Sooner or later in almost every fundraiser’s life the memo comes: You must cut your fundraising budget!
It’s probably not a good move, because fundraising is the lifeblood of most organizations. But let’s be realistic — when times are tough, the pressure rises to make cuts, and you don’t always win the battle.
The truth is, not all cuts are going to kill you. The best strategy is to choose your budget battles. With that in mind, here are two battles: one you should fight and another you can afford to gracefully give up.
The budget battle to fight
You’d be crazy to cut new donor acquisition. This will be a tough battle, but you should fight it like a rabid weasel.
I’m pretty sure the knife-wielders have their eyes on your donor-acquisition program. They imagine it’s a big, juicy, painless cut. Most likely, acquisition is a net cost to your organization. That means every dollar cut from acquisition improves your bottom line. Today. While everyone is feeling the pressure.
But here’s the problem: Cutting donor acquisition doesn’t inflict any immediate pain, but it’s going to hurt in the future. It’s going to hurt a lot, and not just people’s feelings. Abandoning acquisition can create catastrophic and lasting financial impacts in the form of depressed fundraising for years to come.
The hard-to-see truth is that donors grow more valuable to the organization every year they’re with you. Their responsiveness, retention, even their likelihood of upgrading their giving amounts — they all increase every year. Here’s how it plays out:
- At the point of acquisition, you’re losing money. Almost everyone does.
- If your program is healthy and consistent, you’ll start to break even on that initial investment in 12 to 18 months (give or take a few!)
- After another year, you’re earning a 2-to-1 return from those donors who are still with you.
- In the third year, your return rises to around 3-to-1. Starting to look good.
- The real payoff comes in the fourth and following years, when those established donors are returning $10 (or more) for every dollar you spend.
- More important are those who upgrade to higher levels: Those who become major donors, bequests donors, or monthly donors. If you don’t get any new donors, you don’t have a source for those super-important donors.
Those cuts to donor acquisition leave a black hole in the middle of your donor base — a vacuum where there should have been responsive, committed donors.
Every fundraising campaign you launch for years to come will do worse than it should because you’re missing those donors. It’s not just fewer bodies. It’s fewer committed supporters. And that empty donor class continues to echo through your fundraising. The pain tends to peak three to four years after the cuts, but it will be meaningful and measurable for seven to 10 years.
Do your budget-cutters know this? Would they still make the “easy” cuts to donor acquisition if they did? They might think that cutting acquisition is no worse than getting a bad haircut. But it’s actually more like amputating your legs.
The budget battle to let go
You might do better in the critical battle to protect donor acquisition if you’re willing to give the knife guys something they can slash without a fight.
This is going to make me spectacularly unpopular in some quarters, but I’m putting the whole class of branding and awareness activities in the go-ahead-and-cut category. That’s because there’s no direct, measurable connection between those expenses and any meaningful impact on your bottom line. Cutting these activities doesn’t hurt in the short term or in the long term.
Spending on advertising is an act of faith. Faith can be a beautiful thing, but it’s not the best basis for business decisions. In hard times, you’ve got to put your dollars into measurable activities.
Some brand advocates will tell you their work is measurable. They’ll cite metrics like “unaided recall” — meaning that when surveyed, more people mention your organization’s name than did before — or “aided recall,” where people claim to have heard your name when they hear it.
Pardon me, but do you mind if I roll my eyes? Measuring “recall” and things like it is almost completely bogus.
It’s possibly true (though it can’t be proven) that someone who’s heard of you is more likely to donate than someone who hasn’t heard of you. But that’s not a fact you can take to the bank. For one thing, it doesn’t cost anyone a cent to tell you they’ve heard of you — it’s just a thought, an idea. For another thing, as all direct marketers know, the divide between what people say and what they actually do is wide. Since we’re talking budgets here, stuff you can take to the bank is pretty much the whole thing.
Think of it this way: Would you rather move 100 people 10% of the way toward giving or move 10 people 100% of the way toward giving?
In the first scenario — which is a branding or awareness campaign — your revenue is zero, no matter how much you spent. In the second scenario — a classic direct-response fundraising campaign — you end up with revenue. The only question is whether it came at an acceptable cost.
In flush, easy, noncutting times, you might be able to spend money on speculative ventures like branding and awareness and be okay with the non-measurable benefits that could come as a result.
But not when the budget cutters are active. So hand branding activities over to the knifers. You’ll make almost everyone happy.
Read more about smart budgeting for fundraisers:
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