the issue is, there is a lot of time and money being spent on organizing the event. When it is all over, there may be a significant amount left over to put toward the cause, but there would have been a lot more had there not been such a large amount of fundraising cost involved.

But that brings up the simple question about whether fundraising can be decoupled from the social element. The basic development office truism is that people give to people, not organizations. Donors need to feel a personal attachment and investment to the cause.

There is an event called an Un-Gala where you are supposed to stay at home and make a donation. But if you Google the term, you will find that a lot of people sort of missed the memo and are having big flashy events.

At the same time, donors are increasingly looking at the overhead costs of non-profit organizations. Organizations like GuideStar, Charity Navigator and BBB Wise Giving Alliance are pushing back against using overhead ratio as a measure of a charity’s effectiveness.

Then there are some like Dan Palotta who are really pushing back against the concept of overhead ratios and advocate for spending large amounts of money to fund raise enough to pursue big solutions.

He has no desire to decouple the social aspect from fundraising. The more galas, 5k runs and promotional efforts you can muster in order to raise awareness and forge a connection or investment with the cause, the better in his mind.

I find a lot I agree with in Palotta’s philosophy. His thoughts about people taking too conservative a view about fund raising bear considering. Maybe my next statement is reflective of that mental malaise.

I am not sure most non-profits operate at a scale on which his ideas would be viable. I think he is envisioning the steps large cause based charities focused on cancer, poverty, diabetes, environment, etc. An arts organization would probably have to adopt a vision on a statewide scale rather serving a city or town to be operating on the scale required to viably follow the approach he advocates.

I have generally viewed Kickstarter and similar crowdfunding services with a semi-skeptical eye. However, reading Godin’s post on gala economics, I have to admit crowdfunding is superior in some aspects. It does reduce the cost of the social element to some degree. There are costs associated with producing a video appeal and producing and fulfilling the donor benefits, just as with a gala event. However, the costs aren’t likely to be as great as for a fundraising gala.

I have heard some horror stories from people who severely underestimated the amount of labor and cost involved with meeting their crowdfunding promises, but I can attest to the fact people do the same with their gala events. Crowdfunding sites allow an opportunity to experiment and relatively quickly refine your approach over various iterations. Something that is not easily done when you are talking about organizing successive social events.

So it is possible in time people will become as adept at creating engaging crowdfunding presentations as they are with gala auctions.

While most crowdfunding sites are focused on projects rather than being optimized for annual seasonal fundraising events, I imagine that design might evolve over time. Just as likely, non-profit organizations may find the idea of anchoring fundraising around an event on a single day is inferior to a series of longer term appeals customized and delivered to specific groups.

A recent article on Nonprofit Hub notes that donor fatigue is not real. People are willing to entertain multiple requests for donations. The thing that wears on people is poorly designed request and follow processes. A targeted, online approach to both may be the solution and allow for more frequent solicitations.

The other little nagging consideration is if people are increasingly having their cultural experiences at home or on a handheld screen, what will be the future of gala events? Granted, everyone loves a good party and may show up for gala events when they never darken the door at any other time of the year.

I would be interested to know if anyone has studied whether people whose only connection with an organization is these semi-annual events donate as much as someone who involves themselves more frequently. It would be difficult to measure. The infrequent attendee could easily be swept away by the emotion of the night (and perhaps a sense of regret for not participating more often) and give quite a bit. Someone who participates often may not give as much because they are not wealthy, but attend the gala because they do feel a significant appreciation for the experience they have had.

The reality is, both approaches may ultimately be necessary. Currently crowdfunding sites tap as much into the participant’s wider social network as much as it does their direct connection and interest in the project. Live events appeal more directly to a person’s connection, but provide an opportunity mingle and have an enjoyable social experience that a video on a website can’t provide.

If You Believe In What I Am Doing

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Some data on the most successful of President Obama’s fundraising letters is really destroying what I thought I knew about constructing emails. It turns out, the most informal subject lines garnered the biggest donations. His campaign would do extensive testing on dozens of variations in the formatting, amount requested, tone, etc before discovering a winner they would send to the millions.

According to the campaign, the less professional the email looked, the better. They were a little incredulous at how good a response the most ugly emails received (my emphasis)

It quickly became clear that a casual tone was usually most effective. “The subject lines that worked best were things you might see in your in-box from other people,” Fallsgraff says. “ ‘Hey’ was probably the best one we had over the duration.” Another blockbuster in June simply read, “I will be outspent.” According to testing data shared with Bloomberg Businessweek, that outperformed 17 other variants and raised more than $2.6 million.

Writers, analysts, and managers routinely bet on which lines would perform best and worst. “We were so bad at predicting what would win that it only reinforced the need to constantly keep testing,” says Showalter. “Every time something really ugly won, it would shock me: giant-size fonts for links, plain-text links vs. pretty ‘Donate’ buttons. Eventually we got to thinking, ‘How could we make things even less attractive?’ That’s how we arrived at the ugly yellow highlighting on the sections we wanted to draw people’s eye to.”

Another unexpected hit: profanity. Dropping in mild curse words such as “Hell yeah, I like Obamacare” got big clicks. But these triumphs were fleeting. There was no such thing as the perfect e-mail; every breakthrough had a shelf life.

In light of this, I am starting to wonder if perhaps I am working too hard on the monthly newsletters we send out with information about upcoming shows.

Actually, the real lesson here isn’t that the pared down approach works but rather than you will never really be able to predict what will connect with people and you need to be constantly testing.

With as many people sending out as many emails as the Obama campaign had, none of them seemed to be able to accurately predict what approach would work best and even then, the appeal quickly waned. Which I am sure can be partially attributed to the sheer number of emails that people were receiving each day. I suspect a performing arts groups could probably experience success with the same approach over the course of a few emails.

One question I had given that my email list does not measure in the tens of millions was how large a sample size do you need to accurately measure the effectiveness of an approach? Has anyone worked with A-B testing enough to know?

By the way, the title of this entry is stolen directly from Obama’s list of effective subject lines. I will be interested to see what the response rate is.

Oh What A Tangled Web…

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Today at lunch a musician friend was picking our brains about a fund raiser he wants to do for a cause he really believes in. He outlined his vision and then asked for ideas of places he could hold it. There were a couple assumptions he made about his budget that were unrealistic which we helped him to re-evaluate.

The discussion made me think of an article someone I follow on Twitter recently linked to by Nell Edgington, “5 Lies to Stop Telling Donors.”

Edgington lists the lies as:

1. X percent of your donation goes to the program
The distinction between “program expenses” and “overhead” is, at best, meaningless and, at worst, destructive… It is magical thinking to say that you can separate money spent on programs from money spent on the support of programs…“overhead” is not a dirty word…

2. We can do the same program with less money
No you can’t. You know you can’t. You are already scraping by…Politely, but firmly, explain to the donor that an inferior investment will yield an inferior result…

3. We can start a new program that doesn’t fit with our mission or strategy
Yes, that big, fat check a donor is holding in front of you looks very appealing. But if it takes your organization in a different direction than your strategy or your core competencies require, accepting it is a huge mistake…Don’t let a donor take you down that road.

4. We can grow without additional staff or other resources
Nonprofit staffers truly excel at working endless hours with very few resources…But someday that road must end…

5. 100 percent of our board is committed to our organization
If that’s true, then you are a true minority in the nonprofit sector. Every nonprofit board I know has some dead wood…It’s a fact that funders want to see every board member contributing. But instead of perpetuating the myth that 100 percent is an achievable reality, be honest with funders…It is far better to demonstrate that you are tirelessly working toward 90 percent.

I have frequently linked back to a post Andrew Taylor made about 6 years ago where he suggests non-profit organizations aren’t doing themselves any favors by keeping funders expectations high when they report everything went as good, if not better, than planned every single time.

In recent years “overhead” has come to the fore as a problematic measure of effectiveness. I think the whole idea about low overhead being a measure of effectiveness is the root of the other evils Edgington mentions in her article, in the pursuit of portraying themselves as having low overhead non-profits will say they can do more with less money, do more with same/fewer staff and the organization has a super efficient board.

An April article in the LA Times talks about why overhead is such a poor measure of a charity. In that column, Jack Shakely, president emeritus of the California Community Foundation, cites the example of a group that was buying its medicine in Canada but was using the cost of the medicine in the U.S. as a basis to report the difference in price as an in-kind donation in order to make their administrative costs appear to be a smaller portion of their budget.

Writes Shakely (with my emphasis added),

Don’t get me wrong. Low administrative costs could indicate prudence and sound judgment at a charity, but they could just as easily indicate inadequate staffing, insufficient salaries or, shall we say, fudging. Moreover, administrative costs aren’t the primary measurement of for-profit excellence. Are McDonald’s admin costs lower than Wendy’s? Apple’s lower than Microsoft’s?

[…}

But our intuitive thinking system wants an answer now, and because we are intuitively inclined to believe that the nonprofit sector is filled with soft, amateurish executives, we latch on to the pseudo-science of administrative costs as a measure of excellence. It’s hogwash; there is absolutely no way of telling that an organization with 5% administrative costs is superior to one with 20% costs based on that criterion alone. In fact, the exact opposite may be true.

As Shakely notes, it will be hard to get donors and funders to shift to better criteria when the overhead ratio appears to be so clean and rational a measure. But as both he and Edgington comment, no funder is going to use any other measure of evaluation if they aren’t told the criteria is unfair and unrealistic.

Think about what you can do to change assumptions as you make your next pitch or write your next grant proposal.

Info You Can Use: More Cell Phone Donations

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Back in February I wrote about using texting to donate to charities the way people were doing immediately after the Haiti earthquake. I had noted the high cost of setting something like this up was probably cost prohibitive for most. I also suggested that the costs would likely come down as its use became more prevalent or someone figured out a more efficient way to process the payment.

According to Fast Company , it looks like someone has done the latter. Mobile companies Obopay and Benevity have created a way in which you can text a word, choose your cause and have the money and acknowledgment issued immediately. Not only does everything get processed faster, but there is flexibility in the amount you can donate. According to a press release issued by the company:

“The new mobile giving solution enables charities to collect much higher amounts – up to hundreds of dollars – and provides the non-profit with much faster access to the funds, compared to other text-to-donate offerings that have been limited to $5 and $10 amounts and have taken over 90 days to get funds to the cause.

[…]

…said Bryan de Lottinville, CEO of Benevity. “As personal and corporate philanthropy recovers following the recession, mobile donations and campaigns will have increasing importance. We’re delighted to be part of a new solution that will provide companies and consumers with an easier way to give to causes that resonate with them. We’re also thrilled about making this functionality accessible to all charities and consumers, regardless of their size or the amount they can donate.”

No mention of the costs which I will grant, could be just as high as with the text giving I reported back in February. With faster receipt of funds and increased amount people can give, the costs can start to look more reasonable. Again, as people use it, the costs may come down. This partnership may or may not become the dominant player, but what the CEO says about donating by phone becoming more prevalent is likely true.

Since people tend to act on impulse with their phones, texting and calling their friends as soon as something happens, non-profits may benefit and receive more donations than they normally might if people had to pull their check books or credit cards out. I think it also likely non profits will face donors remorse in the wake of such giving and will need to formulate policies to address it.