Giving with Purpose: Understanding Donor Motivations and Trends in 2023
As we head into the first quarter of 2023, one needs to consider political, economic, social, and technical trends impacting donors and charitable growth trends. The external environment affects the nonprofit organization's operations and donors' financial choices. In 2023, inflation is weighing heavily on our donor decisions, and many passive donors need to cut back on discretionary spending. While this is a short-term trend, it can have a big financial impact on a non-profit’s future; therefore, nonprofits still need to remain proactive rather than reactive. There will be financial growth post-recession.
Today's donor seeks easy transactions, transparent data, and emotional connections with nonprofits; this donor mentality shift is making the old methods for fundraising less affective, and nonprofits are reporting reduced attendance or less participation at annual fundraising events. Donors are becoming more selective about donating to these organizations. Nonprofits that match donations are seeing the most significant stability in individual contributions. As such, board members who typically donate to the nonprofit are running donation matching appeals on social media. Donation matching appeals are initiatives in which an individual matches the board members gift. This tactic has been successful, and many campaigns are exceeding their goals. Nonprofits are also feeling the effects of donors canceling or lowering their pledges due to inflation, but some donors are converting these monetary donations into volunteer hours. People are still interested in contributing but are simply contributing time rather than money to the cause.
So, with all of today's digital noise, how do donors pick where to contribute these scarce dollars? They are seeing campaigns across social media, seeking out connections with nonprofit missions, and understanding how they can make a difference. Generations have different needs, wants, and desires. Gen Z and Millennials will continue to be the most prominent donors in 2023, with Gen X and Boomers making up the remainder. Gen Z and Millennials are top supporters of Human Rights, Child Development, and Victims of Crime/Abuse. Additionally, these generations want to give to people they know and have relationships with rather than the nonprofit directly. Social media campaigns are a high priority in nonprofit fundraising because it allows donors to see the mission, connect to it, and interact with people they trust. All that interaction and connection can happen while the potential donor is commuting on the train, sitting in a waiting room, or eating lunch.
Volunteerism on the Rise
Gen Z and Millennials who need to cut back on their expenses are looking for alternative ways to support nonprofits. Many of them are converting from passive donors to active volunteers. Volunteering gives these donors an inside look into the nonprofit fulfilling the transparency need they desire. Many of these volunteers share their experiences on social media which helps to promote the nonprofits mission. Additionally, these volunteers are putting out personal appeals on social media for support which is beneficially because there is already trust present within the donor’s network. While the nonprofit may have converted a single monetary donor to a volunteer, these volunteers are helping to raise more funds overall. Personal appeals by volunteers drive a stronger emotional connection with their
followers, leading to more donations than direct capital campaigns.
Fundraise Your Way
Gen Z and Millennials are looking for deep connections with the causes they support. They are looking for increased transparency in how their donations are used and expect nonprofits to provide measurable outcomes of programs and services. Simply having data readily available in the yearly audited financial statements is no longer sufficient. When providing information to donors, learning styles need to be considered, so documents need to be both written and visual. When possible, nonprofits want to consider quick recorded updates that puts a face with the information and allows donors to feel the nonprofit’s authenticity. In the end, communication always needs to go back to the mission.
Since donors are increasingly selective, nonprofits need to emphasize their needs. Donors want donating to be easy, which requires nonprofits to have their technology up to date. Transactions need to be fast, there needs to be multiple options, and donors expect instant receipts. Another way to make donating appealing and easy is connecting with workplaces to implement direct giving. Workplace giving is attractive to donors because there is a one-time setup that their HR department handles. Donors find this appealing because there is a pre-tax benefit as well as a write-off at the end of the year.
Millennials are not just donors but vested partners in furthering the mission. They are using social media to support nonprofits and run crowdfunding campaigns to support causes. Storytelling is the number one way a nonprofit can emotionally connect with a donor. The MSPCA is an excellent example of this. They show the animals in need and how they support them, making an emotional connection with the people listening and watching. Seeing a dog chained up without shelter or an emaciated and flea-covered kitten pulls at many donors' heartstrings. These emotional connections have a direct correlation with increase giving.
Trust Based Giving
Donors continue to look for full transparency about how their donation is used. The increased demand for transparency has accelerated during the pandemic as donations are decreasing and asks are growing. How are nonprofits spending the donations? Many donors expect their donations to go 100% to the program or service unless otherwise disclosed. Common practice is 65% going to programs/services and 35% to overhead. However, this needs to be disclosed to the donor, and they need to agree. The American Red Cross made this mistake with its capital campaigns, and when donors discovered that their donations were not going 100% to the cause, donors felt betrayed. While they did nothing wrong, the donors felt their actions were unethical. So, to maintain trust-based giving, nonprofits need to be transparent about the use of the donation and educate donors on their overhead needs. At the end of the day, nonprofits are still businesses and need to support their administrative costs to create financial longevity and further their mission
All donors want to be recognized for their donation, which will help nonprofits with donor retention. Gen Z and Millennials are not just donors but vested partners in furthering the nonprofit's mission. To ensure long-lasting relationships, nonprofits must see their donors as vested partners, employ their crowdfunding efforts, and publicly recognize the support received. These mutually benefit partnerships will lead to nonprofit longevity.
