The Giving USA 2023 report highlighted several key points and trends from the past year in philanthropy. The total amount of giving declined from $516 billion in 2021 to $499 billion in 2022.
Economic indicators significantly influenced the drop in giving. With a decline in the S&P 500, a decrease in disposable income, and a 40-year high inflation rate, it was expected that there would be an impact on philanthropic giving. Despite these challenges, there were some bright spots, with GDP growth and low unemployment rates.
In a recent episode of the Responsive Nonprofit Podcast, we reviewed findings from the Giving USA 2023 report and discussed the implications these results have in our sector.
Watch the full podcast episode:
10 Learnings from the Giving USA 2023 Annual Report:
Here are the 10 key takeaways from the Giving USA 2023 report:
- Decline in giving: Total giving declined 3.4%—from $516 billion in 2021 to $499 billion in 2022.
- Economic challenges: Despite a decline in the S&P 500, disposable income, and increasing inflation at its highest rate in 40 years, there were some bright spots, including growth in GDP and low unemployment.
- Growth in foundation giving: Giving by foundations has grown as a share of total giving, increasing from 5% in 1982 to 21% in 2022.
- Mixed results in sources of giving: Bequest giving has become more volatile, while corporations and foundations experienced positive two-year growth, even when adjusting for inflation.
- A decline in individual giving: Giving by individuals has declined over the past two years after reaching record highs. Individual giving as a percentage of disposable income was 1.7% in 2022, down from 1.8% in previous years.
- Strong corporate giving: Giving by corporations, which includes grants and gifts made by corporate foundations, performed more strongly in current dollars amid unusual economic conditions. Corporate giving as a percentage of pre-tax dollars remained at 0.9%.
- The decline in some nonprofit subsectors: Giving to education, human services organizations, environment, and animal organizations declined from year to year, while giving to international affairs organizations increased.
- Growth below inflation: Giving to religion, health, arts, communication, and culture organizations grew in current dollars but declined when adjusted for inflation.
- Increase in international affairs: Giving to international affairs outpaced inflation, increasing by 10.9% year over year.
- Resilience and innovation: The resilience of the nonprofit sector during the pandemic era will continue to serve nonprofits. Giving through mobile devices is at a higher rate, with 75% of Gen Z and Millennial donors giving to charities online. Nonprofit organizations are adapting to new technology and utilizing tools such as AI and chatbots to grow and support their work.
The Importance of Long-Term Donor Retention
As we look at this downward trend in giving, it’s essential to emphasize the significance of long-term donor retention. Nonprofit leaders should begin adding a stronger focus on donor retention strategies.
According to recent data from the Fundraising Effectiveness Project, both the number of current donors and charitable dollars raised have decreased for the time since 2012. In Q4 2022, it was evident that charitable organizations were trying to raise more money from fewer donors. This trend can be attributed to the decline in the number of households participating in individual giving over the last 20 years.
As a result, there were 205 million fewer charitable gifts made last year.
Leveraging technology and data responsibly is key to addressing this generosity crisis. Organizations have been raising more money from fewer donors, making it essential to adapt and think differently.
Utilizing data and technology can help organizations:
- Have a better understanding of the average donor
- Enhance donor engagement
- Make more informed fundraising decisions
Organizations need to engage in intentional retention conversations and growth discussions. Fundraising is not just about numbers; it’s also about building trust and relationships with current donors. When organizations prioritize donor retention and invest in building strong relationships with their supporters, they create a sustainable and resilient fundraising strategy that can weather economic fluctuations and societal changes.
How to Navigate the Philanthropic Landscape
The philanthropic landscape is changing and adapting, with new trends and challenges emerging. As a nonprofit organization, it is essential to navigate these changes and ensure that your organization’s fundraising strategies are in line with the current landscape.
- Monitor trends: Keep an eye on the Giving USA report and other research that tracks philanthropic trends. Understand the dynamics at play and how these trends are affecting your organization’s donor base and fundraising efforts.
- Engage donors: Engage with donors, understand their needs, and build relationships. Donors want to be involved and understand how their donations are making a difference.
- Adapt to changes: Be flexible and adapt to changes. Use new technology, tools, and platforms to engage with donors, especially younger generations. Adjust your fundraising strategies based on new trends and challenges.
- Focus on growing segments: Focus on the donor segments that have shown growth, such as mid-level donors and major gifts. Adapt your fundraising strategies to engage with your donor pool effectively.
The Importance of Data and Its Impact on Fundraising Strategy
Data plays a critical role in influencing an organization’s decision-making process and overall fundraising strategy. In a rapidly changing world, with increasing competition among nonprofits, leveraging data effectively becomes a key differentiator in organizational success.
- Data as a tool for decision-making: When data is collected and shared within an organization, it becomes part of a feedback loop that enables evidence-based decision-making. The valuable insights from data help organizations identify trends and fine-tune their strategies. This change has been amplified in recent times as organizations face increasing challenges, such as economic compression and global events.
- Data-driven efficiency: As organizations aim to become leaner and more efficient, data provides insights into where resources should be allocated for maximum impact. Data analytics can help organizations assess performance metrics and find opportunities for improvement.
- Data for retention and acquisition: Data analytics allows organizations to understand their donors, volunteers, and board members more holistically. By segmenting data into subcomponents, organizations can tailor their communication and outreach strategies for specific groups. This tailored approach can lead to better donor retention and more successful acquisition strategies.
- Building relationships through data: Data is more than just numbers; it represents people. By understanding the needs, preferences, and characteristics of their supporters, nonprofits can build deeper, more meaningful relationships. In a world affected by events, like the COVID-19 pandemic, understanding individual donors’ situations and building trust are more crucial than ever.
- Leveraging technology: Technology is an enabler in the data-driven approach to fundraising. AI can help organizations analyze data more efficiently, uncover insights, and even automate certain tasks. By embracing technology and using it with a clear purpose, organizations can connect better with their community and achieve their fundraising goals.
- Data and culture: An organization’s relationship with data starts at the individual level. Each person needs to understand the importance of data and the insights it provides. By fostering a culture of data-driven decision-making, organizations can create a collective understanding of data’s value and establish a more data-centric approach to fundraising.
Organizations that prioritize data and technology will be better equipped to navigate a competitive fundraising landscape, build stronger relationships with their supporters, and achieve their goals.
The Role of Technology to Engage Individual Donors
The Giving USA report reveals the incredible rise of nonprofits, with over 450,000 new 501(c)(3) organizations established in the past decade. This surge has led to an increase in competition within the fundraising landscape, making it imperative for organizations to level up and embrace technological solutions to stand out from the crowd.
The future of fundraising lies in the intersection of technology, data, and philanthropy. This is evident as we observe the increasing adoption of multi-year pledging among organizations, where they rely heavily on technology and data to make informed decisions.
At the heart of successful fundraising is the understanding of donors, who give based on three fundamental factors: linkage, interest, and ability. With the rise of data analytics and technology, organizations can better understand their donors by analyzing existing databases, nurturing relationships, and utilizing data to build and grow individual support.
The Future of Fundraising Is Digital
Technology will play a significant role in the future of fundraising, and organizations must keep up with the latest tools and platforms to engage with donors and optimize their fundraising efforts.
- Mobile giving: Mobile giving is increasing, and organizations must adapt to this trend. Use mobile platforms to engage with donors and make it easy for them to donate.2
- Online fundraising: Online fundraising is becoming more popular, especially with younger donors. Use online fundraising platforms to connect with donors and offer convenient ways to donate.
- AI and ChatGPT: AI and ChatGPT can automate donor engagement and optimize fundraising efforts. Use these tools to engage with donors effectively and increase giving.
- Customization: Use technology to customize donor communications and engage with donors in a personalized way.
The changing landscape of giving, coupled with growing competition among organizations, has made it essential for nonprofits to adopt advanced technology that enables both precision and personalization.
Technology and data analytics empower organizations to identify donors, understand their unique personas, and tailor their communication tactics to resonate with donors’ interests, passions, and preferred channels. This approach, known as responsive fundraising, allows nonprofits to transform their role from being a barrier to becoming an amplifier of generosity.
In an era where individuals are constantly exposed to personalized experiences through platforms like Netflix, Amazon, and Uber, nonprofits can harness technology and data analytics to create similarly customized donor experiences.
By understanding their donors on a personal level, organizations can foster relationships that extend beyond financial transactions and tap into the individual’s innate desire to make a positive impact. As organizations shift their strategies to become more responsive and data-driven, they will ultimately contribute to a thriving and sustainable future for fundraising.
The Takeaway: Transparency and Personalization Matter
The use of technology and data to build transparency, create a more personalized experience for donors, and increase retention are table stakes for responsive nonprofits.
To quickly recap, here are four key takeaways:
1. Transparency and Personalization
Transparency in how donations are used, who they impact, and their potential to create change is essential for attracting and retaining donors. It’s vital to share your organization’s story, mission, and impact with donors.
Personalization of the donor experience, understanding donor preferences, and communicating in a relevant and authentic manner is crucial for engaging and building trust with donors.
2. Technology and Data Utilization
Technology can be a valuable enabler for nonprofits, especially in building transparency, personalization, and donor engagement. There’s value in using data to create a simple and optimized online donation process, which will have a direct impact on your community and its giving.
The use of data and technology, including AI, can help nonprofits understand their donors better and improve their communication strategies. Data can also provide insights into systemic issues and inform community conversations.
3. Generation Differences and Donor Engagement
There is a shift in donor behavior, with younger generations more inclined to donate online. It’s important to understand and engage with donors across generational segments.
While Baby Boomers are the wealthiest individuals, a narrowed focus on high-net-worth individuals alone is a dangerous strategy due to the finite pool of such donors. Engaging with a broader spectrum of donors and building a healthy pipeline is essential for long-term success.
4. Retention as a Key Metric
Nonprofits should prioritize donor retention as a key success metric, as solid retention leads to stable revenue.
Moving away from the “leaky bucket” approach of constantly seeking new donors and instead nurturing existing relationships is vital for sustainable growth.
Stay In the Know With Responsive Nonprofit Leaders
Earlier this summer, the results came in from the Giving USA 2023 report, sharing the current state of the philanthropic sector. In this conversation, nonprofit leaders across the sector gathered to discuss 2022’s biggest headlines, as well as what we can expect in 2023 in the current fundraising climate.
Want to stay in the loop on the current trends in fundraising and hear from more responsive nonprofit leaders? Subscribe to the Responsive Nonprofit Podcast. You can expect a new conversation every week!
