One of the biggest misconceptions about fundraising is that it is simply Sales 101. Sales consists of convincing someone to make an exchange of money for goods or services, it is a quid pro quo, where something of value is expected in return for cash. The misconception that fundraising is just sales exists because many fundraising activities are focused on providing goods and services in exchange for a “donation.” That practice has resulted in two types of fundraising, transactional fundraising and philanthropic fundraising.
In transactional fundraising the prospect gives the organization money, and the organization provides the prospect with goods or services. This typically comes in the form of a prospect purchasing raffle tickets, bidding on auction items, entering a 5K, buying a gala table, spending money at a gift shop or bake sale. Those activities really are sales, and the organization keeps any revenue that exceeds expenses.
Because of these well publicized efforts to make money, many people think of and treat fundraising like a business. They boil fundraising down to identifying a product or activity they can sell to their target audience.
But transactional fundraising is not the best way to raise significant sums of money or build a loyal donor base. Transactional methods of raising money are time consuming for staff, they can be dependent on a small army of volunteers to implement, they frequently require significant outlays of money for printing, postage, advertising and purchasing product prior to receiving payment, which hurts cash flow. Transactional fundraising does little to build relationships between donors and the nonprofit, transactional donors rarely convert to regular donors, and transactional fundraising is the least cost-effective method of fundraising.
Consider a raffle where typically 50% of the gross proceeds go to the winner(s), add the cost of marketing, printing and mailing tickets, credit card processing fees and an organization might be lucky to keep 40% of what was collected, resulting in a .60 cent cost per dollar raised.
And pity the staff person who must explain to someone in April why the $1,000 they spent last December on 40 raffle tickets for their grandchildren’s stocking stuffers isn’t tax deductible!
This is not to say that nonprofits shouldn’t utilize transactional fundraising methods, but there is another way.
The most effective fundraising comes from philanthropy. Philanthropic fundraising is not sales; it is not about trying to convince someone to buy something. It is about helping a potential donor achieve their philanthropic goals through an organization’s work.
Philanthropic fundraising starts with introducing a potential donor to an organization. If that person is interested in the organization’s mission, the next step is to build a relationship with them, helping them learn about the organization, its strengths and challenges, its leadership, aspirations, and sharing stories of the organization’s impact.
When a donor’s philanthropic goals are aligned with an organization’s mission, donations are motivated by promoting that organization’s mission, it’s wellbeing or growth, not by receiving something in return. Philanthropic donations tend to be larger and at a lower cost per dollar raised.
Stewarding these donors, deepening the relationship between the donor and the organization, by expressing appropriate appreciation, making the donor feel part of a larger effort, by connecting their dollars to the impact they make, the organization creates a long-term association with the organization.
These donors give again and again, and their donations increase over time. These are the donors an organization can depend on year after year to support annual campaign efforts, who will be there when it comes time to launch a new program or build a new facility, and who an organization can turn to in a crisis.