For many years now, an epic battle has raged in the nonprofit world. “Nonprofits should not be run like businesses!” proclaims one side. “It is the antithesis of all they are and hope to be.”
“On the contrary!” exclaims the other. “Nonprofits should be run like businesses, for businesses are wealthy and wise.”
Well, maybe it hasn’t gone down exactly like that (can you tell we’ve been watching too much House of the Dragon?), but the question of whether nonprofits should be run like for-profit businesses is definitely one for the ages. However you feel, there are certainly useful lessons we can take from the consumer sector, especially in These Uncertain Times.
So today, join us on a journey through the wild world of consumer factoids. We’ll share the must-know data points, what the nonprofit sector has to say about them, and how you can apply them to your work in 2023 and beyond.
And one quick note: We want to thank Lisa Greer from Philanthropy 451 for pointing us toward many of these notable nonprofit numbers. Say that three times fast, and then let’s get data-ful!
How are donors like consumers?
Before we get into the data, you might be wondering if this is all really, truly relevant. When it comes down to it, are donors all that much like consumers? A quick Google search tells us that a consumer is a person who purchases goods and services for personal use. Let’s break down how that applies to our beloved donors.
- Like a consumer, a donor is a person who "purchases" a nonprofit’s services or “product”—in this case, the rush of doing good and the knowledge that they’re building a stronger community and better world.
- Consumers buy a latte here or a scented candle there without much thought, but they’re much less likely to grab a diamond necklace or a car without careful consideration. The same holds true for donors; $10 for your friend’s walk-a-thon? Sure thing! $2,000 toward that capital campaign? Hold up a second.
- Similarly, for those infrequent, major purchases, consumers rely on outside experts. For example, they’ll involve a real estate agent before buying a house. Donors, too, will often speak with a financial advisor before making a significant financial commitment.
- While consumers purchase tangible products, it’s not always about the actual value of the item. Keep in mind that a $10,000 designer handbag isn’t much sturdier or snazzier than a $100 one. For donors and consumers alike, it’s about the connection, the feeling, the status.
As you can see, consumers have quite a bit in common with donors. Now, let’s see what the numbers say.
Donors are nonprofit consumers
Despite all the data, the research, The Facts, it's sometimes hard to think of donors as consumers. For this article, we're doing our darndest in the interest of answering the question once and for all. So here are some consumer expenditure stats that we're using to make the final determination.
Donors are subscribers
In 2018, 71% of adults around the world paid for subscription services. In 2020, that number had risen to 78%. (Zuora: The End of Ownership)
… and from 2012-2022, subscription businesses grew nearly six times faster than S&P 500 companies. (Zuora Subscribed Institute)
Once upon a time, people paid for something, and then owned it forever and ever. Now, consumers pay a flat monthly fee to rent clothes, try new recipes, view movies, and listen to music. And it appears we like it that way—and so do businesses. Subscription models lead to repeat customers rather than one-and-done purchases, ensuring greater stability and building loyalty. Another bonus for brands? Consumers routinely underestimate their monthly subscription spend—by an average of $133 (C+R Research). As a result, the subscription ecosystem is here to stay, with a focus on creating a custom experience that keeps customers close.
What’s happening for nonprofits?
In the nonprofit world, we well know that getting new donors is important. Retaining them, however, is even more impactful—and more cost-effective. Unfortunately, over the last several years, retention rates for new and existing donors have continuously declined. Way back in 2008, the overall donor retention rate was 50%. Since then, it’s been on a steady decline, dropping to 46% in 2015 and 44% in 2020. The picture’s even worse for new donors. In 2016, the retention rate for new donors was about 25%; in 2020, it was 19% (Thompson & Associates).
However, recurring (monthly) revenue programs are one of the bright spots of our modern fundraising age. Each year, more and more donors are giving monthly—subscription style! This is especially common for younger donors. In fact, almost half of 18-29-year-old donors and more than one-third of 30-44-year-old donors give monthly, far more than Gen X and boomers (Data Axle).
Focus on donor retention. Zuora analyzed subscription data from 600+ companies and found that 70% of their revenue came after their customers first subscribed (Zuora Subscribed Institute). That means the majority of their revenue is not from newly subscribing customers; it’s from renewals and upsells. Likewise, focusing on keeping donors involved and growing their donations—rather than always trying to get new folks to give—can be mighty good for your bottom line.
Personalize the donor experience. It’s weird but nice how Netflix recommends ever-more-perfect shows and Stitch Fix’s curated outfits look more and more like you. That personalized experience is what keeps consumers hooked on the subscription lifestyle. The more you can take into account donor preferences in terms of communication and interactions, the better.
Look at the lifetime value of the donor. Subscription services are great for upping one of the key metrics of business viability: customer lifetime value (CLV), or the total amount of money a customer is expected to spend at a business. Nonprofits, too, need to look to the long term. While monthly giving is up for nonprofits everywhere, many organizations don’t see the true value. They mark a $50 monthly gift as a $50 gift, when really, that’s a $600 donation they're looking at. Think big, think lasting.
Donors are saving
Millennials’ average net worth more than doubled during the pandemic, jumping to $127,793 during the first quarter of 2022. (MagnifyMoney)
… and as of late 2019, the last year that research was released, there were about 618,000 “millennial millionaires” in the US. (Coldwell Banker)
At present, the older generation still has the greatest net worth. In early 2022, baby boomers owned just over 50% of wealth ($71.08 trillion) in the US, Gen Xers owned 29.9% ($42.16 trillion), and millennials owned just over 6.5% ($9.38 trillion). (Thanks again for all that, MagnifyMoney!) But the younger folks are catching up fast ...plus, millennials spend a daily average of $208.77, more than any other generation, requiring businesses to rethink how they’re marketing their products—and to whom.
What’s happening for nonprofits?
Millennials are saving up—but nonprofits haven’t caught up. Nonprofit boards are overwhelmingly older, with zero millennial members (and you can forget Gen Z representation.) Sure, boomers contribute the most to charity of any age group. But a lot of that could be because we’re asking them! Millennials and Gen Z have money to spend, and nearly 80% of millennials say they prefer spending money on experiences rather than things (Eventbrite). Donating to a nonprofit organization—and attending some fundraising events—fits squarely into the experiential bucket.
Make your move. Over the past three years, we’ve seen companies change. They’re taking a stand, they’re emphasizing authenticity, they’re moving online. And that’s because they know millennials and Gen Z are a crucial audience. If you still think younger donors aren’t interested in giving, consider this: In 2021, 82% of 18-to-34-year-olds who heard about Giving Tuesday participated (Times of San Diego). Yet most nonprofits still focus on donors in their 40s and above. That needs to change, and it starts by reaching out.
Diversify your ranks. Millennials own successful businesses big and small. They’re savvy and socially conscious, and they deserve a spot on your board. By seeking out all ages to get a diversity of opinions and ideas, you’ll set your nonprofit up for success in the years ahead. ...And don't forget all those EDs and DoDs stressed over getting their (really tired) boards to fundraise—with some coaching, this could be what your nonprofit needs.
Maybe your ideal board shakeup includes a range of experience levels: Retain some Boomers and Gen Xers to keep the fires burning, show the new millennial board members how it used to be done, and bring in some Gen Z to keep everyone on their toes.
Donors are spending on social media
From 2021 to 2027, the number of people worldwide who use social media is expected to grow from 4.26 billion to almost 6 billion. (Statista)
… and in 2022, global online sales via social media platforms added up to around $992 billion. By 2026, forecasts suggest that number will be around $2.9 trillion. (Statista)
While different generations use different platforms for different reasons, social media is here to stay. And it’s not just folks hanging out with their IRL friends and perusing brands they know and love. Social commerce is big, allowing users to buy from brands they love on their favorite platforms. And according to Instagram, 83% of those surveyed have discovered new products or services on the platform. That means it’s no longer an option for businesses—it’s a necessity.
What’s happening for nonprofits?
These days, social is where companies are spending their ad money—and it’s where nonprofits have an opportunity to drive visibility, too. Additionally, the major social platforms all offer special tools for nonprofits as well as the occasional matching donation. Despite this, 63% of nonprofits that use Facebook don’t use the platform’s charitable giving tools, while 87% of those using Instagram don’t use them (NP Tech for Good). In the rapidly changing social media landscape, nonprofits need to adapt quickly and take advantage of every opportunity. After all, according to Pew Research, most social media users check their favorite social media accounts at least once a day. That makes social a crucial avenue for engaging with supporters of all ages and backgrounds.
SEO or spend some dough. Social media platforms are businesses, and they make most of their money from ads. On Facebook, for example, the average reach of an organic post is just over 5%, so about one in every 19 fans sees your non-promoted content (Hootsuite). If you want your devoted followers to actually see your content, you’ll need to double down on social best practices—or put more funds toward that ad budget.
Age isn't just a number. While many older adults use social media, millennials and Gen Z put in the most hours—and they’re the most likely to discover new products on social. Specifically, 57% of Gen Z respondents have discovered new products on social media in the past three months, and 71% of them say it’s where they discover products most frequently (HubSpot). If you want to get new, young eyeballs on your nonprofit, get thee some TikTok ads.
Donors are all about video
81% of Americans use YouTube—up from 73% in 2019. In comparison, 69% of Americans use Facebook, 40% use Instagram, and 23% use WhatsApp. (Pew Research)
… and the average amount of online video users watch each week has almost doubled since 2018, from 10.5 hours to 19. (HubSpot)
We’ve established that social media is big, but not all formats are created equal. Specifically, as the continued popularity of YouTube and the rise of TikTok and reels has shown, it’s all about video these days—and businesses know it. The proof: 66% of marketers plan to up their online video ad budgets in 2023 (Marketing Charts).
What’s happening for nonprofits?
According to Google, six out of 10 people would rather watch online videos than television these days. But nonprofits haven’t quite caught up when it comes to the popularity of online video. While 87% of nonprofits use social media nowadays, that’s mostly Facebook, Instagram, and Twitter. When it comes to video-centric social platforms, just 45% use YouTube, despite its status as the most popular social platform, and a mere 5% use TikTok, despite its rapid growth among younger users (NP Tech for Good). This is one fundraising arena that hasn’t been fully tapped. Sure, it requires some effort, but the payoff will be well worth it.
Everyone loves a story. Google found that over 75% of donors find online video ads to be the most useful advertisements when it comes to deciding whether to donate. Furthermore, 57% of those who watch an online video for a nonprofit make a donation afterward. That’s because everyone loves a story—but a story that shows and tells is the most compelling of all.
Tailor the video to the platform. Making a video requires a lot more effort than writing an Instagram post, so you might be tempted to quickly splash it everywhere, from Snapchat to Reddit. But just like written posts, you need to be strategic and tailor the video to the social platform. For example, Instagram has a length limit of 10 minutes, so you’ll want to cut that event presentation for maximum impact.
Don’t forget a CTA. Your video can tell the most moving, captivating story ever, but if viewers don’t know why you’re sharing it, it will all be for naught. Let users know if you’re looking for donations, auction items, new volunteers, or something else entirely.
Set yourself up for success. Video isn't just a one-and done. It's here to stay, and the uses go beyond just drawing in supporters. Think of your website content, your annual report, and your program management tools. All can benefit from your nonprofit leaning into and learning how to maximize video viability.
Donors are sharing
9 in 10 people value user-generated content (UGC) over promotional emails or other branded content. (HubSpot)… and while 92% of marketers think they're creating authentic content, just 51% of consumers think their favorite brands actually offer authenticity. (Stackla)
In a world that feels increasingly unstable, people want to trust the companies they support. They’re looking for something genuine—something they can connect to. More and more, consumers are turning to other consumers as a source of truth, from reading hotel reviews on TripAdvisor to buying whatever lipstick Lele Pons is wearing (apparently she has 50 million Instagram followers!). Since people trust other people, user-generated content, or UGC (that’s any content created by users in case you haven’t heard the term), is a simple and cost-effective way for brands to drive awareness while proving their authenticity.
What’s happening for nonprofits?
Just like consumers flock to Yelp to check whether a restaurant is good before dropping their hard-earned cash, donors look to other supporters to determine whether their donation will be stewarded judiciously to make an impact. While most nonprofits haven’t incorporated UGC into their greater content strategy, a lot of them are already using it—they just don’t realize it yet. That viral ALS ice bucket challenge? UGC. #shoutyourabortion? Also UGC. And when you hold a walk-a-thon fundraiser with a catchy hashtag and encourage participants to share their photos, that’s UGC working for you.
Start with reviews. Reviews are the front line of UGC, and soliciting them is an easy way to build trust with supporters. You’ve probably taken note of various companies’ Google scores over the years, and as a nonprofit, you, too, can benefit from setting up a Google My Business account. This will make your organization searchable, and having a bunch of five-star reviews will nudge users to take that next step. But be warned that it’s a high bar: In 2022, users expected an average of 112 reviews before they’d trust a product (Statista).
If all else fails, add a reviews page to your website and include quotes and praise from donors and clients in social media posts.
Try user over influencer. Influencers do an amazing job at spreading the word—but they’re paid to do it, and that makes them both inauthentic and expensive. In fact, more than 60% of brands spend $10,000 or more each year on influencer marketing (Influencer Marketing Hub). UGC costs you nothing, and most folks are excited to be featured.
Use an editor. UGC is meant to be authentic, but if you’re sharing it as a part of your brand, make sure you’re doing a final once-over. Many a brand has gotten in trouble when a user posts something controversial. First, you want to check the content itself to make sure everything’s kosher. Then, check spelling and grammar—authentic content should still be typo-free!
So... what's your verdict? Do you think donors are nonprofit consumers? Or, at least do you see some ways here that you can use consumer trends to enhance your donor experience and increase supporter engagement?
Donors as nonprofit consumers takeaways
- Even though us nonprofiteers may see it differently, the ways that donors spend money are similar to the ways they donate.
- Investing in different delivery methods for your message and mission can pay off big time in the long run.
- Subscriptions and social commerce are emerging trends to attract and retain supporters.
- Video and UGC (User Generated Content) are ways to infuse your content and marketing with authenticity, extend the life of the content, and establish trust before donors even give.
- Deliberately incorporating millennial donors into your board can provide a new perspective and rejuvenate fundraising initiatives.
- Leaning into the donors-as-consumers angle may not have a down side. As long as you stay true to your nonprofit's brand, vision, and mission, you're gonna come out a winner.