Rethinking Fundraising for the Future
We live in the age of compounded crises, where global challenges are interconnected and complex in nature. Meanwhile, public attention spans are short, and agendas change almost every minute. At this critical point in time, fundraisers need to utilise innovative new tools and technologies to go above and beyond previous efforts. The future of fundraising needs to be efficient, transparent and hyper-personal.
The modern notion of fundraising as a proactive approach to gathering money for a cause was introduced in the early 1900s, but the act of donating has existed for millennia, driven especially by religious teachings. In recent history, we have seen fundraising become a more organised and systematic process, supported by the advent of telecommunications and new techniques such as face-to-face fundraising campaigns and events. Institutional philanthropy has steadily grown into a multitrillion-dollar sector globally with numbers expected to grow up to 5 percent yearly (in the US alone) in the next few years¹. The emergence of social media brings new opportunities for fundraisers by improving the ability to rally around causes and disseminate messages further and faster than ever.
“…fundraisers should try to IDENTIFY willing donors more efficiently, ENGAGE them through customised and transparent channels, and ANTICIPATE disaster situations to the streamline the use of funds. Eventually, this could help fundraisers spend the right money at the right time in the right way.”
Accelerating and complex developments are amplifying the need to solve our numerous global challenges and crises — climate change, social injustice, health issues, natural disasters, among others. Meanwhile, the interconnection between these issues acts as a powerful multiplying force. We live in a world where public attention spans are short, and agendas change almost every minute. In 2021, the crises that dominated newsfeeds have shifted from mitigating the effects of the COVID-19 pandemic to the Western North America heat wave to the sociopolitical unrest in Cuba, Sotuh Africa and elsewhere.
At this critical point in time, fundraisers need to figure out how to go above and beyond previous efforts to compete for donations. In this article, we will look at three key ways to improve future fundraising efforts. The goal must be to:
- Optimise donor search
Identify the right donors by well-designed predictive models to (ethically) optimise the search for willing donors through uplift modelling. - Use funds more efficiently
Anticipate disasters through forecast-based financing to use funds more efficiently, e.g. by auto-launching crowdfunding campaigns when a trigger warning is issued for a potential disaster. - Meet and exceed donor expectations.
Engage with donors through transparent and responsive fundraising to meet and exceed donor expectations (with the help of digital platforms, DLT-enabled smart contracts & crypto-philanthropy).
OPTIMISE DONOR SEARCH THROUGH UPLIFT MODELLING
“For fundraisers, running potential donors through well-designed predictive models can potentially help reveal the individuals most likely to donate, the amount they are willing to donate, which causes they support, and the channels they are affected by.”
After the Democrats lost control of the U.S. House of Representatives in 2010, pundits were predicting a loss for President Barack Obama in the 2012 Presidential Election. Obama’s campaign staff turned their attention towards big data predictive analytics to gain the upper hand and appeal to undecided voters, while making more efficient use of resources. The staff applied the actionable approach known as ‘uplift modelling’, where the intention is to identify the ‘persuadables’ — the individuals who are most likely to be influenced positively by outreach efforts such as online ads or phone calls. The campaign staff’s models helped direct money and time towards the most effective channels to contacting the most ‘persuadable’ undecided voters, and thereby avoided wasting resources on the already decided². As we all know, Obama went on to win his second election, thanks in part to effective campaign management.
For fundraisers, running potential donors through well-designed predictive models can potentially help reveal the individuals most likely to donate, the amount they are willing to donate, which causes they support, and the channels they are affected by. Obvious grey are- as exist related to targeting fundraising efforts at the ‘persuadables’, for instance, identifying those already financially vulnerable. We are already seeing customised targeting through time slot-specific TV ads for charity organisations and algorithms driving online traffic, exemplified by the Cambridge Analytica-scandal during the 2016 Presidential Election, which showed the potential drawbacks of our interconnected, data-abundant society. Enabled by data, fundraisers can get to know potential donors better than before, which can raise privacy and security concerns. However, if fundraisers manage to find an ethical equilibrium, plenty of optimisation opportunities exist within a more real-time and personalised search for willing donors.
USE FUNDS MORE EFFICIENTLY THROUGH FORECAST-BASED FINANCING
“Being able to stretch humanitarian aid and visibly improve the real value of donations could help NGOs ‘win the battle’ for future donations.”
An oscillation of the global ocean-atmosphere system, known as El Niño, sweeps the tropical Pacific in cycles of 2–7 years, resulting in unusual weather activity around the globe. Most vulnerable to these events are developing countries bordering the Pacific Ocean, which are reliant on local agriculture and fishing³. In Peru, El Niño-induced heavy rains and severe droughts have historically threatened basic needs such as general health, food security, and housing. To anticipate the consequences of El Niño and future crises, the Red Cross Red Crescent Movement in 2015 began testing a forecast-based financing (FbF) approach, where the pre-emptive release of humanitarian funding enables early action. Based on risk analysis and in-depth forecast information, the project’s funding follows the likelihood of an incoming disaster.
While predicting the strength of El Niño is still a challenge, the Red Cross has installed community-based early warnings and protective measures before El Niño to build resilience. The measures did not have immediate impact, but in the long run, they have provided great value for the effected Peruvian population by improving preparedness capacity and the stability of houses⁴. On top of saving critical resources, research by the UN World Food Programme has shown that FbF can help save human lives⁵. FbF can help NGOs to manage humanitarian aid more efficiently and potentially, crowdfunding campaigns can be set for auto-launch when a trigger warning is issued for a potential disaster. Being able to stretch humanitarian aid and visibly improve the real value of donations could help NGOs ‘win the battle’ for future donations.
MEET AND EXCEED DONOR EXPECTATIONS THROUGH TRANSPARENT AND RESPONSIVE FUNDRAISING
“Creating accountability and transparency in charitable activities and fundraising are becoming key competitive parameters to build and maintain relationship with donors.”
In 2018, individual donors in the US contributed 68 percent of the total amount of charitable giving ($428 billion) making individual donors the main priority for fundraisers⁶. Prospective donors are continually being bombarded by impersonal messages, all asking to donate for very important causes. In a world where fundraisers are competing for attention and donations, the idea of ‘responsive fundraising’ is gaining traction. Instead of seeing donors as a number, responsive fundraising is focused on personally involving the donor in the cause and creating a closer, more personal engagement, often aided by social media, where individuals can show others what a good person they are by making a public donation, while inspiring others to donate.
Creating accountability and transparency in charitable activities and fundraising are becoming key competitive parameters to build and maintain relationship with donors. Donors want to know what their money supports and do not want their entire donation to be swallowed by bureaucracy. In the UK, it was estimated by Channel4 that on average, 60–70 percent of UK charities’ annual spending goes to charitable activities, while administration and fundraising are the next largest costs⁷. To foster trust and increase donations, the goal must be to spend more on charitable activities, thereby fulfilling the purpose of charities. New tools are needed for fundraisers to meet this demand:
Digital platforms. Digital fundraising platforms have the potential to limit bureaucracy, while reaching a global audience through storytelling and access to news and an overview of donations.
Smart contracts. Blockchain-enabled smart contracts can help automate and decentralise the giving process by holding back funds to charities until they have proved that they have reached specific goals. Further, decentralised digital ledgers like blockchain make the giving process more transparent, as no institution has control over the ledger. This allows for an auditable and verifiable transaction between donors and charities⁸.
Crypto-philanthropy. The donation platform HumanityToken is an example of how blockchain can be used to manage and track donations transparently, thereby allowing donors to keep track of how their individual donation has been distributed and used. While the use case is limited to providing restricted spending for the economically disadvantaged, similar programs in other contexts should be viable with duediligence and vetting mechanisms in place⁹.
Spending the right money at the right time in the right way
The continued acceleration of technology and increasing amounts of available data have created new tools for fundraisers to both anticipate and prevent disasters and to attract potential donors looking for more personalised engagements. We are moving into a more individualised world, where segmentation is dead. Donors want to experience that they, individually, are helping to create a better world. In the midst of the immense financial uncertainty of the COVID-19 crisis, people might start donating less, as they historically have done during previous recessions¹⁰. The crisis is simultaneously creating severe setbacks in areas ranging from income inequality¹¹ to investments in developing countries¹², but it is also an opportunity to realise the importance of solving global crises together across borders. In this context, fundraisers should try to IDENTIFY willing donors more efficiently, ENGAGE them through customised and transparent channels, and ANTICIPATE disaster situations to the streamline the use of funds. Eventually, this could help fundraisers spend the right money at the right time in the right way.
The article was originally published in the Copenhagen Institute for Futures Studies’ SCENARIO Report “CSR in the Age of Compounded Crisis” (09/2020), which can be downloaded here: https://cifs.dk/p/csr-in-the-age-of-compounded-crises
[1] Indiana University Lilly Family School of Philanthropy: “The Philanthropy Outlook 2020 & 2021”, Marts & Lundy, bit.ly/2P4JiQa.
[2] Emma Preslar: “How uplift modeling helped Obama’s campaign – and can aid marketers”, TechTarget, bit.ly/39yidyg.
[3] NOAA: “What are El Niño and La Niña?”, National Ocean Service, bit.ly/3eZt313.
[4] Red Cross EU: “Forecast Based Financing” bit.ly/32XNbhP.
[5] OSZIR: “Forecast-based Financing (FbF) — Anticipatory actions for food security (2019)”, UN World Food Programme, bit.ly/303X7Vi.
[6] Giving from foundations and bequest contributed 27 percent and corporations: 5 percent.
[7] Georgina Lee: “How much do charities actually spend on good causes?”, Channel 4 News, bit.ly/3hMOfJI.
[8] Howard Lake: “Blockchain startup offers transparency tool to track donations to charity”, UK Fundraising, bit.ly/2X9Fm54.
[9] YourCause & Blackbaud: “A transparent experience for companies, employees, and nonprofits”, bit.ly/2BHPL0g.
[10] C. Cutbill, C. Priestley &C. Harris: “Charities and coronavirus: Reflections on the sector following the 2008 financial crisis”, Withersworldwide, bit.ly/3f3TPpd.
[11] UN Development Programme: “Coronavirus vs. inequality”, bit.ly/331Haka.
[12] OECD: “The impact of the coronavirus (COVID-19) crisis on development finance”, bit.ly/2EiYDKx.
