nonprofit fundraising economic downturn

Ever since COVID-19 became a national emergency in mid-March, two words have continually been used to describe the impact of the coronavirus pandemic: unprecedented and uncertain.

They describe our collective feelings that we’ve never seen anything like this (unprecedented) and we don’t know what do next (uncertain). That’s because our closest comparison comes from more than a century ago with the 1918 Spanish flu.

As we turn our attention to the economic impact of this pandemic, these two adjectives don’t work quite as well. That’s because we can turn to history as our guide. We’ve seen economic downturns before, and we know how they’ve affected nonprofit organizations.

However, it’s important to note that this is no time to fear what lies ahead. It’s time to buckle up and prepare for the long road of fundraising during an economic downturn.

What we can expect next

As weeks are giving way to months, we’re seeing exceptionally high levels of unemployment and the devastating impact the “Great Lockdown” has had on huge sectors of the economy (travel, retail, hospitality, sports, etc.).

It’s clear that a global recession is imminent. Fortunately, we do have precedents and guidance when it comes to this area. We know what happened after 9/11 and during the Great Recession, and this gives us a very good indication of what nonprofit organizations can expect in the months and years ahead.

  1. The economy will take time to recover. Recovery will likely be slow and measured as sections of the economy reopen. Government leaders will move cautiously, hoping to avoid a second wave of the virus.
  2. We can expect charitable giving to decline. The way donors have responded during this crisis is nothing short of inspiring. We have seen record-breaking donations as people have stepped up during this time of tremendous need. We’ve seen surges like this happen before during major disasters and emergencies, but this “bump” in giving is typically followed by a “slump.” This shortfall period is barely noticeable initially, but it adds up over a long period of time.
  3. Charitable giving will eventually come back. As you can see in the chart below, when there’s a drop due to a recession, a recovery always follows. It may take a bit of time, but we know it will come back. That’s why it’s so crucial to prepare now for what’s to come.
  1. Some organizations will lose ground. In previous recessions, nonprofits who cut their fundraising efforts lost market share in their particular area. When one organization pulls back, donors will turn to another organization to fill their need to give.

Thus, our message is to keep fundraising – it’s not insensitive to ask at this time. Don’t assume donors can’t or won’t give. They still care deeply about your mission, and that mission is still important during times of struggle.

The key to success is to prepare for the economic downturn by optimizing your fundraising program. The nonprofits who come out of this ahead will be the ones that implemented changes that made them stand out among the rest.

Donors will likely reduce the number of nonprofits they support, maybe from 10 organizations to only five. You need to stay the course to make sure you’re in their top five.

Our experience tells us there are two foundational areas nonprofits need to shore up now: data and relationships.

Prioritize your data … and use it

If ever there was a time to get your data house in order, it’s now.

Whether it’s digital, mail or event data, you need to have a 360-degree view of your donors.

Knowing how your donors consume information and how they give will provide the insight you need to accurately plan strategies and budgets. You don’t want to cut funding to a program without seeing how it affects another area.

A few areas you should be leveraging include:

  • Email tool
  • Google Analytics
  • Digital attribution – (LeadsRX, Donor Marketing Cloud, etc.)
  • Omnichannel CRM data management
  • Omnichannel campaign results

Insights into these areas will allow you to understand donor behavior and make informed decisions. Without accurate data, you’re forced to make assumptions on what you think you know about your donors. And you’ll completely miss your blind spots.

It’s time to drop the silos. That starts by storing all your data in one system, or at least a set of systems that act as one. Then, you need to find the right tool to analyze all that data and provide useful insights. At RKD, we use a tool called the Donor Marketing Cloud (DMC).

This segmentation allows you to optimize the donor journey by making it personalized and meaningful.

For example, you can provide the content donors want to see (based on their behavior) and create personalized gift arrays (based on their giving history). After the gift, you can send a meaningful thank-you that acknowledges the donor personally (based on giving channel and habits).

We see this frequently in consumer retail, where customers have come to expect brands to know what they like and what they want. It should be no different in the charitable giving realm. Donors expect nonprofits to know their interests and their history of giving.

Nothing says “We don’t know you” faster than starting with, “Dear Friend.” That’s why prioritizing data is the key to segmentation and personalization.

Think relational, not transactional

The proper use of data leads to better engagement with donors, which builds a stronger relationship with donors.

Charitable giving is built on relationships, emotions and problem-solving. You need a strong connection with someone to convince them to give their hard-earned money to your cause.  Instead of getting a product in return for their money, the donor is getting a good feeling for giving a gift that will make a difference.

But nonprofits have a limit to their relationship-building capacity. Clearly, you can’t build one-on-one relationships with thousands of donors. But you can make your mass communication feel more personal and relational.

For mass-market, direct-response donors, you can utilize the tools of segmentation and personalization discussed above to provide a meaningful relationship through automation.

But once a donor moves up the gift pyramid to mid-level, it’s time to get significantly more relational. These donors feel like they know your organization, and they expect you to know who they are.

Data is still key here to understanding who these mid-level donors are and when they provide a gift. You need to track these donors with weekly, monthly and quarterly reports across all channels to get a holistic view of their behavior.

Your current system may tell you a donor gives $500 annually through direct mail, but you may not see his $1,000 table sponsorship at your event, or the fact that he participated in a walk with eight of his friends.  A single channel view shows a $500 donor. A holistic view sees a $2,000 donor.

The important part is what happens next. And this is where you can make changes right away.

Once you have clear visibility as to who these donors are, work on shoring up your relationships:

  • Make wellness calls to check on them during this pandemic
  • Provide opportunities to engage with virtual town halls or Q&A sessions
  • Offer the chance to speak with an important person in your organization

(For more ideas on building a relationship fundraising program, click here.)

The goal here is cultivation – creating a dialogue and building these relationships. Build an organization around people, not transactions. A strong relationship can lead to a major gift or a contribution from a donor-advised fund (DAF).

Lastly, don’t forget to tap into your major donors for help.

We live in the age of influencers. Call upon your major donors to activate their networks. Encourage them to be a part of the giving process and bring in more people to help.

Lean into this group of committed donors, and they will feel great about how much they actually helped your mission.

The road ahead

We know the next few months will be challenging. Our message is not to fear the road ahead, but to focus as you approach it.

Start preparing now by shoring up your data and your relationships. In the long run, you’ll emerge as a stronger organization that’s set for success.