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The psychology behind the decline in giving and what you can do about it

It’s no secret that the number of people in Canada who give has been declining since 1990. This means charities and nonprofits have had to rely on a decreasing pool of donors for their fundraising and operational needs. But, the bigger question is why are fewer people donating than ever before and what can we do about it?

As a former psychology major, I wondered if any social psychology theories could help explain this phenomenon. During my research, I realized that my intuition was right. So, here are three social psychology theories that may point to why Canadians are donating less:

Social loafing

Have you ever been assigned a group project and noticed that some of your group members put in less effort than other group members? This is known as social loafing: the tendency for people to put in less effort because they are aware that there are more people to contribute to the same project or goal.

Now, imagine you send out a generic email asking for a donation. One of your potential donors receives the email and realizes that it was sent to numerous people. Based on the email content, there doesn’t seem to be much urgency to donate. So, your donor decides not to donate because “someone else will” eventually. This is social loafing in action.

What you can do about it

When you request a donation, it’s important to clearly articulate the donation’s impact (that every penny counts) and your financial need. Let your donors know that donations are low. Your donors may be more willing to help if they know how and why their contribution will make a difference.

Cognitive dissonance

Cognitive dissonance is the feeling of discomfort when you realize there’s an inconsistency between your attitudes and/or behaviours. So, you rationalize the attitude or behaviour to make yourself feel better.

For example, say someone donated once because they believe in your cause, but they decide against donating again and become uncomfortable. So, they justify their decision to make themselves feel better through objections like, “I needed the money more” or “my small donation won’t make much of difference.”

What you can do about it

Again, communicating the impact and value of a donation may motivate your donor to take action. But, consider taking it one step further by putting yourself in your donor’s shoes; tell your donor your organization understands not everyone can contribute monetarily. And instead, offer alternatives to cash donations such as volunteering or in-kind donations. Your donor may be more likely to give if they feel understood.

Social exchange theory

Social exchange theory is how we evaluate our relationships based on its costs and benefits, what we think we deserve, and whether there are better alternatives.

For example, if a friend doesn’t return your texts or calls, or cancels plans more frequently, we may wonder whether the friendship is worth our time. And if the costs outweigh what we put into the friendship, we will be more likely to end it. And it’s no different for your donors who will evaluate whether their social exchange (i.e., their donations, volunteer time, etc.) is reciprocated by your organization.

What you can do about it

Do you have a donor retention strategy? If not, now is the time to build one. And if you already have one, think of new or more ways you can thank your donors. For example, share your successful volunteer stories or your mission success stories that tell your donors how they helped to make a difference.

And when you ask for another donation, don’t start with big requests like legacy giving or large sums. Instead, build trust through the foot-in-the-door technique by asking for something small. As a result, your donor will be more likely to consider the big ask later on.

Are you looking for more funding ideas or resources? We can help!

Adrienne Vansevenandt

Volunteer Alberta

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Don’t wait for a crisis to diversify your revenue

For many nonprofits and charities, revenue diversification happens when a crisis strikes such as the loss of a primary funder or investor. But, if nonprofit organizations can be strategic and proactive in their revenue diversification, they can mitigate this risk.

At Volunteer Alberta, our leadership team has been working hard to diversify our funding. So, I sat down with our Executive Director, Karen Link, to discuss revenue diversification and how other nonprofits can get started.

What does revenue diversification mean to you?

Karen: It means financial sustainability – it’s looking at multiple revenue streams to mitigate risk and to reduce dependency on just a few sources of funding.

Why is it important for nonprofits?

Karen: Revenue diversification goes beyond risk mitigation and financial resilience. It’s demonstrating your relevance to more stakeholders. When you diversify your revenue, you have to think about who cares about what you care about. It’s not just the government. It ranges from ministries to corporations, to foundations, to individuals.

There are different sources of revenue such as:

  • Governments (federal, provincial, municipal)
  • Foundations (family, community or corporate)
  • Earned revenue (fee for programs and services)
  • Donations and fundraising (lotteries, casinos, donations)

And there are other emerging trends in revenue diversification including:

  • Saving costs by partnering on service provisions (shared staff, shared infrastructure, and shared programs and services).
  • New business models that are similar to social enterprises. For example, partnering with a private business that wants to do something that affects your clients. So, that’s something you could be a part of but not necessarily initiate.

How do organizations even begin the process of revenue diversification?

Karen: There are nine steps to revenue diversification. Step one is you need to understand the impetus for change. You need to understand the need to establish funding that’s reliable, flexible and varied from different sources. Your board needs to be on board as they have a role to play; they have to understand the vision and work their networks.

Once the need is clear, your organization undertakes other steps including a review of your funding sources within the last 10 years, identifying potential investors, evaluating the internal capacity you’ll need, consulting with others, and managing risk.

Finally, you develop your implementation strategy and put it into action. After that, it’s all about assessment and continuous improvement. Improve, scale slowly, and keep building within your means; you need the capacity and the time to do it.

What are the common barriers nonprofits experience when they seek to diversify their revenue?

Karen: Internal capacity is often the biggest barrier. You’ll have to be able to identify prospective new funding streams or investors and establish and maintain those relationships. You need dedicated people for any type of business development. You need to invest in the right people to generate more revenue.

Most times, people try to focus on business development with existing resources, but they don’t realize it takes additional resources to develop those business models and establish/maintain those relationships. You have to spend money to make money.

What tips/recommendations would you give to nonprofits struggling to find other sources of revenue?

Karen: The number one thing is to consult – talk to others about what they’ve done, talk to other organizations, engage your board, engage your staff, and think outside the box. Think about who cares about what you care about. Look at how people are making money and saving money.

There’s no one size fits all. But, when you talk to other people about how they’re diversifying their revenue and how they’re generating revenue, you can get ideas for your fund development plan.

Another important thing is to have a clear aspirational goal – what is it that you want to see? And then make and test your assumptions. This is your theory of change.

For example, your assumption could be I believe people would pay more for our services. And your theory of change could be if we build a platform where the reporting and resources would be so valuable, people will be inclined to pay. Be bold and put those assumptions out there and test them.

Are you ready to diversify your revenue? Get started with the 9 steps to revenue diversification!

Adrienne Vansevenandt

Volunteer Alberta

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