Why do small donors matter?
File under: Who am I to doubt America's top expert?
And yet....
Large gifts? Small gifts? Chasing value
Leading legacy researcher Russell James III Ph.D., J.D., CFP recently wrote the following:
"I’ve argued for peace and understanding. Now, let me join the fight. In fundraising, the important issue is managing for large gifts. Why?
"First, this is true because small gift metrics are easy. Results are quick. If you constantly A-B test, you’ll eventually get there. You probably don’t even need academic theory (or a professor like me). Darwin will figure it out for you.
"Second, this is true because small gifts don’t matter that much."
Please take a breath. Trust me: you didn't just hear what you thought you just heard. Russell's remarks continue...
"Fundraising doesn’t live in an 80/20 world. It’s more like an 80/3 world. An analysis of 3,576 charities found: '76% of gifts come from 3% of donors.' Less than one fourth of the money comes from donations under $5,000. For legacy gifts, it’s even more extreme. Most charitable dollars come from 0.1% of decedents.
"So, I’m not going to disagree with small-gift metrics. I’m going to disagree with applying them to large-gift fundraising. I’m not trying to start a fight. I’m just trying answer a different question."
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First of all, My Dear Reader....
Please know that I am a HUGE fan of Russell James ... and maybe you should be, too? [Rhetorical question. Answer: YES! ... ASAP!! His blog is stupendously useful and thoughtful.]
I've met Russell. Raptly followed him at conferences. Read his studies (accessible via his LinkedIn page).
What Russell James spews doesn't get any better.
In fact, IF I appreciated his incredibly revealing (energetic! delightfully-expressed!! CLEAR!!! generously shared!!!!) insights any more, I'd be duty-bound to send his office at Texas Tech a box of artisanal chocolates from Jennifer's every Valentine's Day.
Still ...
... if one quickly or carelessly skims (as we all do; guilty as charged) what Russell James says about "small gifts don't matter that much," PLEASE please please please puh-leze ...
... take that particular statement with a pinch of deeper understanding.
First-time small donors matter in unexpected ways
Small gifts DO matter ... a lot ... some day.
Here's why: it's called the sales-lead funnel [Wikipedia has a good article].
One quick example?
In 2018, entrepreneur and former mayor of NYC, Michael Bloomberg, gave his alma mater, Johns Hopkins in Baltimore, $1.8 billion ... to be spent on financial aid.
His first gift to the school, though, was something like $25. That was what he could afford at the time ... as a grateful, trusting, broke new graduate.
FIRST gifts do NOT predict lifetime donor value.
BUILDING your base of first-time donors -- at any incoming price point; i.e., "your gift of any size" -- DOES matter ... because so many of tomorrow's MAJOR donors start out as first-time small-gift donors.
According to Veritus: more than 60% of tomorrow's major donors will come in your door initially as "small-time" donors.
This is especially true for legacy giving ... according to lifelong students of charitable bequests such as Canadian legends Fraser Green and David Love.
I NEVER, EVER will disagree with Dr. Russell James ... he's an incredible asset I've relied on for years.
He's a TRUE researcher (unlike me); a lawyer (not me); an academic Ph.D. (not that either); and a Certified Financial Planner (I surrender).
Pre-pandemic, Russell and I would sometimes cross paths on the speaking circuit. He's a warm, humble, dedicated, incredibly generous intellect and person; great smile, too.
But I've also seen fundraisers sometimes RUSH (wrongly) to treat NUANCED conclusions (like Russell's 80/3% "rule") as ABSOLUTES. And come to the easy conclusion:
"Well, I guess we don't need to care about those first-time, small-gift donors any more. Thank goodness. Fundraising acquisition is such a pain in the neck."
Yes, it is. You still need to do it.
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Dear Reader: This is an excerpt from Tom Ahern’s e-newsletter. Did you miss crucial back issues of this how-to e-news? Immediately available! Just GO here. (And scroll down just a bit to sign up for Tom’s revenue-boosting tips and insights. In your inbox regularly. It’s free.)