The approach

One of the pressing questions from donors is ‘Will my gift be valued? Will it be successful? Will it make a difference?’ As one of the strands of the CDE work, this project looks at what donors would like to see and attempts to give insight into how charities can show donors that their money makes a difference.

What is clear is that this matters. Research over the past months confirms that unease about some fundraising tactics, as well as the frequency and tone of some fundraising communications, is a source of concern, among at least part of the donating public.

Without strong evidence of impact, people can search for proxies to indicate the effectiveness of charities, such as using overheads as a measure of charity ‘efficiency’ or saying that X pence in the pound ‘goes directly to the cause’. In the US, Dan Pallotta has made a strong case against the use of low administrative overheads as a measure of charity effectiveness. He argues that focusing on overheads or fundraising costs creates a perverse incentive for charities to avoid investment, risk and innovation. However, in the absence of more appropriate metrics, donors may gravitate to these simplistic measures. The reliance on data about overhead costs has not only created a false and unhelpful distinction between operational costs and charitable spending, but also it can fuel cynicism amongst donors about such costs.

There is a big question here about how charities should help people better understand how they work. Explaining how charities spend their money and what they spend it on is part of that—but always link the cause and the results people want to see, showing how all parts of your organisation have a purpose. Certainly, the research suggests that people accept that charities need to spend something on fundraising and something on their organisation.

In the UK, there appears to be a disconnect between perceptions of overhead of fundraising costs and the true figure. At Charities Aid Foundation (CAF), we looked at this back in 2011. Our polling suggested that people perceived it costing a charity 42 pence to raise £1 in income. By contrast, figures from the time showed the actual average cost of raising £1 was only 12 pence. On this, charities have a good story to tell and are in a good position to give a sensible explanation of how they work and why it is important for them to achieve their mission—which, of course, is central to why donors are moved to support them in the first place.

More recent work by nfpSynergy told a similar story. On average, people thought that 37% of charity income went on ‘admin’, 26% went on fundraising and 38% went to the cause [1] —again, far away from the estimates of what charities actually spend. It is clearly very difficult to separate ‘overheads’ from essential support work that helps deliver a charity’s mission: governance, fundraising, IT, HR and so forth, all ultimately contributing to services. The story about President Kennedy asking a janitor at NASA what he was doing only to be told ‘I’m helping put a man on the moon’ might be a bit of a cliché, but it does describe well how the various bits of charities can make a difference even if they are mundane. Of course, that is no excuse to waste money or be inefficient. Either way, charities should be able to answer questions about their operations, and have evidence—whether systematic or anecdotal—that shows the money they receive in donations does actually make a difference to their chosen cause.

It is certainly the case that people say they would like to hear information about the charities they support. The publicly available research on how donors perceive the communications they receive from charities can give contradictory signals. Polling at CAF carried out last year showed that four in five people (81%) say it is important that they receive some form of communication from a charity after making a donation. [2]

Evidence about how a charity has an impact was most likely to be valued by people, with 68% of respondents agreeing this was important. Identifying how an individual donation had been spent was seen as important by 54%.

That chimes with work carried out by New Philanthropy Capital (NPC) for their Money for Good report, [3] which found that how an organisation will use a donation and evidence that an organisation was having an impact were ranked as the top factors influencing donations among mainstream donors, with 63% of donors paying close or extremely close attention.

However, there is a tension between this desire to know more and the worry that a donation will simply lead to many requests for more money—something that donors identify as a real barrier to giving. Previous market research we conducted in 2012 found that many people feel that the fear of being inundated with requests for more money prevents them from giving.

In the spring of 2016, CAF conducted six focus groups across England amongst charity donors (both current and lapsed) to find out how they perceived and interacted with charity. As part of this research, respondents spoke about good examples of charities and how they currently receive and would like to receive information from charities. To follow up this research and support the CDE, in July 2016 we then conducted quantitative research amongst a general public sample [4] of those who have donated to charity in the last year to test some of the hypotheses from the qualitative research. We are very grateful in particular to Ceri Edwards and Dan Fluskey from the Institute of Fundraising (IOF), who provided feedback on our questionnaire.

Of course, polling and focus group research can only take us so far: people can only tell us what they think at the time and their reactions in practice may well differ. We have reviewed some of the academic experimental work to compare to the polling.

Whilst more research and testing would undoubtedly be useful, this project attempted to gain some greater insight into donors’ preferences with the hope this will act as a starting point and help inform fundraisers and communicators in charities.

By studying the preferences of donors, we have been able to offer some useful insights about their stated preferences. However, it is a complicated picture and there may be some disconnect between claimed and actual behaviour. For example, studies have shown that some donors actually give less when presented with information about the impact of their donations, with researchers suggesting a variety of different psychological factors at play to explain this. We look at this in more detail below. [5] [6]

If we are to meet the demands of donors whilst ensuring this does not negatively affect donations, it is imperative that we continue to study donor preferences and behaviour to tailor the way charities communicate as fundraisers to find sustainable solutions.

[1] http://nfpsynergy.net/press-re...

[2] https://www.cafonline.org/abou...

[3] http://www.thinknpc.org/public...

[4] The survey was conducted via a CAF survey conducted online by YouGov between 20 July and 29 July 2016. Six hundred and forty interviews were conducted amongst those who donate to charity. The sample is nationally representative and is weighted to known population data on demographics, including age, sex, social class, working status and region.

[5] Butera, E. & Horn, J. (2014) Good News, Bad News, and Social Image: The Market for Charitable Giving. Interdisciplinary Center for Economic Science. George Mason University. 

[6] Eckel, C., Phillip, J. & Milano, A. (2007) Is more information always better? An experimental study of charitable giving and Hurricane Katrina. Southern Economic Journal. 74(2), 388–411.