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Nonprofit Strategic Update: September 2020 Review

It’s been six months now since COVID-19 locked down America and there is little doubt that the pandemic and its effects have forever reshaped the way we live, interact and how we behave as consumers. To us, the remarkable thing is that donors have by and large stuck with causes. While the industry has lost billions of dollars in individual giving because of COVID-19, many organizations are seeing a boost to their revenue, especially those that support local, community-based services and programs.

Among those organizations most impacted by the pandemic are those that utilize special events, such as organized walk, run, bike, galas, or other types of a-thons for individual participation and charitable gifts.  The nationwide lock down all but doomed these in-person events and the financial consequences to those organizations were severe, resulting in drastic reductions in research funding, large-scale furloughs and the closing of many affiliate offices that serve local communities. The situation would have been much worse had it not been for the nimbleness of many organizations who quickly transformed in-person events to virtual events hosted on various digital platforms.  While revenue is not equivalent to in-person events, it’s still impressive to recoup between 35-65% of expected revenue.

These virtual events are just one example of how new behaviors evolved out of the pandemic. It is expected that most new behaviors will likely endure far beyond the end of this crisis. As an industry, we will see a wide-scale adoption of digital as both a media and a channel of response across all generations and demographics.  

It feels to us as if we’ve moved beyond the crisis and are now embracing a “long-haul” mentality.   We hesitate to refer to it as the “new normal” given we expect that there will continue to be a myriad of things and events that will impact consumer and charitable behavior. That said, if nonprofits wish to stay competitive in the sector, they should embrace these behavioral differences and invest more in their understanding of the evolving needs and expectations of donors and nondonors. Act fast, as vital year-end fundraising campaigns are right around the corner.

Few people expect the fundraising environment to improve over the next few months. In fact, most believe things could get worse for many nonprofits as they continue to deal with the complexities of COVID-19 and, if that wasn’t enough, the disfunction and drama around the fast approaching 2020 Presidential campaign and election. The battle for the largest share of the consumers’ mind and wallet may never have been greater than it will be over the next six weeks. Mix in the issues with the US Postal Service (increased mail volume, possibility that mail-in ballots could overwhelm the postal service this fall, further perpetuating concerns over slow delivery of outcoming solicitations and incoming contributions), an uncertain economic outlook and shaky consumer confidence, and you have you have all the ingredients for unprecedented performance for year-end fundraising campaigns.

The challenges we face are significant, but so too are the opportunities – especially for those who are committed to evolving and diversifying fundraising programs to meet the needs and expectations of constituents. There are opportunities for those who are willing to break down all remaining barriers to the integration of the organization’s media and channel strategies so to prioritize the needs of individual donors, rather than the particulars of disparate fundraising programs.   

COVID-19 has changed a lot and as fundraisers we must resist the temptation and comfort of staying the existing course, as we must be willing to become uncomfortable and vulnerable. As an industry and as individual fundraisers, we must “press forward, harder.” Don’t shy away from exploring new frontiers or from considering new opportunities, but rather develop a process from which you can quickly and effectively evaluate the risk-to-reward potential of each new venture.  

Between now and the end of 2020, commit to staying engaged with your donors: strengthen the relationship, reach out to those who have given to thank them and to those who haven’t to encourage them to give.  Use this time to leverage new insights to become a more compelling storyteller and above all else, give them reasons to engage and the opportunity to participate in a fundraising campaign/event through various media digital platforms.

Some upcoming dates that you should be aware of:

  • October 19-25 National Estate Planning Awareness Week. Use this week to evolve your planned giving efforts. Educate estates planners in the communities you serve and your donors about the need, options and financial benefits of all forms of planned gifts.
  • November 15National Philanthropy Day. A day dedicated to recognizing the incredible work and efforts of your volunteers and donors.  While you no doubt do so throughout the year, consider using this day to make sure all of your supporters know how much you value their ongoing contribution to your mission.
  • December 1 - #GivingTuesday. Make sure you continue to evolve your Giving Tuesday campaign strategies.  Embrace all those things that worked in the past, but ALSO venture into new frontiers with more innovative solutions that increase awareness, engagement and support. 
  • December 31 Year End. There is something magical about year-end fundraising campaigns, which usually commence at the conclusion of Giving Tuesday and run throughout the entire month of December. If you haven’t done so, start planning for it NOW. Push the limits of its potential and nail down your fundraising strategies: audiences, offers, value proposition and message platform(s) to maximize the full potential of your campaign.   Make sure to reflect on everything that happened to the organization post COVID-19. Embrace all you’ve learned about your donor’s behaviors and adjust and integrate your communication plan accordingly.

Industry Insights and Trends

Giving trends across the nonprofit industry varies dramatically depending on the sector in which the organization engages. Those that support local community foodbanks and deal with food insecurities have reported a surge in giving since the outbreak of the pandemic, whereas those in other sectors of the industry, both small and large, have reported declines in charitable revenue to varying degrees.

According Gallup, the percentage of individual donors engaged in charitable activities has declined in 2020, down to lowest level in nearly two decades. Those who have volunteered their time or services, has declined in 2020, to a level comparable to 2008 and 2009.

Gallup Chart

As expected, donors have continued their benevolence during the COVID-19 pandemic. About one third of all US households reportedly gave directly to charitable organizations, individuals or businesses during the early months of the crisis. When you factor in ordering takeout to support local establishments and their employees or continuing to pay for individuals or businesses for services even if they could not render them, those engaging in a charitable act increased to 50%.

Among households that gave financially, most continued their support at levels of pre-COVID, but of households that altered their contribution amount, those who gave less far outnumbered those who gave more.  As you would suspect, those who gave less cited uncertainty about the spread of the virus and further economic impacts as the primary reason for the change in behavior.  

Pie chart 1

Pie Chart 2

Source: IUPUI Women’s Philanthropy Institute

Direct mail continues to be viable channel for giving during COVID-19

While many of the largest national health charities have experienced significant revenue declines since the outbreak of the COVID-19 in US due to cancellation of live events, individual giving through mass direct response channels has been consistent, if not better, during the pandemic. 

Specific to the direct mail channel in 2020, as compared with 2019, overall performance metrics were largely comparable, but improved donor value resulted in slightly more revenue.

Below is summary of some key metrics worth noting:

  • Total RevenueUp 1%, despite 5% and 3% fewer active donors and gifts, respectively. Gift frequency was up 3% and average gift was up 3%, combined to improve overall revenue per donor by nearly 7%, more than offsetting the decline in active donors.
  • New Donor Volume – Down 5%, due primarily to a 9% decline in acquisition mail volume.  Despite the decline in the number of new donors, overall new revenue increased up 6% due to increased giving among new donors and a 9% increase in average gift. This combined for 11% increase in overall revenue per new donor. 
  • Reactivated Lapsed Donors – Down 11%, based on a 13% decline in lapsed donor reactivation rates. Lapsed donor revenue was down only 1%, as a result of 10% increase in lapsed donor value.  Most organizations reported they focused reactivation efforts on higher value donors during COVID. 
  • Active Donor Retention Rates – Up 2%, despite a slight decline (1%) in first year donor retention. Multi-Year Active donor retention was up slightly (1.8%).   Revenue generated from active donors was up more than 3%.

Note:  revenue from digital campaigns is not yet available for all organizations, but from all account revenue from digital activities increased significantly during COVID-19, across organizations in every sector.

Revenue declines have forced widespread changes throughout the nonprofit industry as organizations have had to make difficult decisions on everything from budget cuts, staff reductions and the elimination of field offices.    Not much has changed over the past three months and the short-term outlook doesn’t look any better for most nonprofits, according to a GGA SurveyLab report.

Source: https://www.philanthropy.com/article/More-Nonprofits-Report/249331

Consumer Sentiment

Dentsu (Merkle’s parent company) has been publishing a recurring study on consumer sentiment during the COVID-19 pandemic.  Some observations from the September 17 Dentsu Navigator report are highlighted below.

Over the last three months consumers have battled new waves of the pandemic across the nation and are coming to the conclusion that the pandemic will be with us for some time. Consumers are now feeling more in control after six months of the pandemic but also now have to turn towards other national issues of justice and the election.

Source: Dentsu Aegis Navigator September 17.

The pandemic is one among other top national issues.

Consumer concern over other national issues in addition to the health and economic crisis stemming from COVID-19 is growing. As November nears, the US Presidential election is a top issue as well as social unrest and racial inequality as police brutality against Black Americans continues to occur and make national news.

While historically nonprofit organizations have not seen a decline in giving during elections, there are organizations that based on their sector can highlight and take advantage of using the election and unrest to promote their cause.

Top national issues

Heading into fall, a return to normalcy still feels far away

In April, over three-quarters of Americans said that things would return to normal in 2020. Now, that number has decreased by 42 percentage points, yet over a third of respondents continue to believe normalcy will return before the end of the year.

The change in when donors will feel comfortable going to events continues to get longer. As organizations continue to work on improving their virtual events, it will also be important for them to look at other outside the box online programs to replace the current approach of events.

Latest Trends

Listed below are trends being observed in the nonprofit industry.

Americans are returning to wellness activities and non-essential purchases, but will wait longer to revisit places likely to draw crowds

Timeline rescheduled

Source: MRI Simmons | Sept 9

While overall ad spending has declined, a new study of TV and radio ad campaigns indicates they are actually performing better during the COVID-19 pandemic.

On an average, TV and radio ad campaigns are generating nearly 7% greater “lift”, which is defined as increased traffic to the advertiser's website over the course of the 15 months analyzed.

The study analyzed 250 radio and TV ad campaigns running on stations in the U.S. and Canada during a 15-month period ending in June 2020.

Average campaign

Innovative Creative

Shown below are some examples innovative creative being used in the nonprofit industry recently.

The United Way and YWCA

The United Way and YWCA join together and co-brand against racial injustice, providing integrated messaging across organizations.  

United Way

 

Human Rights Campaign: Election Box

Human Rights Campaign has developed the “Election Box” concept in an effort to generate sustaining givers. The email includes personalization in the copy and on the gift box image. The email provides a sense of urgency by using a limited time offer and creates a way to show support of the election and the organization by including branded products.

Human Rights Creative

Using Amazon to raise awareness

Amazon has developed a special “Go Gold” program for Childhood Cancer Month. The program uses specially designed shipping boxes to create awareness of childhood cancer. Opening the box provides a request to scan to find out more about the impact of childhood cancer, the doctors working to find the cures, and information on the hospitals Amazon supports.

Amazon creative

What We See Working (and Why)

Charities are transforming “virtually”

The roots of American philanthropy can be traced back to special events i.e., the participation in a charitable endeavor for the purpose of raising money to support a cause or mission.  Whether its walking around a track or through a community, riding a bike for three days or school aged kids jumping rope or marching around a classroom, there is likely a special event for most every type of activity.  

Paid solicitors had been roaming America’s city streets and knocking on doors seeking people to become monthly sustaining donors to various types of organizations. And of course, there’s the iconic Red Kettle with Santa Claus ringing his bell in front of nearly every major department store across America. 

COVID-19 brought everything to a grinding halt and organizations had to very quickly adapt to the necessity of virtual events, and the speed of the transformation was swift and most-likely, everlasting.   

The problem is that virtual events don’t raise as much money as live events.  While actual revenue numbers are not readily available across the industry, estimates are that virtual events bring in between 30% and 65% of the revenue expected from live events. According to Peer-to-Peer Forum, the Arthritis Foundation virtual walk raised 60% less revenue than expected from a live event. A prominent regional hospital had to replace their annual gala and with a traditional “telethon,” which raised two thirds less than the gala.  

Environmental organizations and child sponsorship groups who have stayed away from street corners and from going door to door have returned to the “telephone” to recruit monthly donors.   Results have been much better than expected.

The Salvation Army faces tremendous challenges with its Red Kettle campaign, which historically generates over $140 million annually.   With closing of retail stores, consumers having less cash on them, and consumers creating less foot traffic, the Salvation Army anticipates as much as a 50% decline in revenue from Red Kettles.

To offset the potential revenue shortfall, the organization is evolving its fundraising to integrate all forms of media and to capitalize on all types of donor engagement, regardless of channel. For the first time in 130 years, the Salvation Army is getting a head start by kicking off its annual campaign early this year.  Additionally, they are now accepting donations through a variety of online channels and commerce platforms such as Apple Pay or Google Pay.  Donors can now direct Alexa to donate an amount of their choice to the Salvation Army and they can make their contribution to via text  by texting “KETTLE” to 91999. (source- TheNonprofitTimes 9/15/20)

According to Mobilize, supporters of nonprofits, advocacy groups and political campaigns were quick to “jump on board” to engage virtually.  They say the only things holding organizations back are a lack of strategy and technology, but definitely not a lack of interest and willingness from supporters.  They added, “it’s clear that any organization continuing to hesitate on virtual events and engagement is falling behind.”

In conclusion, nonprofit organizations need to actively address marketing efforts given the new environment to both overcome today’s challenges while also capitalizing on new opportunities. “Navigating the new normal” will require revised marketing guidelines for the end of 2020 and beyond.

Marketing Guidelines

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