Philanthropy & Funding

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Five ways nonprofits can start unlocking trillions of dollars in potential donations from younger individual donors.

Millennials are unlike any generation to date. They think about impact, act on the move, and communicate as digital natives. By 2020, an estimated $100 billion dollars annually will flow from young donors into the nonprofit sector. Nonprofits who speak to them in their native language, communicate with technology, and offer them a wide range of ways to engage will benefit from this massive giving potential.

 

Young, tech-savvy donors matter:

These donors are changing the philanthropic sector.

Nonprofits have long relied on traditional customer relationship management systems to communicate with traditional donors in traditional ways, and for good reason: These systems work reasonably well for email blasts, event invitations, and direct mail. Traditional donors expect these communications, and act on them. But the same methodologies are lost on the Millennial generation. As digital natives, they expect to interact solely through technology, and eschew other forms of communication and transaction—only 10 percent of Gen Y donors mailed a donation check in the last two years. Nonprofits that don’t change their traditional methods risk being ignored, or judged as not innovative, old, stale, and irrelevant.

Consider successful companies like Uber, Airbnb, and Seamless. They quickly spread as both easy and fun solutions to problems Millennials didn’t yet realize they had. Can’t find a cab? Restaurant doesn’t deliver? There’s an app for that. Once used, forever adopted, and virally spread like wildfire. Philanthropic donations will be the same. 

Five ways to engage millennials:

  1. Get out of their in-boxes, and get into their pockets. Direct mail and enewsletters have open rates below 30 percent. Young donors are looking to engage online in creative ways, rather than via emails and mail—62 percent of Gen Y donors say they would give via mobile. For example, One Acre Fund, which supports smallholder farmers, keeps an up-to-date impact dashboard to share metrics with donors, and posts updates such as actual and projected numbers of families served via web and mobile friendly software.
  2. Let them get to know you, not just your beneficiaries. Millennials love thinking about the organization they support as well as the cause. Successful crowdfunding campaigns illustrate the power of sharing authentic stories. The Marina Abramovic Institute, for example, raised support from nearly 5,000 supporters via Kickstarter to build a new performance and education space, by sharing the founder’s personal journey and mission.

  3. Share the facts. Younger donors are more than twice as likely as older generations to demand data about impact. Organizations such as Evidence Action use rigorous evaluations and randomized control trials to identify poverty-reducing interventions. Sharing what works (and what doesn’t) has allowed it to build deeper relationships with donors, and grow its individual donor base by more than six-fold between 2013 and 2014.

  4. Invest in a great online checkout. Make sure your online donation experience is easy—younger donors are hesitant to mail a check, but love easy online options. Text-based giving raised $41 million after the Haiti earthquake, and nearly 50 percent of Gen Y report donating online.

  5. Be transparent. Younger donors want honesty— fast-growing organizations like the Akshara Foundation transparently report and blog about their research, successes, and failures. They post reports on teacher interviews, classroom observations, and school surveys. Share the good and the bad, and donors will trust you and help you grow.

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COMMENTS

  • Great article!  Very enlightening.

  • BY Wayan Vota

    ON December 30, 2015 10:24 PM

    Where is the data to back up these assertions?  You say email doesn’t work (under 30% opens) yet you don’t give actual engagement rates for social (just a survey of potential intent), which I’ve found from experience (and empirical evidence) to be much less. Email might have 25% opens, 8% click through rate, and 4% yield (conversion to donor), yet social media posts usually have percentages around 1/2-1/10th of those numbers. Email still easily beats FB, Twitter, etc.

    Also, your other examples are rife with erroneous comparisons, starting with your grouping of Millennial and GenX as the same. Then, was MEI Kickstarter focused on millennial, or GenX? Or is your assumption that Kickstarter is only for those groups? Was is just evidence that had EA’s donor base increasing? And was that increase just with Millennials & GenX? Text-based giving during Haiti was via ATT and other telcos, not NGOs. And please show link between AF failure reports and Millenial/GenX giving.

    I expect better data and logic from a SSIR post.

  • BY Angela Rastegar Campbell

    ON January 4, 2016 05:00 PM

    Readers – I appreciate comments, thoughts, and questions, thank you!

    The examples in this article represent just a few nonprofits that are using technology, data, and transparency to grow. Wayan and other readers - happy to share individual points where available, but would encourage you to think about the more important questions we raise with this article: Can new technology increase donor conversion?  What channels, tactics, and content work best, for different types of nonprofits? What has worked and failed for your organization?

    These are the types of tests we think the sector should be running constantly. My goal, and the reason we founded Agora, is to bring transparency, effectiveness, and joy to the donor experience.  The ways most nonprofits currently engage donors are opaque, costly and ineffective.  And one of the largest barriers to change is when sector practitioners get lost in the weeds or ‘personal experience,’ rather than collecting, sharing, and using data to rapidly evolve.

    ——
    Footnotes: This article uses sources and age ranges defined and cited by external sources, including Pew Research Center and Blackbuad.  Exact birth year varies by source and publication, but generally refer to 1981-1997 for Generation Y (Millennials) and 1965-1980 for Generation X.  Email and social media lead to low conversion rates. In 2013, according to Blackbaud, only 12% of Millennials gave due to an email solicitation, and 8% gave via a social networking site. As these numbers decline due to ‘undifferentiated messaging’ - email appeal response rates declined by 18% overall from 2012 to 2013 – our organization aims to uncover what works, and why.

  • BY Wayan Vota

    ON January 4, 2016 06:01 PM

    I worry about your organization’s analysis skills if your own sources contradict your statements. Per your notes, Blackbaud says 12% of Millennials gave due to an email solicitation, but only 8% gave via a social networking site. So email is 33% more effective than social media. Then you say email declines by 18% but don’t tell us if social media also declines or increases. But let’s say email drops by 18% and social media holds steady. Email would be at just over 9% - still more effective than social media.

    Oh and my ‘personal experience’? I send around 30,000 emails at month to over 12,000 unique subscribers on 4 different email lists and I have over 8,000 followers on 2 Facebook pages, and over 20,000 followers on two Twitter accounts. I A/B test almost every email and run FB, Twitter, and Google analytics on everything I do.

  • BY Wayan Vota

    ON January 4, 2016 06:07 PM

    What you might miss, is that I fully support your thesis - that NGOs have to get past monthly check-writers as their individual donor funding base. Those people are dying off, and while NGOs may get a legacy gift boost now, they do need to think differently to engage GenX and Millennials.

    I just wish you made a better argument so it could convince those stuck in the past to see the future.

  • BY Peter Olivier

    ON January 8, 2016 08:31 AM

    Great to see the discussion here - thanks Wayan for engaging. What we’re (disclosure - I work at Agora) focused on is what will engage millennials. What we see is every vertical, (social, e-commerce, education) is a trend towards mobile, transparent, visual, and personal engagement. As someone who’s worked in nonprofits, I know how difficult it can be to build an engaging software platform that reaches the expectations of younger donors. Can we help build something that takes the software burden off the nonprofits seeking to engage with millennials? That’s our first order focus.

    Secondly, while current position of the point on the line in the transition towards giving online is an interesting and worthy discussion - I totally hear you here - we’re focused primarily on the slope of that line. We’re seeing online gifts increase in every demographic group and want to figure out how to turn the donation transaction from a one-off moment into a step in the process of finding and engaging with a nonprofit. That’s our second order focus.

    I’d love to hear what’s working most for the readers, and particularly what’s increasing in effectiveness over time. While email is currently relatively effective, it’s decreasing effectiveness makes me think we’re going to see a change in paradigm before long.

    Exciting times, and one we’re looking forward to playing a role in!

  • Sally Garis's avatar

    BY Sally Garis

    ON January 11, 2016 09:30 PM

    Hi Angela, can you please give the full reference for the chart you have included in this article?

  • BY Angela Rastegar Campbell

    ON January 11, 2016 11:57 PM

    Hi Sally, our graph is from http://givingusa.org/ - giving data tables, with future projections calculated by Agora using historical growth rates per segment.

  • Richard Chute's avatar

    BY Richard Chute

    ON March 7, 2016 10:21 AM

    I’m with Wayan on this.  I totally agree with most of the larger points you are making, but your data presented here is thin. 

    Also, information on the Agora website is misleading—for instance, stating that foundations spend 20% on managing the gift process and stacking that on top of the average non-profit spending 25% to suggest that 45% of giving is lost to transaction management.  That, of course, is just not true.  Leaving aside that these averages don’t tell the story for any individual non-profit, you really can’t stack these two numbers—one is for a specialized sector of philanthropy (grant giving) and the other for all giving. You’d have to stack foundation management figure on top of the grant writing costs alone for this to work.  The mixing of the stats seems to undermine your own commentary about the value of transparency, especially given your for-profit status. 

    But all of that misses a bigger point—adding Agora to the mix does nothing to remove these other costs, it just adds even more as charities adjust to handle more and more third-party gift managers.  And no non-profit is going to simply outsource their millennial-focused fundraising effort to an outside company.  Agora is not “better than free” because it reduces costs.  Just the opposite—it just forces us to deal with ever-greater complexity in the philanthropic ecosystem and it takes more and more resources to manage the emerging third-party funders like Agora and Benevity. 

    Without a doubt, non-profit fundraising will have to evolve to incorporate millennial donors, but I’m not sure Agora is the answer or that this article offers the strongest case.  I say all of this even as my organization moves toward some of the practices described here in order to better engage millennials.

  • Richard, think you are missing the Forrest for the trees here.

    For example, how much of The Planetary society’s budget went to fundraising and donor management in 2015?

    Ok, now how much of the Planetary Society’s energy (weighted by stuff like senior leaderships time and attention) in 3015 went to that stuff (if you had to ballpark)?

  • Richard Chute's avatar

    BY Richard Chute

    ON March 8, 2016 01:56 PM

    Actually, I think I’m doing the opposite—seeing the forest rather than just the trees.  The figures you ask about for TPS are irrelevant—none of them are reduced by having gifts come via third party funders.  We have those expenses plus new ones as we work out procedures to handle payments that often come to us with poor documentation and things like a single check for both a donation and a corporate match.  Agora and others are offering products that don’t really improve efficiency; they just add to complexity and actually reduce our efficiency.  And my comments are based not just on TPS experience, but other non-profits with which I am active either professionally or as a volunteer. 

    Rather than ask questions, perhaps you could simply state your point of view?

  • Am asking questions because I am trying to understand your perspective. 

    To be clear, I am a huge fan of Sagan and think that space exploration is a worthy and important cause.

    From your reply, it sounds like your organization spends a lot of time and energy on fundraising and donor management.  From The Planetary Soceity’s financial statements, it looks like you spend around 20% of your budget on fundraising and donor management (in line with the numbers on the Agora website).

    Would you like that number to go down?

  • Richard Chute's avatar

    BY Richard Chute

    ON March 8, 2016 04:52 PM

    Hi Alex - I’m glad you are a fan!  Of course we would like robe as efficient as possible.  A rhetorical question like that sounds like a sales lead-in rather than an authentic question. 

    I still have no idea what point you a trying to make and you have not been responsive to any of my comments.

  • Totally fair.  The reason I haven’t been responsive is because (with all due respect) I think you are focusing on the wrong things.

    As a non-profit, (obviously) you want to be more efficient. 

    As a donor, (obviously) I want you to be more efficient. 

    Ultimately, it seems we have the same goal.

    So the question becomes, not whether software *has helped you in the past*,  but *can it help you* in the future.

    You talk about the pain you have experienced getting solicited by a never ending set of people promising to solve your problems, but only adding to the complex set of painful tools you have to interact with just to do your job.

    I agree, that sounds terrible. 

    As a donor, I want to be able to quickly understand and contextualize what your organization does when you (reasonably) ask for money.  I want to be able to ask questions (like I did in this chain).  I want to be able to hold you accountable, and reward you if and when you deliver on promises.  I might also want to champion your organization because the causes we support say something about who we are as people.

    Right now, as a donor, *this is also a disaster*.

    Ultimate, the reason we founded Agora is because we agree with you. 

    Why?

    We think the entire experience is a disaster.  We agree that the tools to navigate this world kinda suck, and we want to live or do by our ability to solve that problem.

    Because, if Agora doesn’t help, it goes out of business. 

    If it doesn’t make your life easier and reduce costs, then you won’t use it. 

    As a donor, if Agora doesn’t make my life better.  I don’t use it.

    If no one uses it, Agora goes out of business.

    It’s that simple.

    The fact Agora is a for-profit allows us to serve the non-profit world in ways that non-profits can’t.  It also means we are happy to live or die by whether we make your life better. 

    We aren’t trying to sell you anything, all we are asking of you is to hold us to the same standard you would any technology product.  Us it if it helps. Nothing more, nothing less.

  • Richard Chute's avatar

    BY Richard Chute

    ON March 8, 2016 08:04 PM

    Hi Alex - I certainly don’t agree with your propositon that, for donors, the current philanthropic process is a disaster.  On the contrary, over and over again in a whole string of non-profits that I have worked for, I have seen acts of giving that have been not just “good” or “really good,” but actually transformational. 

    Non-profits don’t serve needs that way a taxi or Uber does; there’s no single killer app that will become the viral solution to ________ (fill in your favorite cause).  Why?  Because there are so many things that non-profits do and with great nuance.  The Planetary Society does similar but different work from the National Space Society.  So, can a donor decide to select one but not the other?  Not really.  We don’t do the same thing.  And many select both.  And neither of us address all STEM (or STEAM) educational needs in our schools, and nor do we cure cancer. 

    Moreover, tools are already exist that help donors—Guidestar and Charity Navigator, to name two.  And they are, in fact, doing a competent job.  In addition, sites like Network for Good are helping donors find projects that address issues that they care about. 

    BTW, after reviewing your website, I don’t yet see any current or potential value beyond what already exists elsewhere, though that may develop as you continue down your road of development as a start-up.  In the meanwhile, I would still recommend that you update the inaccurate statements on your website that suggest that the non-profit community wastes 45% of donor dollars.  It’s a kind of straw man, really.  This kind of inaccuracy contrasts with your own calls for accuracy and accountability among non-profits.  I understand the point you are trying to make, but the data you select can’t be combined in the simplistic way that you present it.  As one of your potential customers, I can tell you that reading that statement and how you were willing to stretch the point led me to wonder what other claims might be a little stretched.  Effective fundraising relies on credibility, and this kind of claim didn’t lead me to having greater interest in your services (there’s your focus-group of one). 

    Good luck with your endeavor; I’ll watch with interest to see how things proceed for you!

  • Richard,

    Seems like we are not too far apart. 

    Think you and I see the same problems, just have different perspectives on the potential for great technology to address those problems.

    The 45% number is a best approximation not of the waste but of opportunity. 

    Whether it’s 45% or 30% or 60%, the number represents the tremendous amount of time, energy and resources the non-profit world expends managing it’s lifeblood of donors.  It’s just the cost of doing business.

    At Agora, we think great technology can help make that number go down,  and we are excited about trying to bring that world into being.

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