By Lori Sampson, MBA, EA, CAM
The season of fundraising events in Southwest Florida is in full swing. If you attend a lot of fundraisers and community events, it might also be called the season of swag. I frequently come home from galas, walks, and other fundraising events with a small gift, memento, or bag of goodies. Nonprofits use these promotional goods for a variety of purposes, but one notable intent is to engender a stronger connection with donors. Ideally, this leads to future donations or support.
It’s a common practice. A 2016 study by Texas A& M found that 60% of nonprofits use gifts and promotional items, called “donor premiums,” as part of their fundraising strategy. According to most professional fundraisers, even a frugal charity must spend money to raise money. Yet, doling out donor premiums make charities vulnerable to the charge they are diverting money from their core mission to merchandizing the organization. Do the benefits of donor premiums outweigh the cost and risk?
Doing a little research into the topic got me to a resounding, “it depends.”
How Donor Premiums Motivate…or Don’t
Inexpensive tokens—think return address labels in a direct mail solicitation or a koozie handed out at a community-wide event—given to broad, untargeted audience can and do generate donations. The main motivator for the donor is guilt or a sense of obligation. It is not a connection to the organization or its mission. Studies have found that even the best campaigns using on this wide-net, the low-cost-per-piece strategy usually just break even or make an insignificant amount given the effort involved. And these donors seldom become repeat supporters. If generating new supporters is the goal, this is not a good investment for a nonprofit.
On the other hand, gifts that are offered to established donors as an incentive to bump up the amount of their gift can be more effective than untargeted premiums or premiums to appeal to first-time donors. For example, a charity reaches out to an existing donor to thank them for their last gift and offering them a premium item of some type if they increase their next gift by a prescribed amount. This strategy can successfully increase a donor’s donation in response to the appeal. This same strategy also has been found to be successful at getting a lapsed donor to recommit with a gift.
However, there are pitfalls to this strategy and it should be used judiciously. First, a donor who ups their contribution to “earn” a reward, will not necessarily continue to support the organization at that higher level. And more concerning is how it may affect the donor’s relationship with the charity. A 2012 study done by Yale into what motivates philanthropy found that when a donor receives premium items from a charity for their donation, it reduces their sense of altruism about their giving. They don’t see the money, or other support, as motivated by the need to help the cause but more as a consumer transaction. This can erode the donor’s commitment to the organization.
Using donor premiums or rewards to incentivize higher giving amounts can also create an expectation that giving certain amounts should earn donor premiums. It can be a slippery slope if the organization is not prepared.
This flies in the face of many large, affluent nonprofits who have whole catalogs of merchandise reflecting a hierarchy of donation-based rewards. Totes, calendars, stuffed animals, framed prints, crystal decanters—pages of glossy options based on the donation amount. These organizations make money by rewarding supporters with gifts. They also spend a lot of money. And in the end, the individuals donating in response to the premium item do not have the same commitment as donors who give because they believe in the mission. Such highly merchandised fundraising strategies usually rely on reaching a vast pool of potential donors.
Too Much of a Good Thing
Nonprofits have been using donor premiums for decades now. However, how they are employed has become more sophisticated and more widespread. There has been a growing concern from charity leaders—particularly in light of the mixed response donor premiums receive as tools to garner support-- that donor premiums have become so prevalent that they are now considered “table stakes.”
Organizations fear potential donors are growing so accustomed to receiving premiums that they will expect them, even if the gifts are not an item the donor wants or values. Premiums become part of the cost of doing business as a nonprofit, not an item that produces goodwill or financial returns. Organization are left to devote time soliciting donations to underwrite gifts instead of programs.
Tips for Doing Donor Gifts That Matter
But people love to be acknowledged for their support. A gift to donors, particularly repeat donors, seems like a good way to express gratitude, doesn’t it?
There are ways a charity can make donor gifts or premiums to work without shooting themselves in the foot.
Enjoy the busy months ahead! I hope that they are fruitful for our local nonprofit organizations who do so much to make Southwest Florida a great place to live.
Lori Sampson is a partner with Myers, Brettholtz & Company, PA and manages the accounting services department. Her years of experience include working with nonprofit organizations, small business, and homeowner and condominium associations performing part time CFO, controllership and consulting services.? She has been with the firm since 1993.