Our view on the recession ...

Well, we may as well kick off this blog with something topical, so here is a transcript of a piece I've put together for a few people about the recession and its impact on individual giving.

Take a look ...

The impact of the recession on individual giving

There can be little doubt that much of world is heading towards recession. In the UK most sectors are witnessing a large contraction and the government and Bank of England have officially acknowledged that we are in recession. Many observers are suggesting that the downturn will last throughout 2009. A number of analysts are predicting a much longer period before the global economy recovers.

Charities exist in an increasingly commercial environment, and as in the commercial sector, not everyone will share the same experience in an economic downturn. Whilst many will suffer, smart operators may be able to turn the situation to their advantage if they implement suitable strategies. We believe that the charities that will be best placed to thrive are those that are nimble, efficient and balance short-term tactical measures whilst steering organisations toward existing strategic goals.

We suggest that fundraisers should plan for adverse conditions for the next 12 to 18 months. Some charities are already experiencing a down turn in voluntary income from all sources. However, this experience is not universal. A recent anecdotal survey of 12 leading charities suggested that their experiences in 2008 were equally split across experiencing no change, increasing income, or facing up to a significant decline in donations. There is clearly no universal experience. Our experience, and that of the vast majority of our charity partners, is that at the moment income from individual giving is being maintained. Indeed, many report an excellent 2008 in financial terms. However with increasingly gloomy economic predictions for 2009, and ongoing uncertainty about how long and how deep recession will be means that their will inevitably be an impact. Charities must be braced for this.

A recent piece of analysis by think tank NFP Synergy highlighted that whilst the sector experiences a reduction in income in times of recession or downturn the impact is less than that of the wider economy i.e. charities are typically relatively well placed compared to many other sectors.

MORI recently carried out a poll of adults in the UK. People were asked whether they would be more or less likely to donate money to charity in the current economic climate. The majority of respondents (51%) say they would be neither more nor less likely to donate money to charity; 13% say they would be more likely to donate money to charity; and 31% say they would be less likely to donate money to charity.

Many households are going to experience a difficult time of it over the next year. People will reassess existing financial commitments and carefully consider new ones. As people face uncertainty over their jobs, committing to a longer-term regular gift may become less attractive for many potential supporters. It is also likely that supporters from lower-income and higher risk demographic groups are the first to give up support because of a reduction in disposable income. More affluent supporters will continue to have the funds available to give, but will consider where to place their giving very carefully. Charities may therefore see responses to appeals fall, but average gifts increase as only those most able and willing to give continue to do so.

In summary we believe that recruiting new supporters, particularly regular givers will become more challenging. Before the downturn began, it was a common experience in the sector to witness an ever more challenging environment for successful recruitment activity. However, it is important that charities continue a programme of recruitment even if short-term returns on investment are affected. Those charities who stop recruiting will suffer long-term losses even after the economy recovers and face potential supporters being recruited by other competitor charities.

The above scenario also highlights the importance of ensuring charities keep supporters engaged and on board – it will be doubly costly to lose donors at this critical time. We cannot emphasise this enough – engaging with supporters to ensure their continued support and loyalty is more important now than at any time in the recent past. Charities must listen to the needs and fears of their supporters and respond accordingly. Feedback, update, engage and thank. Without these mechanisms in place, charities will face a decline in response, but even more worryingly, risk donors moving to support other organisations who are better placed to meet their needs.

Responses to these issues include emphasising cash donations in the short term. People give cash with a short-term point of view and in a time of uncertainty are likely to support if they can afford it at that point in time.

All charities must focus on ensuring retention programmes are working at optimal efficiency to reduce attrition. For instance, if a donor contacts a charity to cancel a regular gift why not offer them a payment holiday for 6 or even 12 months rather than accept the calculation straight away?

However, opportunities continue to exist, and will do so in 2009 and beyond. Charities that are quick to act, innovative and that place the donors needs at the heart of their fundraising will be best placed to minimise the financial impact.

Those charities who are bold and decisive will be the ones who win in the longer-term.