Individual philanthropy is the primary funding source for many nonprofit organizations. A major challenge facing such organizations is the volatility of individual giving: Nearly half of newly acquired donors only give once. Because of this instability, nonprofits strive to increase repeat giving by individuals as well as to identify and retain donors who are more committed.
A new study in the Journal of Marketing explores the challenges and opportunities with nonprofit fundraising to provide organizations with strategies they can use to increase sustainable giving and profitability. To this end, our research team worked with a large, successful nonprofit organization that conducts research and outreach related to an animal species and engages with more than 100,000 individual givers each year. The organization structures individual giving in two different forms: donations and memberships. One reason for members to give is the benefits they receive, depending on the membership tier, which range from a quarterly magazine to exclusive guided tours and online courses. By contrast, donors do not receive any benefits from the nonprofit in return for their donation and give largely because of a “warm glow” (i.e., the good feeling that comes from giving) and tax deductions.
Using detailed data provided by the nonprofit, we studied the behaviors of first-time givers in the US over five years and obtained several insights about fundraising. First, the two forms of giving attract different kinds of individuals. For instance, donors were more likely to be women, while members were more likely to be men. Second, during the five-year period, over half of the individuals transitioned to becoming multi-form givers. That is, those who started out as members added donation to their giving portfolio and those who started out as donors added membership as another form of giving. These “member-donors” were especially important to the nonprofit: They gave more each year than those who gave in a single form and gave more frequently. Thus, multiple options for giving served as a pathway to engage more committed givers over time. Third, we found that appeals sent by the organization tended to primarily increase the likelihood of repeat donations or membership renewal, but not the amount given. Fourth, while lapsed donors were likely to donate again even when two years had passed since their last donation, lapsed members were positively disposed to renewing even three years after their last renewal. This insight can guide the nonprofits efforts to bring back lapsed givers.
In addition, we developed a predictive model that can help identify individuals who are more likely to become member-donors in the future, based on their characteristics and past giving patterns. Once identified, the nonprofit can focus on nurturing longer-term relationships with them.
Collectively, the data-driven insights we derived can help nonprofits develop strategies to structure their giving options better, retain givers for longer, and target their marketing resources on more committed individuals. The net impact of these strategies is to make fundraising more effective, implying that a larger share of every dollar raised goes to serve the organization’s mission rather than to fundraising efforts.
Read the full article.
From: Sungjin Kim, Sachin Gupta, and Clarence Lee, “Managing Members, Donors, and Member-Donors for Effective Non-profit Fundraising,” Journal of Marketing.
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Sungjin Kim is Assistant Professor of Marketing, University of Hawai’i at Manoa, USA.
Sachin Gupta is Henrietta Johnson Louis Professor of Management, Cornell University, USA, and Journal of Marketing Research Editor-in-Chief.
Clarence Lee is Assistant Professor, Cornell University, USA.