Good News or Bad? Giving USA 2014 Report

Giving USA just came out with its annual report on 2014 charitable giving in the United States. 

Here are some top findings on the good news side:

• A record $358.4 billion was contributed to nonprofits in 2014, an increase of 5.4% over the previous year.
• Donations from individuals, corporations, and foundations all exceeded the previous all-time high of 2007 (right before the recession caused donations to plunge.)
• This recovery from the recent recession was the shortest on record, and much faster than all the experts predicted.
• Charitable giving rose in all service areas except international aid (which is largely driven by situational disaster assistance). Arts, culture, and the humanities were tops with a 7.4% increase followed by the environment and animal welfare at 5.3%.
• Corporate giving increased a remarkable 12%, largely due to big growth in pre-tax profits and the Gross Domestic Product (GDP).
• Individual giving accounted for an astonishing 58% of the increase in giving in 2014.

And on the not-so-good news side:

• Corporate dollars were up - but not by much - .7% of pre-tax income (compared to 1.8% in 1985 and 2% in 1986). And much of this giving was in-kind rather than actual dollars.
• Religion still reigns at 32% of total gifts, but has been losing ground to other causes since 1982 when it topped the charts at 53%.
• This past recession hit harder than originally estimated, with a 14% decrease in gifts from 2007-2009 - making it the most serious decline since Giving USA started keeping count 60 years ago.
• Despite the big 2014 increase in individual giving, the average donated remained consistent at 2% of disposable income. This hasn't varied over time, even when the economy has been strong.
• Individual giving is not increasing as fast as giving by corporations and foundations - total contributed in 2014 was $258.5 billion, still short of the 2007 high.

Reading between the lines, the other important story is that the increase in individual giving has largely been driven by donations from "mega-donors." These gifts in the range of $80 million and up are being designated for big mainstream institutions (universities, hospitals, museums, etc.) as well as foundations that provide grants for big nonprofits.

In other words, a very small number of donors are controlling our philanthropic dollars, and they are not giving to small and mid-sized organizations that serve the neediest among us. The income inequality we are seeing throughout the country is indeed being reflected in the current landscape of charitable giving.

Stories vs. Statistics: What Raise More Money?

Three different studies highlight a fascinating discussion going on in the nonprofit world about the relative effectiveness of storytelling versus statistical data in fundraising:

1) Wharton School of Business Professor Deborah Small wrote about an experiment where people were given $5, then instructed to respond to various charitable solicitation letters. Stories generated the biggest response; in fact, the more statistics provided, the less generous people were. Her conclusion? To fundraise effectively, you need to appeal to the heart with a touching story rather than to the head with statistics.

2) Princeton University Professor Peter Singer wrote about another study in which individuals shown a picture of a girl named Rokia and told her story were willing to give far more than when asked to help three million hungry children in Malawi. His conclusion? Individuals are more amenable to contributing towards saving one person than to save thousands.

3) M+R Strategic Services did their own survey and came to a very different conclusion. They showed two random groups one letter using the old-fashioned approach outlining accomplishments and needs, and a second version based on a personal story. The first letter generated four times as much money, almost twice as many donors, and a higher average gift.

So what does this mean for you as the average grassroots nonprofit desperately trying to raise more money for your good work?

• Statistics are powerful. Numbers provide insight into community need, let people know how many people you are serving, outline your demographic reach, and demonstrate the quantifiable impact of your services. Yet so many nonprofit appeals stop right there, assuming impressive statistics will move people to donate.
• Stories are powerful. People who care about your cause will respond deeply and generously to a story told from the heart. This works best when you tell your own true story with passion and well-chosen words. What doesn't work are sappy stories clearly crafted to manipulate emotions.
• Storytelling is also a comfortable entryway into fundraising. People like to hear and tell stories; using them in personal asks can help folks make the leap away from fear of fundraising. Try this: practice telling 90-second stories about the direct impact of your work. Yep - keep it that short! It keeps people focused, and it's fun. And you'll see how very engaged everyone will be.
• How you use them depends on the context. Online and email appeals need to be very short and sweet, coupling visuals with a quick story, and sending the reader to your website to donate. Solicitation letters should include a quick story along with a selected few key achievements and statistics. Personal phone calls or meetings should include time of story and data, as well as the opportunity for the donor to ask questions and tell his/her own story. 

My final conclusion? Use them both. Numbers provide valuable data; stories invite action by appealing to donor emotion and empathy. And keeping track of your response rate will allow you to pinpoint what works best in your community for your organization.