Is the traditional fundraising model obsolete?

Definition: Fundraising is usually for – Charities, schools and other educational organisations, community service clubs or organisations, sporting clubs and facilities. In order to be brief, all these types of groups shall be defined as “charity groups” in the following page.

The Challenge

Fundraising business models take many forms ranging from: altruistic in the more traditional sense, to income-producing for participants (a more modern variation), and many versions in between.

The objective of traditional fundraising is to generate a substantial lump sum of cash for a worthwhile cause (i.e. a charity group) and there are numerous examples of these. Traditional donations usually come from people who make an emotional decision to provide cash from their discretionary income or financial reserves. Generally, such a benevolent gesture gives the donor “warm and fuzzy feelings” and a sense of emotional joy.

However, the initial problems with the more traditional types of fundraising are firstly, getting exposure and secondly, “selling the deal”.

In regard to exposure, modern social media makes this easier but it must be said that you still need to either create a large contact base before the event, or alternatively create interest through television, radio, hard copy, or viral marketing. While it is obvious this can be done successfully, it still takes considerable time, effort and cost to “get the word out”.

Then you have the issue of “selling the deal”. In marketing and sales, it is essential to “lead with the benefits and then follow up with the features”. In a normal sale situation, the “benefit” is providing an answer to the paramount question asked by the potential buyer: “What’s in it for me?” Once you answer that question, it becomes substantially easier to get a “sale”.

The challenge for fundraising is that, in general, there is nothing of great benefit for the donor except the “warm fuzzies” generated by giving. Thus the “sales pitch” is always difficult because although it is emotional (and using emotion is always the best way to “sell the deal”) there is also the counter feeling of: “Can I afford to do this?” and “Do I really care about this issue enough to give away my hard-earned money?” Thus the decision-making process is always a battle between an emotional (right-sided brain) response and a logical (left-sided brain) response. Consequently, there is doubt, indecision and delay in making a decision and, as anyone in sales will tell you, delay or indecision is most likely to result in a “no sale”.

For these reasons, it is generally hard to present a compelling argument for people to donate.

An alternative method of fundraising is to get sponsors (generally corporate) to donate very large amounts of money and then give the appropriate corporation or person naming rights or provide a very public “Thank you”. However, it is always a challenge to convince a sponsor to pay money, and even more of a challenge to have them continue to make regular donations. If you think carefully about this, one of the concerns with this type of donation is whether the donors get “value” for their money. After considering this for many years, it seems that usually the value is low and generally there is a poor return on investment. If you analyse it;

  • Does the community really care who a major sponsor of a charity group is?
  • Do people buy more products or services because a company or person sponsored a particular charity group?

In the majority of cases, inevitably the answers are NO. Thus the chances of a sponsor continuing to donate over the long term are much reduced.

The real problem

The reality is that, in most cases, fundraising is a “one-off” event. Even if the charity group’s “cause” is long-term (e.g. cancer prevention as opposed to flood relief), it still requires a constantly renewed “call to arms” by fundraisers to get people to continually donate. Thus the real problem is that fundraising models tend to be orientated around generating an “active” cash flow and thus requiring constant participation from all parties. Further, such methods make it hard to predict what the annual income will be from donations (because it depends a great deal on current circumstances) and consequently, planning and goal setting tends to be retrospective rather than prospective.

Of course, some leverage can be gained from the more modern approaches to fundraising. As an example, we have all had annoying “cold” phone calls from marketing people (who usually give the impression they have no desire to be involved but just doing it to make a dollar) requesting a donation for this or that charity (often on the pretext that the spouse donated previously – despite the fact that this usually never happened). The trouble with this approach is that it is an annoying form of marketing that, more often than not, discredits the charity group concerned and, just as importantly, costs a lot of money to run. Thus a large percentage of the money raised does not go to the charity group but rather to the third party who is running the fundraising scheme. It goes without saying that this generates considerable resistance and scepticism within the donating community.