Does online fundraising have to mean restricted funding?

Published by Rachel Beer on

For the last few years, the buzz about ‘crowdfunding’ has been steadily growing and a increasing number of crowdfunding sites for charities have been appearing, and continue to appear at an astonishing rate – to the point where I increasingly finding myself questioning how necessary and valuable some of them are (do we really need specific sites for charities in particular regions or sectors when there are sites that allow all regions and all sectors, and are searchable?).

But, a while ago, I started to wonder whether these sites were changing something they hadn’t actually set out to change – that they were responsible for a trend towards restricted giving online.  I found myself pondering how big a trend it would become, and what impact it might end up having on the sector.

The launch of CRUK’s MyProjects sticks in my memory as a pivotal moment that made me stop and wonder whether I had been witnessing a trend emerging.  I observed, with interest, the restricted nature of the projects that donors could choose to find through the site and was surprised that the charity had taken that tack.  Surprised because, during the 15 years I’ve been a professional fundraiser, I can only think of a handful of times that I’ve worked on an appeal that wasn’t unrestricted – because most individual giving is, for reasons I won’t insult anyone by explaining.

Some time after that, I was talking to someone in a digital role in a charity who told me, very confidently, that it is necessary to restrict funds in order to secure donations through digital media – because ‘it doesn’t work in the same way as traditional media’.  I raised an eyebrow at this because I know it’s not that simple and because fundraising using traditional and digital media really isn’t that different, apart from the mechanics.  They both require some basic fundamentals to work, and one of those is a clear, strong fundraising proposition.  Granted that a fundraising proposition is stronger the more tangible it is, but it does not need to be any more or less clear and tangible to be effective for print or digital.  Fact.

However, I’ve lost count of the number of times I’ve wondered about how much more income charities might be able to generate if they invested some time apportioning ‘core costs’ across different project areas in order to allow fundraisers to use more specific, restricted fundraising asks.  In most cases, this would generate a better response, and possibly larger donations, too, from almost every appeal.  But it would certainly be more involved and make charities’ finances more challenging to manage, as well as potentially leaving organisations with less flexibility, when they may really need to use funds ‘where they are needed most’.

Virtual gift sites succeed by leveraging an exceptionally high degree of tangibility in order to secure donations, but the majority of them are, in reality, unrestricted.  However, Oxfam Unwrapped has developed a clever way of giving their offering greater veracity and transparency by categorising its gifts within defined areas of its work, such as Agriculture or Education.  Donors are advised that their donation will either be spent on their ‘chosen gift or on something else in the same category’, and the charity also states clearly that it has added ‘associated costs’ to cover ‘things like transport and training, plus up to ten percent to cover local running costs’.  It’s restricted enough to satisfy donors that want to be reassured about how their donation will be spent – who are interested enough to want to read the small print or cynical enough about charities to feel they need to – but it has enough wriggle room to mean that the charity isn’t committed to sending thousands of goats to people in more need of something less cute, yet more vital for their situation.

Back to crowdfunding for a moment – it’s always struck me that it isn’t really anything new.  It’s just become web 2.0 vernacular to describe the way charities have been raising money for years – lots of people giving small donations to fund specific items, buildings, projects or services delivered by charities.  The bit that is relatively new is that this version is facilitated by digital media, allowing the message to be spread quickly through connections powered by social media, with donations able to be made instantly and targets to be met visibly, and in real time, with online payment processing and instant gratification.

Our use of the web, and its evolution, has changed behaviours and attitudes and created more of an appetite and need for immediacy and transparency.  Perhaps that puts more pressure on charities to reconsider restricting appeals in order to persuade donors to support them, rather than support another organisation with a ‘sexier’ fundraising proposition that’s just a couple of clicks away?  We should recognise that this does not only impact on our online behaviours and decisions, but those that are made when (or, increasingly, if) we are offline too.

I’m still musing on where all of this might end up and I’m not sure anyone knows the answer.  I can’t see charities moving to a fully restricted funding model, because of the administrative burden and because, for many, it could be difficult to sustain satisfactorily and hamper their work.  After all, so much of the funding that charities receive is restricted already that individual giving represents a valuable opportunity to diversify income streams and ensure greater sustainability, rather than just cover the costs of single, specific areas of work – particularly when so many other types of funders are just as reluctant to cover ‘core costs’.

However, that said, there are plenty of smaller charities around that do manage to keep going on restricted funding alone – albeit in a somewhat hand to mouth fashion.  There are also plenty of new charities who don’t have the legacy of how things were done previously to shackle them, who are doing things instinctively and logically and for whom that means fundraising based on specific needs, and for specific projects, and spending the funds specifically on precisely what they have stated they would, rather than spending them as and where needed.  The distinction is a murky one, but an important one from the perspective of most donors so, since the question ‘which type of charity has more impact?’ is just as murky, the one that appears to be having the most direct impact might well be the one that seems like the best use of their hard-earned cash.

When you add the plethora of crowdfunding sites into the mix, where donors can choose a project in their locale – that they can see for themselves – or base their choice on any number of factors that personalise the causes they give to to their own experiences and preferences, it is certainly a more challenging landscape than the one the majority of charities have become used to operating in, and that calls for a re-evaluation of tactics – including, perhaps, whether there is a place for restricted fundraising in individual giving, even if just alongside your core programme of unrestricted activity.  Will this force charities into greater accountability?  Will the additional administrative burden be worth it for the income they generate?  Only time will tell.

Rachel Beer

Rachel Beer has been a professional fundraiser since 1999, with experience gained from at several fundraising creative agencies in the UK, as well as in house. Currently a fundraising consultant, she specialises in helping organisations to take their fundraising to the next level – creating fundraising brands, appeals and campaigns that excite existing supporters and attract new donors and fundraisers. She also works with teams in house at charities, helping them to develop the skills to get the best possible results. In 2008, Rachel created NFPtweetup - a regular series of events to promote effective use of technology in the charity sector, and she is well known as a fundraising expert, digital specialist and strategist for the third sector.


david heyer · March 1, 2012 at 15:46

great post rachel

Clare · March 1, 2012 at 16:42

Hi Rachel,

Very interesting article, thanks for pulling it all together. I work for a Canadian charity and our individual donations come through our ‘crowdfunding’ platform. What I found very interesting was your point about restricted versus unrestricted gifts, and the difference being in the value offered to the donor, not about the channel. We have actually found that we raise more unrestricted gifts than gifts to selected projects (restricted)….. We have been operating for just over 2 years and are still learning a lot as the landscape changes.

Coming from the UK to Canada last year, it’s very interesting to see the difference in fundraising approaches. Also very interested to learn that niche crowdfunding sites are popping up all over the place in the UK. This trend has not started in Canada yet, we are one of only 3/4 sites operating solely in Canada right now!

Thanks for your thoughts.

James Long · March 7, 2012 at 21:10

Hi Rachel,

As ever a very insightful piece.

I think this whole area throws up some interesting challenges for the sector as a whole, in addition to the potential paths a charity may take.

I find the increasing number of charities looking to promote restricted giving slightly worrying from a sector point of view, for two reasons.

Firstly, restricted giving changes the nature of competition between charities in a way we haven’t seen before. Should an increasingly number of charities focus on restricted giving it will start to change the framework within which people choose which charity to support. The ability to pick those ‘star’ projects which appear most appealing will surely mean that those projects that may be equally valid, but lack the emotional hook of the ‘star’ projects, will be left unfunded – a simplistic interpretation but you understand what I mean.

Secondly, from a LTV point of view you can see real difficulties emerging in trying to migrate donors from giving to a restricted ‘star’ project onto an unrestricted, less appealing project – suddenly getting that second, third or fourth gift looks more difficult, especially if the donors expectations have been set over and above what the charity can sustainably deliver on an ongoing basis.

I also think the trend towards restricted giving smacks of research gone wrong – I wonder if it’s a classic case of charities asking people if they would like it, yet in reality the issue of how much is spent on that project rarely effects the decision making process. Yes it may effect legacy giving or higher value giving but for most supporters their understanding of how much of their donated pound goes to that project is very inaccurate.

My final point is about how effective charities have been in displaying the success of a campaign through online visuals (in the CRUK example a horizontal thermometer). Letting donors know how much others have already donated is a hugely interesting issue as it raises the question of how powerful social norms are in the motivation to give. Charities run the real danger of triggering the bystander effect – a situation where is the amount raised is too low is demotivates as their gift will have little impact, while if the target is nearly reached it demotivates as the potential donor feels the target will be reached without their help.

I recently did some observational online research that looked at people’s responses to these different scenarios and it was clear that the ‘thermometer’ had the effect of reducing someones previous intention to give when the level was low and when the level was very high.

It’s a fascinating area and I’m interested in anyone’s thoughts & ideas.

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