Nonprofit Sector Embraces New Technoogy-Based Strategies for Challenging Economic Times

Author: Bert Kollaard

October 2009

Around the country, non-profit organizations, and especially the human services charities, have been hit hard as a result of the economic downturn in 2008 and 2009.  In the Dayton region particularly, the impact of the GM and Delphi plant closings and the eventual loss of NCR have further exacerbated an already difficult situation  resulting in one of most challenging fundraising climates ever.  

Faced with the dichotomous challenge of significantly increased demand for services but, at the same time, decreasing revenues and rising costs, a growing number of nonprofits, according to the Council for Nonprofits, “are being forced to layoff staff and cut back programs, thereby reducing vital services.”.  At a time when the need for their services is growing, the ability of nonprofits to fulfill their traditional role of serving as the community safety net is being “severely compromised”.

Most nonprofits have taken, and continue to implement, steps to reduce their costs by cutting staff, services and programs, tapping into their cash reserves and prioritizing initiatives around those most critical to their core mission.  At the same time, a growing number are embracing and using technology-based marketing to proactively communicate their value proposition and relevance, expand awareness, get closer to, and grow, their donor base and revenue.

Economic Impact and Outlook:

The impact of a challenging economy on the nonprofit sector is well documented and the near term outlook for the sector is troubling.  Leading industry sources such as Guidestar, The Center on Philanthropy at Indiana University, the National Council of Nonprofits, the Bridgspan Group and others, consistently paint a discouraging picture. Surveys and other data from nonprofits around the country, show that a majority of nonprofits are reporting declining revenues, escalating costs, yet growing demands for their services, severely impacting their ability to provide the vital services. .  

Data from the Giving USA Foundation in their Annual Report on Philanthropy for the Year 2008, foretold of the challenges ahead for nonprofits indicating that charitable contributions from all sources declined for the first time since 1987.. In fact, even though charitable giving exceeded $307 billion in 2008, donations dropped 2% in current dollars and 5.7% in inflation adjusted dollars in comparison to 2007.   Each of the following traditional sources of revenue declined during the year:  

•    Corporate donations dropped by 8%;
•    Individual giving decreased 6.3%;
•    Fees for services have faltered among many nonprofits;
•    Foundation assets shrank 26% in 2008, translating into fewer and smaller grants;
•    Governments have delayed or even stopped paying nonprofits for services     that government had contracted with nonprofits to provide.

More recent survey data shows that nonprofits are scrambling to balance declining resources against growing demand for their services.   

According to a Guidestar online survey conducted from March to May, 2009:

•    58% of the responding organizations reported increased demand for their services.
•    52% of those surveyed reported a decrease in contributions, with 20% reporting a “great decrease” in contributions, and 30% reporting a “modest decrease.”
•    69% reported that fewer individuals contributed, and 68% reported that gifts from individuals were smaller.
•    38% indicated that corporate grants were smaller, and 23% said that corporate grants were discontinued.
•    37% of organizations reported that foundation grants were smaller than previous years.
•    8% of respondents reported they were in imminent danger of closing their doors because of financial difficulties.

A June 2009 Johns Hopkins University Listening Post Project report further reinforces the difficulties faced by the nonprofit community.  According to their latest findings:

•    80% of responding nonprofits described some level of “fiscal stress” and close to 40% of the respondents considered the stress to be “severe” or “very severe.”
•    32% identified an increased demand for services.
•    53% reported increased operating costs, the majority of which were due to increased health benefits and wages.
•    51% of the organizations surveyed reported revenue losses between September 2008 and March 2009, as compared to the same time period a year ago.
•    Smaller nonprofits (those with revenue under $500,000) reported a more severe impact with close to 63% of smaller organizations reporting revenue losses compared to 47% of larger organizations.
•    35% of all respondents reported declines in government support and 37% reported delayed payments from the government.
•    13% reported concern for the survival of the organization.

How are nonprofits responding?

Other than such obvious, and unfortunately necessary, steps as cutting staff, services and programs as well as dipping into reserves and finding creative ways to do more with less, a growing number of proactive nonprofits are using technology-based marketing to enhance and grow operational funds.

According to various industry groups and industry consultants such as the National Council of Nonprofits, the Bridgespan Group and Hurwitt and Associates, there are a number of initiatives and practices that are being used successfully by nonprofits around the country to offset the shortfall of resources by growing the donor base and donor revenues.  

Given that donors have become more savvy consumers and are demanding more for their charitable dollars, recommendations include:

•    Applying technology-based tools to stay connected with current and potential donors and communicating often, honestly and in more relevant ways.  The emphasis should be on:

o    Building relationships with and “staying close” to donors using an approach like TDH Marketing’s Continuous Customer (Donor) Conversation™ described in a previous article in this publication
o    Clearly articulating and communicating the value being delivered by the organization and the use and effectiveness of funding
o    Use of a dashboard to track and communicate financial health, mission and program effectiveness
o    Featuring real donors and specifying how donations have helped, including testimonials and photos of donors and recipients.

•    Using technology-based database marketing to segment your donor audience and tailor messaging and appeals to the motivational preferences of targeted sub-segments to increase program and campaign relevance and effectiveness.  

o    Segmentation opportunities include those based on age groups, gender, income, interests, previous giving history, geography, etc, and don’t forget about lapsed or soon to be lapsed donors.

•    Leveraging technology to provide multiple ways for people to donate money and especially explore new methods of giving such as:

o    Greater use of online donation
o    Promoting initiatives in online newsletters, on your website and direct mail/email campaigns
o    The use of social networking media to build community among supporters, volunteers and staff and to recruit and interact with new donors
o    Providing opportunities for non-monetary contributions such as volunteer time.

Other promising developments according to Joanne Fritz, writing for About.com include:

•    Online Auctions  

o    As reported by CMarket, which operates BiddingForGood, funds raised from auctions in 2008 were up 26% and auctions booked for the first quarter of 2009 are up 58% over the same period last year.

o    Online auctions are appealing because they dramatically expand an organization’s marketing reach and fundraising capacity by overcoming barriers of time and geography with 24/7 anytime, anywhere access.  They are also entertaining for participants and highly measurable.    

•    Fundraising through mobile phones is very new and still small, but it is growing rapidly and is expected to be one of the big trends in 2009 and beyond.  Text messaging is gaining popularity for small donations and is being used effectively at sporting events and concerts.

Hot concepts gaining favor with fundraisers, according to Sarah Hoddinot, in an article appearing on the July 2009 issue of Fundraising Success magazine, include:
•    Major-Event Fundraising
o    Although nonprofits always have included events in their development strategies, taking major events online will enable greater reach and will ultimately raise donations and awareness.  Key success strategies include:
Coordinating different locations and hosting multiple events on a single day, while promoting these efforts under a single brand.
Building online registration and peer-to-peer fundraising tools early, and putting them in the hands of your most loyal donors.  Offer incentives for fundraising in lieu of charging a registration fee.
And don’t forget the value of strong Web site content and the power of the Internet; build a mini-site for your event, and promote it on social-networking sites like Facebook. LinkedIn and Twitter.
•    Peer-to-Peer Fundraising
o    With your most loyal donors and the people you serve as your best ambassadors, peer-to-peer fundraising makes it easy to reach out to friends and family members, when the time is right for them. Nonprofits can start to build a culture for peer-to-peer fundraising by integrating simple features into their Web sites.



•    Microcampaigning
o    Conducted over short periods of time and targeting modest fundraising goals, micro-campaigns are becoming an integral part of the fundraising strategy for a growing number of nonprofits.  Conducted online, micro-campaign pages are a great solution, allowing you to keep your main Web site focused and uncluttered, yet allow for the development of sub-brands, new programs or specific messaging for target audiences.  As with all fundraising initiatives, a micro-campaign site should be carefully planned with defined audiences and goals.

These suggestions are but a few of the many technology-based marketing initiatives available to nonprofits during these challenging times.  Not all of them will be appropriate or effective for every non-profit.  Selection and deployment of specific initiatives should be carefully evaluated taking into account the organizations’ mission, audiences and ability to execute.  With expectations that the financial challenges are likely to impact nonprofits for some time, technology-based marketing initiatives can make a real difference in terms of ensuring that sufficient resources will be available to meet the growing demand for the organizations’ services.     


Bert Kollaard is Vice President of Strategy and Planning for TDH Marketing, Inc., a Dayton, Ohio-based marketing firm with alliances and joint ventures in the U.S., England, The Netherlands and Singapore that support its global client base. The firm provides strategic, marketing and operational planning and implementation for large, mid-size and small corporations looking to develop profitable, technology-driven business growth.