The road ahead for nonprofit fundraisers is paved with uncertainty—with inflation and a potential recession at the forefront. In this series of Group Thinkers episodes, we're sitting down with guests who have a unique perspective on our current landscape and who can share how nonprofits should be preparing in the coming months.
On this episode, we sit down with Tim Kersten, CEO at RKD Group, to discuss the impact inflation has had on nonprofits and how they can adapt their messaging and strategy in response. Tune in as we cover:
Tim Kersten
CEO, RKD Group
“In a time like this, don’t talk to me about how big your mailing list is. That’s not the metric that we need to be focused on. We need to be focused on net long-term value of the donors that you have. How many core donors do you have? … How do you identify donors on your file who may have given you smaller gifts but can give you larger gifts? All of those kinds of things, and I just scratched the top layer of what can be done, to optimize your strategy through more precise and efficient targeting.”
Justin McCord: Ronnie, normally whenever we start, I typically ask our guest their path or their journey into the nonprofit space. But you can't really do that more than once. We know the answer. This time.
Ronnie: We've heard it.
Justin: We've heard it. We've heard it before. So, I was starting to think about it. OK, well, how do we welcome, how do we most appropriately welcome, Tim to the podcast? So, our good friend behind the scenes, Ryan Mellinger, like, he might help us by welcoming him with applause.
If there would be, this would be a good place for Ryan to insert applause or other fanfare. You know, that might be a good way to welcome Tim.
Ronnie: On the video, we could have some sprinkles dropping down or something or fireworks going off.
Justin: Yeah, how would you want to be welcomed?
Tim Kersten: Well, this is just free flowing. I mean, this is not going to be on the program?
Justin: No, no, no. We're, we're rolling. This is live. This is cold open.
Tim: Cold open. Wow, this is tough. Well, you could introduce me as having sort of come of age in a very inflationary environment. I was in college. And when I was early married, I mean, I remember I was reflecting with my wife just the other day about how she used to get up at 4:00 in the morning and fill her car with gas. Because of the gas shortage in Southern California. And home mortgage interest rates were in the teens, like 15% to 16%. So, if we're going to talk about inflation today. Been there, done that, survived.
Now, I was a lot younger in those days and didn't know as much as I know now about life and business and so forth. But I do remember the pain, and I remember the fear of, oh, my gosh, is it always going to be like this? Will we always be waiting in gas lines? Will mortgage rates always be in the teens? Or will we be able to live and maybe buy a house someday and so forth? So, you know, I've been in this movie before, unfortunately, and I read a little bit of history, and inflation is really wicked in terms of what it does to countries and organizations and individual people as they're trying to survive and build a life. So, I don't know if that helps when you say introduce myself, you didn't actually introduce me. I ended up introducing myself. But that's one way to think about it, that's why.
Justin: So, I'm going to take it. And yes, and this scenario: say that if John Hughes made movies about the ‘70s instead of the ‘80s, and he did a movie called ‘The Inflation Club’ instead of ‘The Breakfast Club’, he might cast one Tim Kersten as someone coming of age during that period. How's that?
Tim: If he were desperate, I suppose.
Justin: True, all right. Well, fine. That's fine. That's fine. Welcome to Group Thinkers. Ladies and gents, the podcast from RKD Group. I'm your host, Justin McCord. With me, as always, is Ronnie Richard and, here we are.
We are here today to wrap up our series of conversations on uncertainty. For now. We anticipate being uncertain again at some point in the future. But in terms of the conversations that we've had most recently on uncertainties that nonprofits have been facing, today's our last one. And so, we wanted to go out with a bang. So, we brought the best bang that we could find, which is Tim Kersten, CEO of RKD Group. Tim, you've already introduced yourself, but it's good to see you today.
Tim: Thank you. It's so good to see you. Good to be seen. We haven't done this in a while. I always look forward to conversations with really smart people. And so, here I am. Should be a good time.
Justin: We'll let you know when the smart folks arrive. Otherwise, you're stuck with Ronnie and me.
Tim, we're going to walk through your experience and your perspective on inflation today. And so, as you know, we've had conversations around the recession. We've had conversations around uncertainty with data regulations. We've had uncertainty conversations around employee development, employee engagement, employee recruitment. Most recently, we've had conversations around uncertainty as a leader and how to navigate those things. Because we like to focus our conversations in on our nonprofit marketing brethren, sisters and brothers, that is our listening audience. We really want to focus in this conversation on the real impact of inflation on nonprofits.
And so, I'm going to start with just a couple of stats which, by the way, for the listening audience, you can head on over to the RKD Group blog and find various posts on the impact of inflation on nonprofits. We're going to reference a couple of stats that you can read about more in detail there.
But I want to just use a couple of statistics, or one in particular, to help rhyme our discussion today. So, publicly available information from the United States government shows that inflation from January 2022 through June of 2022 was up 13%. How are nonprofits feeling the impact of this?
Tim: Well, I think they're feeling it in a couple different ways. Unfortunately, it's a double-edged sword. And one, the costs of providing services to those that they serve are going up. So, if you are a mission or a food bank, or even an animal welfare organization, you are buying things. Obviously. It's pretty obvious you're buying things that you need. If you’re an animal organization, you're having to pay your people. And like any nonprofit, your people, your employees are feeling the pressure of rising costs. You're having to buy food to feed the animals and so forth. And in the case of food banks or other social service organizations, the cost of food is going up. We all see it when we go shopping. So, the impact on nonprofits is significant on that side of the equation.
And then nonprofits are going to donors or prospective donors to ask them to give some money to help out. And when people only have so much disposable income, it's interesting when people say, oh, she's on a fixed income. Well, aren't we all on fixed incomes? They're just fixed at a different level. But most of us, you know, get a paycheck and that's it for the year. And so forth. So our income is fixed.
So, everybody's income is, generally speaking, fixed at different levels. And so, it affects people differently. And unfortunately, we know some of the most generous people on a, what's the right term, per capita basis are people who, I'm sorry, people who give, as the percentage of their income is higher, at the lower end of the demographics of nonprofit organizations. So, you have somebody who maybe is making $40,000 a year. They're likely giving a higher percentage of their income than people who are higher up on that hierarchy.
And so, there's just no question, and we're seeing it in statistics across the nonprofit sector, of response rates falling off and falling back to pre-pandemic levels, which, of course, we all know that we saw a huge jump in response rates and income, particularly with some organizations that were on the front lines or feeling the effect of COVID most severely.
And so, that's the double-edged sword. Costs are going up and the ability of people to donate is going down, of many people that donate. Which really to me speaks to what do we do in response from that. But I don't want to answer that question until you ask it because we'll get there.
Justin: We’ll get there. We're going to get that. So, but you're right, this is interesting. This is, you know, and I mentioned it's up 13% from January 2021 to date. So 13%. But Tim, the picture that you paint there, it's not something that solely impacts the development team anymore.
Like, when you talk about the cost of goods rising, that impacts the program scene. And, you know, I think there are times where we forget about that relationship between the programs and development. And maybe this is one of those that draws them even closer together because of the way that double-edged sword hits both of their plates, likewise.
Tim: Yeah. So I have a thought on that. I know that probably shocks you, but I would have thought that. But here's my thought, and that is, in my experience, too often there's a gap between the program, people who are on the front lines delivering service, and the fundraising team and one of making sure there's a flow of information between the two.
So, the program side understands what the fundraising side needs to say. You know, what? What raw material do you need? And of course, the fundraising side is proactively going in and having those conversations, so they pull it out. You know, this is both, it's a messaging challenge for nonprofits, but it's also a strategy challenge for the nonprofit.
So, I'm going to talk about the messaging challenge first. So, I was reading an article the other day about how do you persuade people to do things that they ordinarily either are maybe opposed to or wouldn't think they needed to do or sort of neutral, and they need a nudge. And it's just interesting. This is in the context of the second change anywhere, you know, within an organization, society or whatever. And the key word is “because.” When people are helped to understand why they need to do something, the odds of them actually complying and doing that thing go way up.
So, I think we've heard this story of the … social scientists do this experiment of people in line, and so they have somebody comes up and, let's say you're in line to get on the airplane or whatever. This actually happened, probably happened to you, too. And there's 10 people in front of you, and somebody taps you on the shoulder and says, “Excuse me, do you mind if I move ahead?” Well, if that person doesn't give a reason why, it's like, well, no. But if they say, I'm really sorry, but my car had a flat tire on the way here, and I'm going to miss my flight. You mind? Well, of course, no problem.
And so, explaining the “because” part of inflation to donors becomes more important. And so, I think sometimes in my experience, nonprofits are … this is going to sound completely wrong and it kind of is ... nonprofits are afraid to actually put their authentic needs right out there in clear black and white.
And so, you know, the copy, from a messaging standpoint, nonprofits need to be much more purposeful in explaining the “because.” Mrs. Donor, your help today is especially important because the cost of delivering services to the people who depend on us have gone up 17.5% in the last 12 months. And I recognize that you, Mrs. Donor, are feeling the price increases too. But if you could help us out, it would really, you know, fill in the blank.
And so that “because” messaging, I believe, becomes very, very important; you cannot assume that people sort of get it. Oh, they know that we're nonprofit, and they know we need help. We help people. And so, we're going to ask them for a gift, but we're not going to get too specific. Now, I think you really do need to. So, I think in a time of inflation, being much more purposeful, specific and clear in explaining the “because”—we need your help because—and then provide that information, that's a really important thing.
Justin: Now I love that ... I really do love that. But it speaks to also being more intentional—which we’ve talked about, by the way, in I think every episode around uncertainty—the need, the elevated need for intentionality in whatever topic area.
And so, in this case, there's greater intentionality between programs and development, right, of connecting, collaborating, understanding, communicating, and then, obviously, being more intentional in the way that you message to your donors, right? So that they do understand that “because.”
Tim: Exactly. Just never, you never want to assume as a communicator that people understand why you're asking for money. It just … you need to be more explicit.
The strategic side of that is the well, how does a nonprofit manage its cost to fundraise, which we know, I mean, the cost of sending direct mail, which is still the backbone of individual giving in America, as we know, those costs have gone up by, I don't have the stats right off the top of my head because I don't remember numbers the way I do words, but I know Ronnie will chime in at some point and give some stats about the cost of producing direct mail. It has gone up. And so, what do you do there?
Well, talk about intentionality. And the nonprofit community has matured a lot since I entered it in the late ‘70s during a time of inflation. Even then, you know, you could mail out direct mail packages in acquisition and get way better than 1% response and so forth. And so the science of direct mail, again, just speaking of direct mail, digital didn't exist in anybody's mind, really, except some futurist, I suppose.
But it was very unrefined and unsophisticated. The segmentation strategies, the computing horsepower, and so forth, was obviously not what it is today. And so, using the amazing analytic tools that we have in predictive analytics and modeling and so forth, because every nonprofit has to optimize their audience, you just can't afford to, to, to sort of broadcast this narrowcasting to individuals. You know, what is close to one-to-one is possible. And so, that’s an area that great strides need to be taken in. The nonprofit community has taken great strides.
But at a time like this, it's like, you know, don't talk to me about how big your mailing list is. That's not the metric that we need to be focused on. We need to be focused on the net long-term value of the donors that you do have. How many core donors do you have? Donors who've given two or more years in a row without skipping a year? How do you identify donors on your file who may have given you smaller gifts but can give you a much larger gift? All of those kinds of things. And I just scratched the top layer of what can be done to optimize your strategy through a more precise and efficient targeting.
Ronnie: Tim, I'm going to disappoint you a little bit and say that I don't have the data right in front of me for that direct mail, but hopefully make it up to you with some other data. So, I just want to read some, some stats to dig into a little bit here.
So, Justin mentioned the government data that we had on inflation. And one of the things that we found is that the impact of inflation varies greatly across the U.S. It really depends on where you are. For example, in West Virginia, people are feeling an extra cost of $560 per month. Nearby in Washington, D.C., they're seeing $1,020 per month in higher prices. In Texas, where just and I and, Tim, you are as well, people are feeling $755 a month increase. But just across the Red River in Oklahoma, the impact is $600 per month.
So, you see that these numbers are kind of all over the place. And yet, when we look at the data our team put together on fundraising and how impact, how inflation is impacting fundraising, in D.C., they're seeing the biggest increase from inflation, yet they're seeing very little impact on their fundraising. Likewise, the geographic disparity is kind of all over the place. So, how does that affect nonprofits when we think about this varying impact of inflation?
Tim: Well, the two things I would like to point out, that Washington, D.C. has, I think, the highest per capita income of any metro area in the country, large metro area, or close to it. So, not surprised that contributions to charity have not seemed to fall off too much there.
So, the old adage that I've used around here a few times is that everybody's in the same storm, but we're all in different boats. So, the fact of the matter is, some nonprofits are in more survivable boats than others in the same storm. And the storm does vary in intensity, like you said, but by geography and, certainly, by demography as we see in the Washington, D.C. statistics.
And so, you know, the impact on nonprofits, you know, it varies. It depends on what service they're delivering. And we certainly saw that during COVID when food-related charities did extraordinarily well. But, you know, their giving is falling back off to roughly 2019 levels, getting, kind of reverting to the mean, I think, or regressing to the mean, if that's the correct term. And so, that's not unexpected.
I think one of the damaging things about inflation for nonprofits and for consumers is, and this is so obvious it hardly bears repeating, is that uncertainty is a killer of all sorts of things. You know, I was reading an article over the weekend about a young woman somewhere who had planned to get married, and then she lost her job and couldn't find another one, had to take a lower-paying job. Then her rent went up, and it's like, well, I can't get married. We can't get married now because things are so much more expensive. We're going to defer having a child and so forth.
Well, you multiply those kinds of personal decisions across the country and multiply them across the nonprofits. How do you plan in this environment? How do you put together an annual, an annual operating plan for your nonprofit if you don't know what costs are going to be. And if you don't know what your fundraising income will be. So, it's a very difficult position that we find ourselves in. And I hope and pray that, that, you know, I've heard some echoes that maybe inflation is starting to wane a little bit. We know gas prices have come down and so forth. And, I hope that happens because inflation corrodes a lot of things. And erodes confidence in the future, which is a pretty bad place for anybody to be or any organization to be.
Justin: You know, we saved this conversation for last because it was one of the more complicated conversations around uncertainty. And Tim, something you just said, it stands out to me: that inflation erodes confidence. And I wonder if it, if it erodes confidence in our strategy as much as it erodes confidence in other aspects, whether on the consumer side and/or our decision to go through with major life changes like the anecdote that you just shared or not.
It just stands to bear that this idea of eroded confidence is something that we have seen many nonprofit decision makers carry or burden themselves with, certainly in the last two years and, most recently, in the last few months. And that's what makes this topic so complicated for us.
Tim: Yeah, it's an incredibly complicated topic in theme for our country and all the individuals and all the nonprofits. If you think about American history, and I'm going to call on my experience in the ‘70s of living with and through serious inflation. And I remember President Gerald Ford wearing a pin, a lapel pin, that he and his administration got. And it said, W I N. It stood for whip inflation now. I mean, it was a major thing. And the federal reserve, under Paul Volcker, would walk down memory lane, had to impose some real pain on the country in order to get it back and that back on an even keel.
This belief, it's in the American psyche, that tomorrow can be better than today and that there's a reason for hope and optimism in growth, sustained growth and things like that. Inflation just chops at the base of that tree. And I remember feeling it, you know, 45 years ago, like, wow, it just felt kind of gloomy, like, what's this going to be?
And so, I think America needs to whip inflation now for reasons of, sort of, our national psyche and our emotional health in beliefs and in, sort of, this dynamo that the United States is. And I don't refer only to the business dynamo, but I refer to the nonprofit sector, which is 2% of GDP that needs an optimistic America, a confident America.
People who believe that, yes, we can defeat cancer. Yes, we can solve the problem of homelessness, yes, yes, we can rescue children in difficult circumstances and on and on and on. Everything that we do in the nonprofit sector is premised on the fact that we can do something as people to solve these big societal and human problems. And so, I worry about that.
I come from, again, I'm an old creative guy thinking about messaging, thinking about people's emotions and what do people need to feel and what do they need to hear? They need to believe deep down that things will get better. And they can make a difference. And actually, contributing to charity during this time is a way to help restore your belief in the future. We, I will say, nonprofit leaders need to be really concerned about how they speak to their donors and what is the vision of the future that they paint for them in light of whatever circumstances we're in right now.
And it's obvious what the circumstances are that we're talking about. It's about inflation, rising costs, and it's difficult. So, what do we say? Well, the mission hasn’t changed. We still need to accomplish the same thing. There may be more reasons now than ever before, depending on if the nonprofits and social service sector helping people or struggling food banks and so forth. There's a compelling story to tell, but that's, I think, about all of that within that sort of broader social climate and how people feel. And nonprofits have a really important role to stay out there in the market telling their stories, making a compelling case why people need to help.
Ronnie: Thinking about that, Tim, as we're preparing and heading into the year-end giving season—with this air of uncertainty out there, is there anything nonprofits should be doing as they prepare for year end? Is it just a matter of that confidence that you were kind of speaking of, that, hey, this is our mission, and we need to make this happen? Is that it? Just kind of sticking to it?
Tim: Well, I think doubling down on the message is really, I really believe that strongly. But look, we are, what's the date today? This is September the sixth. I hope those who have been listening to this podcast and are fundraising professionals out there got ahead of the year-end fundraising season strategy and planning. That they got out ahead of it several months ago. Because we here at RKD Group, we preach about digital readiness all the time. Digital is … I was going to say it's the name of the game. Well, it's certainly one of the big names; direct mail is still there. But in terms of if what are we solving for in an environment like this?
Well, we're having to solve for sustaining or increasing engagement and contributions and keeping costs as low as possible. So where is the ... I'm going to put this in air quotes ... “easiest place to do that?” It's hard, but the easiest place to do it in is digital. And so, nonprofit organizations, if I'm going to speak directly to the camera, if you haven't gotten ahead of this, the time is now.
You know, what kind of resources can you deploy into digital with high probability of success? And obviously RKD is helping our clients do that, but it's not too late. There are still things that can be done online in your digital program to help close the gap without the spending at the same level as traditional media. So, that's a really important thing because we are an omnichannel company. We are channel agnostic. We go where the results are for our clients, and direct mail is still hugely important. But digital is growing.
In fact, I saw the stats here, Ronnie, I'm going to have to fumble around for them, and if I can find them quickly, I think online giving is now over 12%, and it's grown significantly in the last few years. That's great. That's really good, because if there's any place where you can control costs at a more precise level and keep them low, it's online. So, in digital marketing and fundraising channels.
Justin: So, definitely leaning into online and even, to maybe pluck at something that you shared earlier Tim, it's also lean in to being authentic. Lean into a way that you can be relevant by being yourself as an executive director or the CEO of a nonprofit, et cetera. And sometimes that might even just be turning on the camera and recording a message of gratitude and hope and Thanksgiving and sending that to a segment of donors, right? That authenticity. And communicating who you are and what you need can certainly also maybe cut through some of the noise and cut through some of the uncertainty at year end.
Tim: I agree completely. And, you know, I've been in this business for 45 years, and it still disappoints me to know and to have direct experience in observation of nonprofit executive directors or CEOs or whatever who feel very uncomfortable of letting their emotion show in their fundraising communication.
And I don't know if it was Hemingway or Steinbeck, one of the two, probably Hemingway, sounds more Hemingwayish than Steinbeckian: You will write writing. It's easy. You just open a vein and let it bleed out on pay. It sounds a little grotesque, but, but great; write it, great. Connecting with other human beings in whatever medium is always intensely personal and puts the one who's communicating in a position of vulnerability.
And it's disappointing to see a lot of heads of nonprofit organizations sort of hide behind the dignity of their office or their brand. Oh, let's just put our brand out there, and so forth. But the most effective fundraising is intensely personal, where the person signing the communication, voicing it, is sort of carrying the weight of the need on his or her shoulders and is a proxy to the donors or prospective donors for that.
And so, again, we're sort of circling back to messaging that's very passionate about, obviously, the strategy that undergirds it, that helps define the audience. That message is going to be fundamental. The nonprofits have to be much better at the targeting that flows out of the analytics and drives strategy. But that authenticity of communication and just putting it out there with a lot of emotion will make a huge difference.
Never assume that donors and prospective donors sort of understand. Give them the “because.”
Justin: You know, Ronnie, as we wrap this conversation and we wrap the series on uncertainty, it feels appropriate that our team would not only join us but reference great writers like Steinbeck and Hemingway and reference lessons from history. And here I am about to reference Jimmy Cliff.
And, and because the thing that I've taken away from all of these conversations is that maybe the best way to navigate uncertainty, including the uncertainty around inflation, is from the lyrics of “I can see clearly now.” Right? “I can see clearly now the rain is gone. I can see all obstacles in my way. Gone are the dark clouds that had me blind. It's going to be a bright, bright, sunshiny day.”
Doesn't always mean it's going to be a bright, bright, sunshiny day. But to the tee, every one of our guests and every one of our experts have leaned in a little bit towards, like, your clarity of your focus is the thing that's going to help you get through whatever the uncertainty is. And sounds like Tim's saying the same thing regarding inflation that, you know, as a nonprofit decision maker, you can't control inflation. But what you can see clearly is your ability to be relevant to the audiences that you're talking to and give them the opportunity to connect with you.
Tim: And relevance is absolutely key. And I'm sorry, Ronnie, if I just stepped on your territory, if you come in at the end and do your thing. But I just stepped in your area.
Yeah, relevance is absolutely key. And I'm going to riff on one other thing, Justin. And that is decision making. You have to decide. And you need to make decisions that are based on the best information you have. And because, look, I have high regard for nonprofit leaders. They are stewards of limited resources. And it's a hard job, especially in a time like this. But gathering all the information and deciding, this is the course we're going to take. And go for it. Because times like this require bold leadership. You know, it's because you can't assume anything these days. We’re not living in a status quo world. And I know we've talked here about how printing and mailing costs have stayed roughly the same for a long time. And so, OK, well, we're going to order a novel of paper for the next year. OK, well, we'll give it a 1 and 1/2 increase in price, and maybe you want to do that, or whatever.
Well, now we're in a storm. And so, making really sound decisions in light of the information, the best information you can get. But deciding and moving forward with it, that's what leadership's about; takes courage.
Ronnie: And I'll add that, you know, speaking of providing clarity, you know, one thing we talk about a lot is the use of data and analytics. And how that can help provide clarity, projections and see the road ahead.
So, I'll just do a small plug here, that if you want to check out this data that we've put together on inflation, go to blog.rkdgroup.com. And that's, it's a lot of really good data that you can check out and help kind of plan for the road ahead there.
Justin: Right on. Very well said. I appreciate that plug there, Ronnie. Not only can you find inflation-related blog content and data on blog.rkdgroup.com, you can also find the full series of our conversations on uncertainty, as well as loads of other content. Also content featuring Tim and helping us navigate current times and helping lean forward into staying out front in our fundraising.
So, Tim, I really appreciate you taking the time today to chat with Ronnie and I, to share with us some of your experiences and lessons that our audience can definitely benefit from.
Tim: Thank you for your time. I enjoyed it. And I hope this is useful to a lot of people. That's the goal.
Justin: Do you know how, if John Hughes were directing this, how would he, how would he wrap it?
Tim: You know, Justin, you should know better than to ask me a question about a movie director. I just never know. I'm not ….
Justin: I'm just trying to be authentic, trying to be … what I need you to do. I mean, I try to turn. I mean, he's your turn and put one fist in the air and just turn. Turn all the way around. All the way. Like one fist. And then this is where all the way putting out?
Nope, not in a full circle. Not in the full circle. Turn face. Yeah, now punch that fist up in the air.
Yeah, there you go. And we're going to have our editing team lay a little music over that and wrap it up in true Breakfast Club style. It's going to be amazing.
Tim: Well, I mean, could we do, like a Freddie Mercury thing?
Justin: I mean, we could do that, too. Yeah, we could. Yeah, we can do alternate endings. Choose your own adventure endings. All sorts of possibilities.
Tim: All sorts of possibilities. I'll leave that up to them. I'll focus on other creative endeavors.
Justin: Perfect Tim, we really do appreciate it. Folks, be sure to check out our other episodes of Group Thinkers and be on the lookout. We're just weeks away from launching our next series of episodes, which are going to be tied to our research that RKD has recently conducted and published around donor sentiment and their words, what they think about the nonprofits that they support. So, be able to look out for that. Thanks for checking out this episode, and we'll see you down the road.
Group Thinkers is a production of RKD Group. For more information, visit rkdgroup.com/podcast. Special thanks to our production team, including the talented Ryan Mellinger for his work on mixing every episode. Also a shout out to the content team that helps pull together research and guests, puts the marketing efforts behind the Group Thinkers, Suzanne, Ronnie and others for their work on this and every episode of Group Thinkers.