The impacts of COVID-19 and 2020 have disrupted almost every sector, and nonprofits haven't been spared. Current research available early in 2021 shows that about 70% of nonprofits lost revenue in 2020, with one-quarter losing between 26-50% of their revenue.
Those who work for and support nonprofits of all different types know all too well the impacts of forced program closures, distracted or economically challenged donors, and the loss of fundraising events as a staple for funding.
Two biggest impacts of COVID on Nonprofits
Two broad impacts on nonprofits were:
- forced program closures
- cancelled fund raising events
Program closures are subject to the progress of vaccination programs, and many could resume once their population begins to receive vaccinations. Of course these programs have to be re-energized and re-marketed in order to open. Some will have to seek brand new funding as well, so fundraising will be a priority to support re-openings.
The loss of fundraising events has been significant across the sector. While the percentage of annual revenue that comes directly from fundraising events is generally less than 25% of total budgets, the primary source of funding (individual donors) is directly connected to those events.
As my friend and nonprofit expert Jeanette Richardson taught me at the beginning of my nonprofit work several decades ago, events aren't fundraising, they are "friend-raising." If you aren't making new donor "friends" and keeping the ones you have, revenue declines.
60% of nonprofits report impacts from missed fundraising events in 2020.
Fundraising events plan an important role in donor acquisition and provide an opportunity to demonstrate social support and cast a vision that helps to win new donors and inspire existing supporters. Effective fundraising events are one of the tools that many nonprofits rely upon for donor acquisition - and COVID has been shut down this opportunity.
Is the real cost of event fundraising worth it?
One great benefit of fundraising events is the fact that the costs can be underwritten by donors. The thinking that goes with this is that the event is "free" to the charity because donors cover the costs.
Of course, that is anything but true. Costs for events are steep and include printing, ads, diversion of donor funds and the ultimate cost - staff burnout.
Could the shift away from reliance upon fundraising events be the silver lining from 2020?
Is there another way to acquire donors without the mass collection approach of fundraising events? The answer to that begins with an important calculation about the cost of donor acquisition. Like for-profit entities that track and plan for the cost of customer acquisition, it's important for nonprofits to calculate their donor acquisition cost (DAC). This equation combines all of your costs for fundraising against the the number of donors that you win (DAC = total fundraising costs/# of donors won).
This DAC number then is compared to the average lifetime donor support average for your nonprofit. (Yes, sorry to say, donors get fatigue and eventually shift support to another charity.) If your DAC is high, then your lifetime donor support (LTV) should also be high. If your DAC is high and average donor support over the lifetime of giving is low, then you have to rethink the approach.
The problem with events, is that it can actually be very expensive to acquire donors this way, especially if you add the long-term impacts on staff. Ask a staff person who used to work on 3-4 fundraising events a year what they think about this. DAC should add staff churn and replacement costs to the total fundraising costs of events, if it is truly your fundraising mainstay.
Is there another way to win donors effectively?
With events cancelled, some have opted to make them virtual instead. Of course taking an event virtual can require substantial technology and media resources (here's a great example, which I've toured in the Philippines), and may not achieve the fundraising goals to meet budget. Virtual events have to compete with all the other big events that have gone virtual include national conferences.
The best answer when you need to shift away from in-person fundraising events is to understand the bigger shifts that have been occurring with donors. These parallel the brand loyalty shifts that have been occurring across the market.
Here are some of the donor shifts that you should be thinking about:
- The Pandemic has created new heroes and needs that are attracting donors.
- People are flooded with virtual event options including webinars, workshops and high-influence conferences that have gone virtual.
- The entire population has gone digital in big ways. Estimates are that people made 10 years of digital progress in consumer behavior in just 3 months last year.
- Some people have moved from the donor column to the need column.
- Corporate donors have been presented with whole new need classes and demands.
The new way to reach donors begins by understanding the donor journey
While you may have a client you provide services to, your donors are customers too. And just like a for-profit entity, your donors go on a journey on which they discover, consider, and decide to support your work. This "donor journey" begins online more than ever before, and these "donor customers" are getting something of great value from their connection to you - the opportunity to do good.
Finding a new donor acquisition channel requires a deep understanding of how donors have changed.
Since the in-person approach is still tenuous at best and suspect as a key strategy going forward, understanding the online donor journey is a high priority for charities that want to recover and grow into the future. Online donor journeys in which donors are engaged and won online are a critical element that must be included in nonprofit websites.
A donor journey identifies elements that include donor decision drivers, and go much deeper than the traditional "donor personas." The donor journey also captures the brand story your nonprofit presents. When these elements are positioned in the right way, they make the nonprofit a more appealing donor opportunity and have the ability to move donors from first learning about you to making commitments much more quickly.
online Donor journeys help create the most effective market position for nonprofits
We don't like to think about nonprofit work as competitive. But it's a fact that we are always competing for people's time, attention, and support. The needs that we champion are also in competition for community resources. And we're not doing any of this in a vacuum, others are after that same support, too.
The best way to put a nonprofit in the right position to champion its cause (competitive position) is to make sure that it has been positioned in the market properly for its donors. The donor journey has to be combined along with competitive forces to position the nonprofit for donor support. The example of a virtual event reference above has the benefit of a solid donor journey and strong competitive positioning developed by its business minded founders- that's one reason it can transition to a virtual event so effectively.
Given the level of market disruption that everyone has experienced in 2020, important steps include:
- analyze and refresh the unique donor journey
- refresh the brand story
- review the competitive position of the nonprofit
There is no disputing that donor journeys start and often finish online, now more than ever. A well-developed donor journey allows the nonprofit to be more attractive and effective in what is shaping up to be a new normal.
It might be a silver lining.
Gaining a deeper understanding of your donors drives, needs and motivations can empower your fundraising in new and powerful ways. Repositioning your nonprofit to be more competitive in the market of causes, is a critical step. Meeting donors online, where a much greater level of consumer engagement is the new reality holds potential as a lower-cost and more sustainable approach to fundraising.