PARTNERS ADVISORY SERIES
September 2003

Overcoming distrust
As we enter the critical end-of-year giving cycle, it is important to keep in mind what others are saying or implying about the nonprofit sector. Last year Epsilon and Barna Research Group reported results of a survey revealing that donors’ trust in nonprofit organizations is at the lowest level in two decades. Only 23% characterized nonprofits as having integrity and being trustworthy. Further, just 21% felt they were financially efficient.

As the giving season approaches we will again see a plethora of articles in the public press advising donors to be careful with their charitable contributions. Worth magazine will likely update its 100 best and 10 worst charities. While it includes largely national charities, take heed of its advice to readers. It expects the best nonprofits to spend at least 65% of funds on programs and directs readers to ask for Form 990s and to check with watchdogs like the Better Business Bureau Wise Giving Alliance and the American Institute of Philanthropy (AIP).

Note the language used by Worth in leading into its list of the 10 worst charities. "We aren’t saying they’re crooked, but we do take issue with some business practices of these charities, especially when they spend too much money on fundraising or joint educational-fundraising programs." I’m afraid in readers’ minds it creates suspicion about all nonprofit organizations. Crooked?

Your donors will also read wire stories in their newspapers with headlines like "Donors who seek worthy charities have options to check them out." This particular article referenced the BBB Wise Giving Alliance and the AIP as well as GuideStar. However, the interesting thing was information about the for-profit Philanthropy Group in Chicago, which charges $1,000 for a background report on a specific charity! You can go online to read a sample report that includes categories for program evaluation and outcomes, strategic plan, challenges and financial data.

What’s the message for us? We should be routinely giving our donors this kind of information. We need to assure them at every opportunity that their gifts to us are good investments. "Transparency" has become the mantra this year for greater accountability. As public benefit corporations we are accountable to society. Donors are increasingly interested in cost efficiencies and demonstrable outcomes as well as anecdotal stories about the good work that we are doing. We need to be proactive and now is the time as you plan your year-end solicitations.

The "Almost Rich"
The September issue of the Harvard Business Review discusses households with annual incomes of $100,000 — the "almost rich." The interesting thing is their spending is lagging behind their earnings. In other words, their disposable income is increasing and they’re choosing to save it rather than spend it.

They are spending more on insurance/pensions and education and almost as much for cash gifts to and support of dependents. It seems they are concerned about having enough money in retirement and they are investing in their children’s/grandchildren’s education and other interests.

If your organization has programs for children, think of likely prospects among their parents and grandparents in this income category. Chances are they have the capacity for major gifts to programs that will benefit their offspring.

Certain planned gifts may hold appeal for them as well — deferred gift annuities and charitable remainder trusts in particular.

The article also points out that these individuals are good prospects for tiered offerings. That means that mass offerings lack appeal for them, but they are willing to pay for experiences that make them feel important or special without blatantly pandering to them. For example, a community theatre could offer valet parking for season subscribers who make a gift of $1,000 or more. It’s an opportunity for you to be creative.

Older, wealthier and wiser
According to research firm Claritas, the number of households of 55-74-year-olds with annual incomes of $100,000 or more will increase by 61% during the next five years! That’s about six million households, a number that is projected to grow to eight million by 2010. Average net worth for the group is estimated at $1.5 million according to the Federal Reserve Bank.

You can get a good idea of how many upper-income households are in your own backyard. Go to The Chronicle of Philanthropy website for its analysis of giving by county (you have to be a subscriber). Using data from the Bureau of Labor Statistics, Census Bureau, Institute on Taxation and Economic Policy and the Internal Revenue, The Chronicle calculated the discretionary income and average charitable contributions for households with incomes of at least $50,000 that itemize income tax deductions.

Couple this information with a telephone survey this spring by marketing firm Vertis. It reports that the great majority of people in all age categories who make charitable contributions focus their giving on one to five charities. At upper income levels ($50-$75K and $75K+) 80% and 67% respectively of donors limit their gifts to five or fewer organizations.

The implication seems pretty clear. First, look within your own constituency for these major gift prospects, particularly those who are already giving to you. Then, use their influence as advocates for your organization to introduce their friends and colleagues. This purposeful, patient process will pay off even if yours is a small organization with limited fund raising resources. That’s even more reason to apply these proven principles.

I’m not rich!
Money magazine commissioned a study of affluent Americans, defined as having household incomes of $75,000 and more. Surveyed households had a median income of $121,000 and net worth of $450,000. The average age was only 47. One interesting finding was that a minority - 20% - considers themselves "affluent." Three-quarters of them think they need $1 million in assets to be well off. More men (26%) than women (20%) said it would take $10 million!

This has implications for our work. When our prospects don’t see themselves as affluent or wealthy, they will likely have a hard time seeing themselves making major gifts. We have to lead them in incremental steps to help them discover that they can give away larger sums of money without jeopardizing their need for security or their lifestyle. It’s a long-term, thoughtful process, but some of them will experience the joy of giving and want to repeat it over and over. At an average age of 47 you’ve got plenty of time to work with them; the investment of time can be extremely rewarding.

Boomers
Nearly one-third of households with incomes of $200,000 and more are headed by Baby Boomers aged 45-54. Another 26% are ages 35-44 (not all Boomers). Dropping to households with $100,000-$199,999 incomes, the percentages are roughly the same according to an analysis of census data by American Demographics. Responding to a poll last March by Major Media, 39% of Baby Boomers used the Internet the day before they were surveyed.

Each generation has its own general behavioral characteristics and motivations. If you are not of the Baby Boomer generation, it would behoove you to try to understand them and how to communicate with them. You might start with Marketing to the Mindset of Boomers and Their Elders by Carol Morgan and Doran Levy.

Cause marketing
The July issue of the Harvard Business Review has persuasive data to help gain corporate support of your cause. Cause marketing is not only good for building brands, it increases employee satisfaction. According to a Cone/Roper Corporate Citizenship Study, 88% of employees who knew their companies had a cause-related marketing program felt a "strong sense of loyalty." Surprisingly, 53% chose to work at such companies at least in part because the companies supported social issues important to them. This excellent article has information about the value of employee volunteer programs as well. It’s objective data worth including in your proposals.

Michael R. Maude, ACFRE, FAHP
President
Partners In Philanthropy

Copyright 2003 Partners In Philanthropy

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