As the icy winds of recession blow into the UK, the charity sector is bracing itself for the storm ahead. As consumers’ disposable income drops away and stock-market-related investments lose money, the sector is facing a winter of discontent.
Eighty per cent of people say they won’t increase what they give to charities this year, while 15% are aiming to reduce their contributions, according to research from charity marketing agency DMS. Another recent piece of research suggests that a third of consumers would axe regular direct debit donations to charities if forced to reduce monthly expenditure.
The restrictions on available money have already led to an ugly public spat between the RSPCA and its Scottish equivalent, the SPCA, as the latter accused its southern sister of “stealing the food from the mouths of poor defenceless animals” by carrying out fundraising in Scotland where the RSPCA has no jurisdiction.
It is not just individual donors that are disappearing. Fundraising events that rely on massive corporate sponsorships are being axed and the assets belonging to charitable trusts – the investment-linked vehicles that provide many UK small charities (under £500,000 income per year) with the majority of their revenue – have plummeted in value. A recent survey of 362 charities by PricewaterhouseCoopers estimated that the recession could leave UK charities with a £2.3bn deficit.
Alan Goshalk, director of fundraising at homelessness charity Shelter, claims it is forecasting an income loss of £1m this year. It is also going to miss out on £400,000 of corporate donations.
“We had some close links with housing related financial partners. For example, Bradford & Bingley supported Shelter for over ten years, and it is obviously not placed to do that now,” he says.
But Hugh McGraw, chief executive of specialist charity telemarketing firm Relationship Marketing, says it is important to look at each charity on a case-by-case basis. He argues: “News that donations fell from £1.7bn to £1.3bn is frightening, but if we dig behind the headlines, overall charitable giving rose by 8% last year.” McGraw adds that one client, Sense Scotland, has seen 11% growth over the past four months.
The National Charity for Voluntary Organisations (NCVO) is also remaining positive, suggesting that a perceived fall in cash contributions may not be catastrophic, but a sign of people moving to credit card and online donations.
“It could be viewed as a really positive development,” says Karl Wilding, head of research at the NCVO. “Planned giving is more likely to create reliable, committed givers.”
While small, region organisations that rely heavily on cash donations, such as local hospices, may feel the effects of tightening belts, medium sized or larger charities are less likely to suffer such severe effects due to a mix of larger cash reserves and more facilities to plan strategies.
Alison Cowan, fundraising and marketing director at charity Missing People and vice-chair of mental health giant Mind, agrees that a recession will show up those organisations that haven’t done their strategic planning.
“There is a lot of uncertainty about at the moment, but I think some people are using the recession as an excuse,” she claims. “The organisations that have been future focused have seen the difficulties coming and have the appropriate risk management processes in place.”
Joe Saxton, head of not-for-profit research agency NFP Synergy, agrees that charities can prepare themselves for hard times by using common sense. He warns against obvious mistakes like investing now in a legacy marketing recruitment campaign that won’t deliver results for four years. He also points out that his consumer research has shown people claim they will only cut back on charitable donations after 12 other “unnecessary” outgoings, including gym membership, holidays, eating out and home improvements.
Elly Woolston, who has recently become managing director of charity marketing agency DMS, says that she will spend the next year drawing on her experience from the recession of the late Eighties and early Nineties when she was part of the team that launched Barraclough: Hall Woolston Gray, now Proximity London.
She claims that joining DMS at a challenging time for the sector will be interesting, but need not be a struggle if she remembers lessons from the last economic downturn. She recalls the “importance of focus, perseverance and belief, while maintaining rigour and risk management.”
Specifically, Woolston says it is wrong to assume charities will be one of the worst hit sectors in a poor economic climate. “People recognise that charities need more support during difficult times,” she claims. “The sectors that suffer the most are those that sell products or services that people can cut back on. For example, luxury goods, the finance sector or the motor vehicle sector.”
Both DMS and Relationship Marketing are recommending to charity marketers that they focus on positive, practical messages in their fundraising communications, rather than talking too much about doom and gloom.
One of RM’s clients recently did a split mailing to test this theory. One half were sent a pack referencing hard times and the recession, while the other received a mailing demonstrating the positive outcomes that could be achieved for the beneficiaries of the charity with supporters’ financial help. The second mailing produced a 30% higher response rate.
Back at DMS, Woolston says she is recommending to charity clients that all communications show the positive outcomes of donations. Even a simple action like saying “thank you” can make all the difference when people are handing over their hard-earned cash.
Case study: British Heart Foundation
The British Heart Foundation (BHF) is hoping to recruit supporters over the next 12 months by taking a team of specialists into communities to raise its visibility and communicate important messages about heart disease.
Betty McBride, communications and marketing director at BHF, says the charity will take a team of specialists (a cardiac nurse, dietician, and lifestyle advisers) into communities with high incidence of heart disease. In addition to Asda supermarkets, the bus will be going to workplaces and major community events.
The team will assess people’s lifestyles (for example their smoking, exercise and eating habits), check their BMI and then offer support and signposting to services that can help them improve their health.
McBride says this will build support: “When people’s lives are improved via a BHF intervention, our research shows these people are likely to become supporters.
“We absolutely know that people who have heart disease and interact with us will want to give us money in the future, but we have to ask for it.”
Case study: Association for International Cancer Research
The Association for International Cancer Research (AICR) has worked with agency DMS for nearly 30 years.
In that time, AICR has grown to become one of the UK’s top 350 charities by income – raising £16m in 2006/7 – and the sixth largest funder of cancer research.
One of AICR’s significant income streams comes from its prize-led fundraising activity. More than 200,000 donors who have demonstrated a preference for prize draws and raffles are targeted with a combination of offers. Players receive regular opportunities to win prizes of cars, holidays or up to £10,000 cash.
“Since the end of 2007, AICR’s prize draws to donors have repeatedly beaten response and income targets,” says Jane Moore, account director at DMS. “We’ve seen donating response rates up by between 17% and 24% throughout 2008 compared with the equivalent campaigns in 2007.”
This success has been repeated in cold recruitment activity – response rates increased by 29% over last year.
DMS recently commissioned online research into donor attitudes to the recession. While 75% of donors say they are likely to continue supporting charities at the same level in 2009, they also indicate a strong preference for methods of support that bring them some personal benefits at the same time, such as prizes.
While donors may be motivated by their desire to win prizes, this doesn’t mean they aren’t interested in the charity’s work, says Moore, who adds that giving donors extra information about research projects that the charity has funded has significantly uplifted response.