TOPIC 8

Entrepreneurial
Fundraising and
Marketing
The Donorschoose.org case

2
Donorschoose.org matches donors with nonprofits seeking support

It specializes in grants that are too small for most funders to continue

In addition to matching, it provides feedback and reports to donors on the

use of their funds

This is an example of entrepreneurial fundraising.

http://www.donorschoose.org/
Five types of fundraising activity
Fundraising is a major activity for nonprofit managers:
1. Personal relationships
• Get others on board with personal contact
• Letters may not be sufficient to convey that vision
• Conversations, tours, and events with direct contact with individuals
2. Direct mail
• Although it seems antiquated, it is profitable
• Some fundraising firms conduct direct mail for nonprofits, e.g., Easter
Seals, St. Jude’s Children’s Hospital
• Few (1 – 3%) of recipients respond to initial asks
• More (e.g., 20%) of prior givers donate later times
• It may not work for early stage social ventures
3. Telemarketing, calling lists of donors and non-donors
• There is resistance from call recipients
• It helps with small donations, member renewal
• Impractical for some early-stage social ventures
• Because it needs equipment and expertise, it is often delivered by
fundraising firms
4. Traditional media
• Newspapers, magazines, television, radio
• Fundraising using broadcasting has been effective for many
Christian organizations
• Social ventures can buy advertising and other placements in such
media
5. Virtual means
• Raising revenue over the web is not a cure-all
• Social entrepreneurs should be careful
• Donors are still adapting to e-giving
• E-mail solicitations are treated as spam
• No guarantees of Web site traffic
• Nonprofit have been slow to adapt technologies
Spending fundraising dollars
• Building fundraising over time
• Personal relationships at first, then direct mail
• Virtual fundraising for organizations with capacity
• Traditional media can be costly
• Tradeoffs between purposes and targets
• Between number of donors and size of gift
• Figure 8.1 illustrates this tradeoff
• Between purposes and focus:
• Purposes: raise money or raise visibility
• Focus of targets: new or established donors
• Table 8.2 shows the strategies from each choice
Figure 8.1 Spending tradeoffs in fundraising

Average annual giving

Relatively few
“angels”

per donor Relatively numerous

small donors

Number of donors per year

Table 8.2 Choosing a fundraising strategy
Focus: Focus:
new donors Established donors
Purpose: Strategy: mix of Strategy: larger,
Raise money large and small fewer donations
gifts
Purpose: Strategy: smaller, Strategy: mix of
Raise visibility more numerous large and small
donations gifts
The Easter Seals case

• A long-established nonprofit that helps individuals with special

needs and disabilities
• Dozens have contributed amounts over $100,000
• 3,800 have contributed over $1,000
• But millions have contributed amounts less than $1,000 – even
pennies
• Small donations make up the majority of Easter Seals revenue
Differentiating donors
There are different kinds of donors
• Potential donors
• New donors
• Transition – give a second time
• Core – three or more donors
• Lapsed – have stopped giving
• Lapsed but reactivated

Most donors – as much as 80% – are inactive

Active donors can be in any of the other types
Core donors are the most productive
Fundraising strategies
Win: gain new donors or regain lapsed donors
• Example: Habitat for Humanity soliciting volunteers and donors
through churches
Keep: maintain donors in the core
• Example: World Vision targets donors for retention
Lift: Obtain larger gifts from core donors
• Example: MAP targeting the best prospects from donors to increase
gift averages
Figure 8.5 illustrates the fundraising ecosystem
Figure 8.5 The fundraising ecosystem

New donors Lapsed donors

Transition donors Win
Win
Keep

Core donors
Keep
Lift
Losing donors
• Why do donors lapse:
• Fatigue from too many requests is a myth
• Other organizations are more deserving
• Can’t afford to support
• Failure of organization to establish a relationship
• Donors are not asked a second time
• Research suggests that fundraising expenses increase donations but
administrative expenditures don’t reduce donations
• So, nonprofits should not fear responsible spending to build donations,
including administrative capacity
The United Way case

• UW fundraising was very successful in the 1970s and 1980s

• In the 1990s, it faltered even when the economy was doing well,
for two reasons
• Scandal based on the CEO’s fraud
• Corporate downsizing and declines in union membership changed giving
patterns
Volunteer recruitment and attrition
• Donations of time must also be won, kept, and lifted
• Three main types of appeals to volunteers
• “Warm body,” i.e., no special skill needed
• Targeted recruitment for specific skills
• Concentric circles, when volunteers recruit other volunteers
• Help the Hospices built volunteering by gaining publicity for its
mission
Avoiding volunteer attrition

• Understand that volunteers recognize the value of their time – it is

not free
• What are the elements of time valuation
• Compared to the value of market work
• Compared to other volunteer opportunities
• Compared to leisure time
Social enterprise marketing
• Planning, pricing, promoting, and distributing a venture’s programs
and products
• Key tasks include defining target markets and linking to those
markets
• Who should clients or donors be?
• How should they be reached?
• Setting prices for services
• Communicating to them
• There are critiques and barriers to nonprofit marketing
• But nonprofit operate in market economies
Steps in building a social enterprise marketing
strategy
• External analysis: in what industry does it compete, who are
constituents and competitors?
• Internal analysis: What does it do, what do constituents think it
does, what do constituents think it ought to do?
• Expand by growing markets or products
• Select market strategy and evaluate it
• Communicate explicitly with overt messages and implicitly with all
contacts with constituents
• Figure 8.8 shows these steps
Figure 8.8 The social enterprise marketing
strategy process
External analysis
•Who are my constituents?
•Who are my competitors?
•What is my industry?

Internal analysis
•What do constituents think we do?
•What do constituents think we ought to do?

Firm development
•Market growth
•Product growth

Strategy selection and evaluation

Communication
The CARE International case
• CARE’s programs address underlying causes of poverty, but it is still seen
primarily as a distributor of food relief
• CARE changed its logo to reduce the mismatch between perception and
reality, and also uses newsletters to inform donors

Old logo New logo

Social enterprise messages
• Targeted marketing emphasizes social enterprise benefits important to
specific groups
• Messages can be devised to address underlying reasons why some people
don’t give
• Appeals can be abstract, concrete, promotional, or refutational
• Table 8.3 shows appeals that were significant to some demographic groups
in a survey of Atlanta residents
• Table 8.4 shows which issues nonprofits in Spain need to address to build
contributions
• Table 8.5 shows types of messages
Table 8.3 Targeting demographics
DEMOGRAPHICS FUNDRAISING FOCUS
TO TARGET
SENSE OF CHARITIES ARE SENS HELPED TAX RELIGIOUS
COMMUNITY MORE EFFECTIVE E OF YOU IN BENEFITS REASONS
THAN GOV’T DUTY TIMES OF
NEED

HIGH INCOME X
LOW INCOME X X
YOUNGER X
PRACTICING FAITH X X
MARRIED X
SINGLE
NONWHITE X X
WOMEN X X X X
CONSERVATIVES X
VOLUNTEER X X X X X
Table 8.4 Using negative information in
marketing

Strategy
Target group Show how Show that Show that Improve
aid helps aid reaches even small awareness of
those in those in gifts can organization
need need be useful
Young X
Older X
Men X
Unmarried X
Low education X X
Small family X
No religion X X
Big city X
Table 8.5 Types of messages

Promotional Refutational
Abstract “Giving is vital for “Your gift might be small, but
society” you are doing your part”*
Concrete “Your $10 gift will feed a “$10 might seem like a
child for 10 days”* pittance, but it will feed a
child for 10 days”
• Source: Clary, et. a., (1994)

• Concrete/promotional and abstract/refutational are especially

effective
Pricing: Alternative approaches

• Maximize profit (e.g., net revenues)

• Like a business, but inconsistent with nonprofit objectives
• Sliding scale or price discrimination, e.g.,
• Charge some clients more to cross-subsidize desirable programs
• Voluntary price discrimination, when clients make voluntary donations
• Charge different prices at different times
Table 8.6 Pricing options

Strategy Description
Profit maximization Maximize net revenues
Mixed pricing Cross subsidize favored clients with fees from
others
Classical price Charge prices that vary by client characteristics
discrimination (age, race, income, etc.)
Voluntary price Charge a low price but augment with voluntary
discrimination donations elicited at time of sale
Classical price Charge according to time or day
discrimination