As we wrap up the first half of 2023 and prepare for year-end season, there are a number of big-picture trends that could impact the fundraising industry. In this blog post, I’ve identified nine risks that we should all keep an eye on as we plan for fall and winter.
In the short term, the biggest concern is the fear of a pending recession. Inflation has made it more expensive to buy groceries, get gas and purchase other basic necessities, and people are tightening their belts.
Charitable giving is one of the first places that will likely get cut.
We know that 68 percent of nonprofits are seeing increased demand for services, and the number of households donating to charity is already near an all-time low.
In a recent Dunham+Company survey, nearly 25% of donors plan to reduce their giving in 2023—the highest percentage in three years. And a Gallup poll found that 50 percent of Americans said they were worse off financially than they had been a year ago.
As we continue to navigate this new state of the economy, competition for giving will increase, and there will be fewer people willing to give. This decline in giving may also lead to:
Digital will start to notice the declines first, given the immediate transactional nature of the space. There may be a reaction to fix the net loss first rather than hold to allow recovery, which may impact some organizations in the long run.
While it is true that safeguards can be put in place to help ease this decline, there may be some inevitability in the space as the sector deals with ongoing changes.
Costs in all fundraising and advertising spaces continue to increase.
U.S. Postal Service costs are now rising twice each year, the cost of paper is skyrocketing, digital media prices are up, and space to advertise on TV is becoming more competitive and expensive. Inflation is making matters worse, and there is no indication that these costs are going to steady in the near future.
As it gets more expensive to reach donors, a concentrated effort must be made on whom organizations are reaching out to in order to most efficiently spend their dollars. Data modeling and analytics are already important, but this is only becoming more pivotal to the success of any fundraising program.
Across the industry, we are starting to see stricter data collection and privacy laws roll out in states across the U.S. (Colorado’s new law goes into effect July 1).
Data collection and the ability to utilize data to plan and execute within the digital space is starting to change. This also extends to platforms like Meta where lookback windows have already changed, targeting demographics has tightened up, and donors are becoming less likely to want to share information with organizations.
While nonprofit organizations look to compete for donor dollars and donor giving rates decline, there is another key factor that is in play—gaining the trust of donors.
Because donors are less likely to give to multiple organizations as they might have in the past, where they do give their money is becoming more important to them. This is especially true for younger donors, who are more inclined to research an organization before giving.
On top of that, nonprofits now rank lower in trust than for-profit businesses, according to the Edelman Trust Barometer.
Nonprofit organizations must build trust and transparency with both their current and prospective donors and showcase how their dollars truly make an impact in the world. It is not just a transaction but a clear intent to do good work with a donor’s investment into the organization.
There are benefits that generative AI will bring to the fundraising space. It’s a new tool that organizations can use in their outreach to donors.
Plenty of questions about this new technology remain, but there is a rapid movement toward utilizing AI in all ways. For example, Google recently announced how generative AI will be applied to Google Search at their Google I/O event, and they’re calling this feature Search Generative Experience (SGE).
While there is still much to be known about how this may impact organizations, there are areas that will need to be closely monitored, like organic and direct traffic impacts, paid search and e-commerce. RKD Group has a blog post about this.
Overall, we suspect that this movement toward AI will make impacts in the fundraising space, much of which is still to be seen.
A common term we hear is, “We need to tap into the younger donor base,” but the stats show that few nonprofit organizations have been able to do this.
A number of factors are in play here:
Our Listen Up research found that engagement is the biggest differentiator between donors who had a strong relationship with a nonprofit and those who had a weak relationship—regardless of age.
There needs to be a clear plan to help fill the gap of giving by ages, and it has not been effectively done yet.
COVID-19 was a prime giving time for many nonprofits, like food banks, hospitals, homeless shelters, relief and development organizations, etc. And emergencies in Ukraine, Turkiye, Syria, etc., have driven up charitable giving for international organizations.
But this emergency giving is skewing the underlying health of giving.
Emergency donors are great during emergencies, but years of studies across sectors have shown that these donors do not retain. Yet organizations spend hundreds of thousands of dollars on these donors. This is not only impacting revenue numbers and the health of donor files each year, but it is also slowly eroding the core donor base.
Modeling and donor trends must be evaluated to ensure that a consistent stream of non-emergency new donors are being acquired and that dollars are spent efficiently when it comes to reactivating the emergency donor file.
In the last few years, donors are starting to recognize some charities as “emergency charities”—meaning they are losing their connection to the core of what the organization does. There needs to be consistent effort to reinforce brand health in the market.
Giving Tuesday has become an important “holiday” for charitable giving. But this also means that organizations are competing for more attention and space during this timeframe. Particularly in the digital space, this can be problematic when Black Friday and Cyber Monday are already driving up space and costs for advertising.
Economic uncertainty changed the way that people gave in 2022, leading even more donors to delay gifts until the end of the year. This trend was expected, knowing that many donors would want as much information on the economy and their personal financial situation as possible to make a fully informed and strategic gift before the tax deadline.
Again, as this becomes a more important time for giving, the competition in the market to get donor dollars will just increase. Coupled with the information provided above around transparency and brand recognition, it is important that organizations work beyond that Giving Tuesday and the year-end space to be recognizable and build a strong foundation with donors year-round.
Too many organizations fail to do this and expect big returns by only being in market during this key timeframe, and we have seen this impact results.
As you prepare for the second half of 2023, take these nine risks into account. That doesn’t mean you should pull back in your fundraising efforts. It’s simply a matter of making informed decisions about where to invest for a maximum ROI.