As we move full steam ahead into 2019, it’s the perfect time to share themes we see influencing the market gleaned from this past year of working with nonprofit customers, thought partners, and other industry leaders. As the chief marketing officer at Classy, I’m entrenched in the latest data and trends shaping the social sector, but more importantly, I’m focused on how these reflect and impact the real world challenges and opportunities of our customers.
On one hand, we see several new themes taking center stage. On the other hand, we see an evolution of trends that have shaped the industry for years. There’s so much exciting ground—and opportunity—to cover for 2019, but I expect these five trends to lead the way:
- The new tax laws will reveal Americans’ altruism
- Nonprofits that tap into the real value of recurring donors will see faster growth
- The better marketer you are, the more money you’ll raise
- Emerging channels will heat up: social media, video, gaming
Corporations may expand and take more of a stand in their philanthropy
1. The New Tax Laws Will Reveal Americans’ Altruism
The new tax laws went into effect Jan. 1, 2018. We wrote a robust summary on the Classy Blog, but as a reminder, the corporate tax rate was cut from 35% to 21%, and personal tax exemptions were removed.
These major changes sparked initial alarm, as some believe the removal of personal tax exemptions could diminish charitable giving, with losses estimated in the billions of dollars.
To further investigate whether these predictions were well-founded, we went to donors themselves.
The Survey Says…
Recently, we conducted a two-part, nationwide consumer survey to understand how these new laws, as well as other factors, may affect donors’ plans to give. The survey found that many Americans plan to give more:
- Only 10% of respondents say they plan to give less this year, with 49% of Americans planning to give more
- 74% of households with an annual income of $100K to $150K, and 85% of households with over $150K plan to give more
Initial results from Giving Tuesday 2018 were promising too, with overall donations growing almost 40% year over year from $274 million to more than $380 million. Here at Classy, we saw 50% growth on the Classy platform year over year, and almost 100% growth on Dec. 31, 2018, compared to the same day the year before.
But when we turned attention to the tax laws as part of our survey, we found:
- While less than 10% of Americans say a tax write-off is their primary reason for donating to charity, 42% said they would definitely or probably give less if they knew they’d receive a smaller tax break
These results could indicate that consumers don’t yet know exactly how the new tax code will affect their returns. The 2019 tax season will be the first time Americans are really seeing the effects of these new laws, and their reaction is what could ultimately affect the 2019 holiday giving season even further, putting their good intentions to the test.
How DAFs Play Into the Tax Story
With the tax code changes, donors may continue to turn to donor-advised funds (DAFs), a type of brokerage account designed for charitable contributions. DAFs allow individuals to get an immediate tax benefit, but do not require an immediate distribution of these funds to nonprofits.
DAFs have grown in the last year, with total assets climbing from $29 billion to $85 billion with a big influx in 2017 as donors tried to maximize the former tax benefits. However, actual donations distributed from DAFs only totaled $15.75 billion.
To put this into perspective: these assets are so large they represented 20% of giving in 2017. Yet, donations from DAFs only represent 4% of 2017 giving, and less than 20% of DAFs’ total ability to give.
If donors continue to invest in DAFs instead of direct donations, it could exacerbate the “pileup” of inactive philanthropic dollars despite a predicted increase in annual donations.
There’s still a lot to play out when it comes to the tax laws’ impact on philanthropy, and as things unfold, we’ll keep you up to date.
2. Nonprofits That Tap Into the Real Value of Recurring Donors Will See Faster Growth
We predict that organizations who become experts in recurring donation campaigns and activities will see much faster growth in 2019 than their peers.
Earlier this year in our report The State of Modern Philanthropy, we shared insights based on more than 2.5 million data points specifying the value of these donors:
- Recurring donors are over 5 times more valuable than one-time donors
- Each individual recurring donor is 42% more valuable than an individual fundraiser (someone who asks their network for donations on your behalf)
- Within a year, donors who make recurring gifts make an additional one-time gift about 75% more often than one-time donors (in other words, recurring donations don’t “use up” people’s goodwill)
Giving Tuesday 2018 provided further evidence of that last point, when we saw an 84% increase in the number of existing recurring donors that chose to give an additional one-time gift on Giving Tuesday.
These stats suggest that recurring donors are even more valuable than people initially thought. Their first repeating credit card authorization just scratches the surface of their willingness to give.
Eliminate Your Fear of Asking
Sometimes nonprofits face an understandable—but based on the data, somewhat irrational—fear of asking recurring donors to give again. Several reports suggest that nonprofits don’t reach out frequently enough to their recurring donors.
A recent NextAfter survey conducted with Salesforce uncovered interesting data about how timid nonprofits can be:
- Only 14% of organizations prompted one-time donors to upgrade to recurring gifts
- 47% of organizations made no attempt to retain a recurring donation after a credit card was canceled
- 38% of organizations made no change to their email strategy for recurring donors
- 58% made no change to their direct mail strategy for recurring donors
We’ve established that recurring givers are incredibly valuable and important, so how come nonprofits aren’t treating them that way?
You have to communicate consistently and effectively with all of your supporters, especially recurring donors. Don’t be afraid to ask them for another gift, to upgrade their donations, or to evangelize your cause.
3. The Better Marketer You Are, the More Money You’ll Raise
As a nonprofit marketer, you’re probably acutely aware of the fierce competition for your donors’ attention. In parallel, donor expectations for their experience once they do pay attention are exceptionally high, set by their consumer interactions with companies like Amazon, Netflix, and many others. These companies lead users to expect a beautiful, frictionless experience from item discovery though checkout, plus personalized recommendations based on past behavior.
Consumers increasingly expect the same from nonprofits. Our recent consumer survey found that younger donors also associate trust with a seamless experience, with more than half of millennial and Gen Z respondents (54% for each) saying that if they can’t easily donate to a nonprofit online or via mobile, then they will have less trust in how that nonprofit uses their funds.
Much has been changing in the marketing landscape over the last several years, and we predict that 2019 will continue to challenge marketers as artificial intelligence, dynamic personalization, and cross-device identification start to become more common. But it’s important to keep a level head even as you’re lured by the shiny new tools promising to unlock tons of untapped value. We do expect to see more and more intelligent insights and automated personalization, but we predict that these technologies are still at least a few years away from being ubiquitous or even truly transformative in day-to-day fundraising efforts.
While the for-profit world (and their deeper pockets) spend time and money figuring out how to leverage these emerging technologies, the nonprofits we’re talking to are still seeing more immediate value from advanced execution of slightly less cutting-edge marketing approaches: improving your overall mobile experiences; smoothing supporter interactions; zeroing in on thoughtful donor segmentation, targeting, and messaging; and regularly A/B testing campaign design and execution tactics.
These fundamental marketing tactics are not universal but can do as much, if not more, for you right now than the cutting edge technologies. So keep an eye on the artificial intelligence news coming, but get your foundational infrastructure, processes, and best practices in place this year. The time is right.
4. Emerging Channels Will Heat Up: Social Media, Video, Gaming
Giving is a personal choice, and there’s nothing more personal than social media, where users can share a glimpse into their daily lives, passions, and even struggles. If we look at the relationship between these dynamic channels and fundraising as a marriage, in 2018 they said their vows, and 2019 will test the strength of their union.
Leading the pack, Facebook had a banner year with their charitable giving tools, sparking several viral campaigns and a massive Giving Tuesday effort. Then you have YouTube and livestreaming platform Twitch, where nonprofits like St. Jude Children’s Research Hospital are tapping into the power of YouTube stars and passionate gamers to accelerate fundraising efforts—to the tune of millions of dollars. The sheer number of humans on these channels, and their level of engagement with each other, make them exciting new territories for fundraising.
But like any relationship, it’s not all sunshine and rainbows for nonprofits, and there have been complaints and concerns about lack of donor data, slow payments, and security. And when you connect that with the Why America Gives report finding that the majority of people feel compelled to give routinely to a nonprofit if a friend or family member has been affected by the cause—and not necessarily because of their affinity with the nonprofit itself—it implies that social media donors are more likely to be one-time than longer term. So while we expect nonprofits to experiment even more with these channels this year, they must be looked at as just that—channels.
These channels may give you access to new fundraisers or new donors, but they are not set up to help you maximize your longer term relationships (and long-term fundraising). For example, today, if you run a successful fundraising campaign solely through Facebook, you will only receive a portion of your new supporter contact info (usually under 10%), and won’t have a mechanism to contact those donors again directly to show the impact of their funds. In this context, how can you re-engage with those new donors and build a lasting relationship?
There are creative ways to get these socially driven channels to work in concert with your typical online fundraising efforts, rather than instead of them, so you don’t miss a beat—or a donor’s email address. Keep your online fundraising platform as the final destination to receive funds and promote it on social media, but make sure it’s a smooth, consistently branded giving experience across all of these new types of engagement channels.
As these mediums continue to develop their fundraising capabilities, we expect nonprofits to continue exploring them cautiously and optimistically in 2019, determining the best ways to create a well-rounded portfolio strategy for sustainable revenue versus just a fleeting burst of funds.
5. Corporations May Expand and Take More of a Stand in Their Philanthropy
While giving by corporations constituted just 5% of overall giving in the U.S., 2018 saw an interesting development as several organizations took very bold stances on political and social issues in what could be considered part of their philanthropy. This included Nike’s marketing campaign with Colin Kaepernick, as well as Dick’s Sporting Goods and TOMS’ commitment to gun violence prevention.
We will be watching how this trend builds and intersects with charitable giving in 2019, as consumers increasingly expect corporations to reflect their own values. The recent Edelman Trust Barometer found that 64% of survey respondents say CEOs should take the lead on change rather than waiting for government policy. Further, 40% of millenials feel that the goal of business should be to improve the world, according to the 2018 Deloitte Millennial Survey.
The rise of B Corps, businesses that are certified to balance purpose and profit, highlights how some corporations are responding to growing consumer demand and employees’ hunger for purpose. In just 12 years, over 2,600 corporations have become certified.
There has also been an upswell of companies launching corporate giving programs and engagement even earlier in their growth curves. Pledge 1%, for instance, is a community just five years old that brings together over 8,500 companies that have pledged to donate 1% of equity, profit, product, or employee time to charity. These companies include start-ups, and pre-IPOs, as well as established corporations—a promising sign that organizations of all sizes and stages are prioritizing philanthropy.
In talking to corporations, we find many of their donation dollars go to organizations with whom they have multi-dimensional relationships, be it also through volunteering, product donations, employee-driven fundraisers, relationships with top executives, or other aspects. In 2019, we expect to see nonprofits taking advantage of this trend and thinking creatively around how they can engage corporate sponsors beyond one-time donations.
The combined trends of corporate and employee activism and philanthropic engagement may mean more opportunity for nonprofits to further expand corporate partnerships and facilitate deeper, more impactful involvement.
We hope these insights will help you plan your success in 2019 and beyond. Change can be scary, but it can also be a great opportunity to get smarter and more effective. As always, we’re excited to be on the journey with you, helping you raise more and do more.