If you’re expecting to increase the income of the charity sector through fundraising, I think you’re barking up the wrong tree.
Fundraising is becoming a more crowded environment these days. More and more people are doing it. Last week, a survey showed that university fundraising was growing like billy-o: in ten years, universities have doubled the amount of donations they secure, and they’re still growing fast.
A couple of weeks ago, the report Managing in a New Normal, published by the CFG and the IoF, showed a similar thing: more small and medium-sized charities are fundraising as a way to make ends meet.
In her speech to introduce this report, Caron Bradshaw, chief executive of the CFG, expressed caution about this, saying fundraisers should beware of “more rods being dipped in the same pool”. She didn’t say this was inevitable – just something to be cautious about. A lot of people missed that subtlety, and gave her a fair bit of undeserved stick for it.
Now they can give me some stick for it, because I am going to say it. I think all fundraisers are basically competing for the same pool of donors, and there’s not much to be done about it. As a result, I don’t think fundraising is the way to grow the charity sector as a whole – although you can certainly grab a slice for your charity.
I accept that there’s a lot you can do to fundraise better. You can improve your efficiency through segmentation work, for example. It’s really good stuff, segmentation, and I think everyone should do more of it – the sector included, frankly. You can get more canny about the ask. You can certainly develop more efficient systems to retain donors. You can improve your Gift Aid claims. All of these are good ideas.
But they’re nothing to do with the pool. They’re about knowing where to fish, or how you cast your rod, or getting better fishing tackle. It’s still the same pool. The British public are the pool, and there isn’t going to be another one. You can only extract so many fish.
Charities are certainly getting more efficient at asking people for money, and as they do so, it becomes more profitable to do it. But that just means, as we saw above, that more charities are getting in on the act. They aren’t as good at asking for money, and they hire more fundraisers; some lose money fundraising. So the average cost of fundraising goes back up.
Now perhaps the pool isn’t being very thoroughly fished, and you can improve success by just asking more people, more often. It’s axiomatic that people don’t give unless they’re asked. But that’s only true up to a point. Some people don’t give because they just don’t want to.
There’s a concept taught in economics called marginal utility, which says, basically, that each thing you do is less useful than the last. And eventually, you can get to a point where every extra thing you could do is actually worse than useless. Marginal utility is less than zero, to use the economic rubric.
In short, there are generous people, and there are mean people. Once you’ve asked all the generous people for money, you’ve only got the mean ones left, and they aren’t going to give you much. And even the generous ones are going to start getting meaner if you bother them too much.
I think you can measure how much people give by looking at only two numbers; average real income, and the tax rate. If people have more money, they give more. If they have less, they give less. The marginal tax rate in this country hasn’t meaningfully changed for a long time, and giving has remained at around 0.4 per cent of household incomes for a long time – the same amount, the Charities Aid Foundation pointed out, that we spend on cheese.
So I think the sector is deluding itself if it thinks fundraising can generate massive, long-term gains. The British public will give so much, and no more, however you ask them, whatever you do. And each extra pound that’s extracted will cost more than the last to extract.
So a lot of what the sector’s doing is just robbing Peter to pay Paul. This certainly doesn’t mean you shouldn’t hire good fundraisers, though – in this scenario, it’s very important to be Paul.