Outlook 2006: Fundraising Forecast for '06, Beyond

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Here's a prediction: Next year, some fundraising organizations will look back on 2006 with disappointment, specifically in terms of net revenue gains. But others will see increases and be pleased. The key challenges for the year? Continued increases in costs of acquiring new donors, driven in part by paper and postage. And, yes, donor fatigue is an issue. Legislation aimed at protecting individual privacy also is a challenge.

However, donations from the baby boomer generation will increase; Internet giving will enjoy gains as costs decrease and people put more trust in this channel; and technology will continue to create new strategies for giving. The news will be especially good for charities that work hard to convert one-time donors into ongoing donors and for those that develop personal relationships with top donors.

Overall, expect an increase in giving of around 5 percent, thanks to a still-improving economy and the introduction of more people to charitable giving because of last year's natural disasters. But the question remains: Why will some organizations do better?

Here are some factors that will make a difference this year:

Guard personal information. Privacy will continue to be huge. Donors need to be assured that their personal data will not be misused or sold, and rightfully so. With the news media focused on misused consumer information, fundraisers will need to hammer at this point. Legislation and technology - do not call, do not spam and spam filters - give donors more control. They will exercise that control this year, so it's up to fundraisers to persuade them to make the right choices.

Analytics. Nonprofits must migrate toward more donor-focused marketing strategies, using best-of-breed analytic solutions to target the most loyal donors and profitable members. The idea is to rigorously target new and active donors, the ones most profitable and loyal in terms of responsiveness and gift size. Also, analytics will let fundraisers match appropriate offers and creative copy to each defined donor segment.

Channel challenge. Another key will be to continue providing multiple opportunities for the donor to give, including direct mail, inbound telemarketing and Internet giving. In a related vein, fundraisers must continue to increase their donor bases via online acquisition. This will be critical for donor renewal marketing and communication strategies.

Hangover effect of last year's natural disasters. This is a double-edged sword. Some donors are growing weary.

But many new donors were brought in. If they are cared for and targeted properly, they will be a huge source of additional gifts. Rather than focus on donor fatigue, we should focus on donor opportunity.

Strategies for fatigue and lapsed-donor renewal. Though the strategy is to focus on opportunity, donor fatigue is real. One way to reduce fatigue is to focus on acquiring donors who will stay loyal and engaged. Sophisticated analytics can help. Organizations must create analytical methodologies for identifying lapsed donors and donors who are about to lapse. With the right analytics and strategies, organizations can focus their energy and budgets on those identified as having the greatest propensity to reactivate.

The "David and Goliath" syndrome. How can smaller nonprofits compete against the sophisticated, effective fundraising programs used by large national organizations? It's a challenge, but they can. The mantras: Target, target, target and relevance, relevance, relevance. Reach out only to targeted donors with mixed media strategies. A variety of communication channels is crucial, but again only with offers relevant to the donor or prospective donor. Donors are most likely to respond to nonprofits that pay attention to their needs, interests and expectations.

In addition, lower Internet costs will help smaller organizations that lack the scale and heft to bring costs down by themselves. Smaller nonprofits also would be smart to cultivate local board member involvement. One key is not to let fundraising get in the way of showing the community exactly how the charity is helping. Another strategy, for groups large and small, is to do a better, faster job with acknowledgment processing. Today's technology means donors expect quicker turnaround on everything, including acknowledgments.

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