Special to The Philanthropy Journal
By Liz Deering
In the philanthropic world, the holidays are the most important time of the year for giving, but also one of the most challenging. When nonprofits pursue year-end contributions to meet their fundraising goals, they’re not just competing against their peers for donor dollars – they’re competing against the pressing concern, held by many in the general public, that the donations may not be put to good use.
Unfortunately, those concerns are valid. As more headlines about nonprofits mismanaging funds emerge every year, it’s clear that it’s not just the annual barrage of holiday giving scams that consumers need to protect themselves from – it’s also some of the causes they care deeply about.
Throughout holiday giving season (and the rest of the calendar year), it’s vital for charities and other 501(c)(3) organizations to eliminate concerns of fraud and abuse from potential donors’ minds. To do that, they must invest in philanthropy’s most important core value: Trust.
The Evolving Nature of Trust…
Trust is the foundation of every prosperous relationship, and nowhere is that more clear than the nonprofit sector.
Study after study showcases just how integral trust is to the act of philanthropic giving: 20% of respondents to a 2014 survey by the BBB Wise Giving Alliance said the most important thing they consider when deciding to give is a nonprofit’s overall “honesty and ethics”; and 90% of consumers age 20-35 recently told The Millennial Impact Project that they would stop giving to a nonprofit altogether “if they did not trust the organization.”
Knowing this, many charities – especially large ones – have bolstered their marketing spend over the last decade-plus to establish themselves as well-known nonprofit “brands.” But if traditional thinking holds that trust is an outgrowth of brand awareness, it’s time to think again.
According to Cone Communications’ 2014 Digital Activism study, 58% of Americans say it’s more important for an organization they support “to be able to have an impact on the issue” than for them to be familiar with the organization. So if familiarity is no longer key to establishing trust with donors, what is? Transparency.
…Meets the Changing Landscape of Giving
The rise of online fundraising has not only boosted internet users’ exposure to unique, niche causes; it’s increased their interest in supporting them. Individual donors gave $258.51 billion in 2014, an increase of 5.7 percent from 2013, and the global crowdfunding industry is poised to become a $90 billion market by 2025.
The popularity and project-based nature of crowdfunding, however, is only intensifying consumers’ desire for accountability. When everyday people donate to a crowdfunding campaign, they feel they’re making direct pledge to the project, person, or issue they’re backing – but with more and more campaigns being exposed as fraudulent, and the Federal Trade Commission cracking down on such instances, there’s clearly a need for transparency about where donors’ dollars are going.
And that need extends well beyond the crowdfunding world, since consumers interest in making direct donations online is hardly limited to creative projects and personal fundraisers. Donors want to use the crowdfunding model to support the philanthropies they care about: In the Cone Communications study, 47% of Americans stated that they would be more likely to give to a nonprofit organization online rather than directly to an individual or to a company’s social or environmental campaign.
What these factors all converge to show is that nonprofits seeking to establish trust with potential donors must inject transparency into the business of giving – chiefly by incorporating the best benefits of the online crowdfunding model into their philanthropic fundraisers.
A Tangible, Visible, Transparent Future of Philanthropy
To successfully serve their communities now and in the future, nonprofits must adapt to the new philanthropic reality: American consumers want to give, perhaps more so than ever, but they need to know where their giving is going. The emergence of “effective altruism” – a small-but-growing movement that uses data to determine the most effective application of philanthropic donations – is evidence of that.
The gap between donations and results can be vast, but thankfully the crowdfunding industry recognizes the problem just as much as the nonprofit world does. The participatory nature of crowdfunding fosters a genuine connection between donors and causes, but it works best when it’s tangible and transparent. When donors trust that their contributions will meet real, specific needs – ideally in their own communities – they’re more likely to give.
Recognizing that, new crowdfunding tools are making online giving as transparent as possible for both donors and organizations. Platforms like my company 121Giving, for example, enable nonprofits to request the exact goods and services they need, and allow donors to apply their contributions directly to the purchase of specific items on nonprofits’ wishlists.
Crowdfunding is still a new realm for philanthropic fundraising – not to mention the world at large – but the “tangible giving” model is catching in the nonprofit world because it creates accountability on both sides, leveraging tracking and analytics to help both donors and organizations gain visibility into the business of giving.
Ultimately, it’s another positive step toward the ideal future of philanthropy: One in which donor trust is inherent, up front, thanks to the innate transparency and accountability built directly into the processes of fundraising and giving. Giving donors confidence that their funds will be put to good use has always been vital to philanthropy; nonprofits now have access to tools that can make that easier than it’s ever been.
Liz Deering, Co-Founder & COO of social enterprise platform 121Giving, has found that one of the keys to reinforcing the inspiration to give throughout the year is showing donors how they can support causes they care about in a tangible way.
