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Why Demographics Matter

Editor’s Note: Since this post was published, Hope Consulting restructured and is now named The Camber Collective. They still publish “Money For Good”.

Hope Consulting recently released the “Money for Good” report, a robust research study making a case for the ridiculous: Demographics are irrelevant to fundraising.

Surveying individuals in 4,000 high income ($80,000+) households, with an intentional oversampling of individuals in households earning over $300,000, the authors endeavored to determine how nonprofits could more effectively obtain donations from individuals by understanding their true motivations.

“Money for Good” concludes its section on “increasing major donations from individuals” with five key findings and seven recommendations to nonprofits seeking to increase their fundraising capability.

The key findings begin with the conclusion that there is an additional $45 billion market opportunity for philanthropy. This they say is “limited in part by high levels of loyalty in charitable giving,” making a perhaps obvious and related point that donors are “generally satisfied with nonprofits,” although they are also frustrated at being “solicited too often.”

The authors also highlight their finding, perhaps unsurprising but in sharp contrast to much of the discussion in donor advisory circles and among watchdog groups, that “few donors do research before they give…and those that do look to the nonprofit itself to provide simple information about efficiency and effectiveness.”

Unfortunately, the authors also draw two additional conclusions which are very difficult to support.

First, in an echo of the old “Seven Faces of Philanthropy” book, the authors conclude that “there are six discrete segments of donors with primary reasons for giving.” These “behavioral” pools are broken down as follows:

  • Repayer: “I give to my alma mater”
  • Casual Giver: “I donated $1,000 so I could host a table at the event”
  • High Impact: “I give to the nonprofits that I feel are generating the greatest social good”
  • Faith Based: “We only give to organizations that fit with our religious beliefs
  • See the Difference: “I think it’s important to support local charities”
  • Personal Ties: “I only give when I am familiar with the people who run an organization”

While pouring donors of various backgrounds into behavioral buckets is very compelling in a report of this type, it is difficult if not impossible to apply these simplifications to the fundraising process given that there is no credible research methodology for identifying prospects who fit into these categories or for screening donors on that basis.

In sharp contrast, I do believe that many people would identify themselves as having an affinity to an ethnic group, nationality, gender, age group, profession, political orientation or similar demographic characteristic. But this, it turns out, is exactly what Hope Consulting soundly refutes as being important to understanding donors and their motivations.

“Demographics don’t matter,” the authors write, “HNW [High Net Worth] donors behave similarly to others.”

If the authors mean to suggest simply that wealthy people and people of modest means make philanthropic decisions in much the same manner, they have no way of knowing this is true without conducting a similar study of individuals in households earning under $80,000 annually.

If they mean that other demographic characteristics are not meaningful, they would have to be far more transparent about the demographic characteristics of their survey pool to be persuasive.

Even if the pool of respondents was sufficiently diverse to draw these conclusions, however, the contention that “demographics don’t matter” would only be credible if the surveys were designed specifically to elicit details on demographic self-definition and its influence on philanthropy, much in the same way that the survey has in fact done by including “faith” among the behavioral markers. In a sense, people who recognize faith as an important characteristic in their giving are saying that they are defined in part by their relationship to their religion. Might not “boomers” or “women” or “Latinos” or “musicians” or “democrats” or “environmental donors,” all cohorts defined in large part by their members, also say that their giving is influenced by their own unique self-described cultural identity?

For that matter, even if we were to accept these new behavioral group labels in fundraising, how can we know that they are not just derivative of the more important markers of our donors’ identities, the demographic cohorts to which these individuals truly belong and with which they associate themselves?

But don’t take my word for it. Just ask your major donor which of these new labels best fits them. It’s hard to imagine any choosing “casual giver” as their description of choice!

In pursuing the hypothesis that behavioral characteristics are the best measure of commonalities among donors, the authors wisely ignore these types of objections and instead focus on how to implement the labels they have designed. They provide good practical ideas on tagging and tracking donors, starting with donors surveys and behaviorally segmented marketing. It should be noted that these same techniques can be used to identify other perhaps more concrete demographic markers as well.

“Money for Good” is right to bring greater discipline to our effort to understand donors. Where they are wrong is to invent yet another set of terms of art that we might use but our donors would not. How donors define themselves is far more important than how we define them. And that is precisely why knowing the demographics of our constituency is so critical.

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