The coronavirus pandemic puts many colleges and universities at great risk of decreasing fundraising revenue. Unfortunately, poor planning has made them this vulnerable.
In 2018 The Chronicle of Philanthropy and The Chronicle of Higher Education issued a joint report entitled “Fixing the College Fundraising Crunch.” Unfortunately, it went widely unnoticed by leaders in higher education. The report raised the alarm that, while overall higher education philanthropy was growing each year, there was an alarming underlying trend: virtually all of the growth was coming from fewer and fewer large donations at the expense of a dramatically declining core donor base.
The report documented how from 2007-2015 fully two thirds of institutions of higher ed saw their total number of donors decline. These declines averaged 27%! The 80/20 rule of a small group of donors making up the bulk of your donations has always been the case. However, our current addiction to major-gift fundraising has shifted that ratio closer to 90/10. At some institutions it is literally a handful—less than five donors who making up 90% of their philanthropy.
The COVID-19 health crisis and the impending recession is going to provide a second wake-up call, and one much harder to ignore. Twenty-to-thirty percent of those major donors we have been leaning on are now going to be in financial positions the jeopardize their ability to continue their previous levels of support. Simultaneously, we have diminished the pipeline that has historically identified and engaged the next generation of major-gifts donors. In my 20+ years in education philanthropy, I have yet to come across a major donor who did not start their relationship by making a smaller gift.
So, what can we do?
In the age of wealth screening, CRMs, and data analytics, metrics have become more critical than ever. Advancement offices need to start paying as much attention to the total number of donors and the number of new donors at any level as they do to major-gift prospect visits. Let me suggest a new metric for your advancement office: calculate the percentage of your annual budget devoted to major or principal giving. Then calculate the percentage of your annual budget devoted to individual non-major giving. In general, you should be spending 50% on the major gifts area, 30% on lower level individual giving and the remaining 20% on stewardship and operations. If you are spending north of 60% of your annual budget on major gifts alone, take a good hard look at what you are doing (or failing to do) to support and grow lower-level giving.
Ask more often. We have had no problem leaning on our major-gifts officers to make multiple visits to key donors throughout the year. Yet we feel the need to communicate with our lower-dollar donors only once a year in an annual appeal. Perhaps we ask a couple more times through a Giving Tuesday or Founders’ Day appeal. At a minimum, institutions should be in the mail or online with a direct ask for support every other month. Ideally, we should be making some sort of request every month.
Diversify your request. We tend to make the same request every year to our individual donors, and it is essentially a renewal appeal. However, we ought always to be making at least three types of requests:
- Acquisition or conversion appeals to solicit first-time donors,
- renewal appeals to existing donors, and
- a “lift” appeal to increase their giving level (sent to a select group of existing donors).
Data analytics can help pinpoint who in your house-file is the best prospect for each message. Increasing the number and variety of requests will appear, in the short run, to reduce your ROI on individual giving. But if you are disciplined and strategic, these efforts will increase both small and major gifts.
During the 2008 financial crisis, I spoke with the leader of a national nonprofit that had a house-file of over 600,000 donors who regularly made gifts of less than $20 (on average). When I asked him how things were going, he told me with some embarrassment that their donations were up. This was right in the midst of the Great Recession. What his organization had that superseded the effects of the economic downturn, was a group of lower-dollar donors with a strong relationship to the organization and a commitment to the mission.
Ultimately, a strong individual giving program for institutions of higher education is about having a continuous and meaningful relationship with your alumni, parents, and friends. The few schools that have spent the time and resources to work on such relationships will weather this storm with fewer problems. For the rest, it is not too late to begin working on improving the relationships that lead to sustained individual giving. The short-term limitations on our major-gift programs will hopefully prove to be a great opportunity to improve our relationships with all of our donors.