2014 State of the Not-for-Profit Industry

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1 2014 State of the Not-for-Profit Industry

2 TABLE OF CONTENTS INTRODUCTION...3 METHODOLOGY...3 EXECUTIVE SUMMARY...4 ONLINE GIVING...5 DIRECT MARKETING...6 SOCIAL MEDIA...7 MOBILE TECHNOLOGY...9 PEER-TO-PEER FUNDRAISING...10 GIFT AID...12 CONCLUSION...13 RESPONDENT PROFILE

3 INTRODUCTION From fundraising to mission delivery, organisations have endured substantial challenges as the economy makes its recovery. These not-for-profits must continue to seek ways to improve their efforts and better serve their missions, while still functioning in a recovering economy. Each year, Blackbaud conducts studies to better understand the views of our customers and the not-for-profit community at large. We launched the State of the Not-for-Profit Industry (SONI) Survey to help not-for-profit professionals understand key trends in the sector, benchmark their forecasts and operations, as well as learn about key management strategies successful not-for-profit leaders are using. Conducted annually since 2004, more than 3,400 UK and Irish not-for-profit professionals have participated in the survey. This year s study provides insight from UK and Irish not-for-profits on topics related to: Online Giving Direct Marketing Social Media Mobile Technology Peer-to-Peer Fundraising Gift Aid METHODOLOGY Invitations to participate in the study were distributed to not-for-profits online via industry newsletters and targeted s, as well as at trade events. Responses were collected in June 2014, and a total of 423 completed responses were received. Because this was a convenience sample rather than a random sample of the entire not-for-profit community, results may not be statistically representative of all not-for-profits in the UK and Ireland. The results do, however, provide a useful basis for benchmarking and analysis. Please note that comparisons are made throughout this report to the 2013 study. These comparisons are general in nature and do not directly compare matching sample sizes or organisations due to differing respondents from year to year. Where financial bands are mentioned throughout the report, survey questions were referred to British pounds and are reported in the same way. 3

4 EXECUTIVE SUMMARY ONLINE GIVING AND DIRECT MARKETING Not-for-profits in this year s study used online giving as a key donation channel, with roughly 81% of responding organisations accepting online donations. This decreased slightly from the 86% acceptance rate in last year s survey. Not-for-profits of all sizes and from all mission categories were likely to accept online donations, although larger organisations were particularly likely. On average, online giving represented 15% of individual donations, the same as last year. Online giving continues to grow in importance. More than half of survey respondents reported an increase in online giving as a proportion of overall individual giving in the past 12 months. Social networking, special events and were once again the three most commonly used traditional marketing channels to drive individual donations, identical to the results for the past two years. SOCIAL MEDIA The use of social networks increased appreciably among this year s respondents, with more than 96% of all organisations using some form of social media to communicate with their supporters. Facebook and Twitter were the most commonly used social media networks, and when two social networks were used together, they were the most often used pair. YouTube emerged as a highly used social channel in 2014, with nearly half of respondents noting that they used the social media network. Not-for-profits continue to struggle to use social media effectively. As seen in last year s study, most not-for-profits felt that they did not meet expectations in executing their social media efforts in the past year. More than 60% rated themselves lower than 7 out of 10 on a scale of effectiveness. To increase effectiveness, about half of respondents plan to put more financial resources towards social media in the next year. MOBILE TECHNOLOGY Mobile technology usage for not-for-profits has increased but is still primarily focused on SMS and text giving. As seen last year, nearly 70% either already do or are planning to begin using mobile devices for SMS and text giving. While most respondents are not currently using mobile applications to either access the donor database or collect funds outside of the office, such as at special events, there was a slight increase in respondents either using or planning to use mobile technology for those reasons. PEER-TO-PEER FUNDRAISING Peer-to-peer fundraising, in which supporters ask for individual donations on behalf of a charity, remained a well-used fundraising approach in the UK and Ireland; the portion of not-for-profits that receive donations from peer-to-peer fundraising increased to 69% in the past 12 months. Not-for-profits most commonly incited peer-to-peer fundraising by encouraging those raising funds on their behalf to thank their donors. Hosting or participating in fundraising events (e.g., races, challenges, awareness months, etc.) was also a frequently used method of advancing peer-to-peer fundraising. Respondents accepting peer-to-peer donations corresponded well with those leveraging social media and online giving tools. More GIFT AID than 75% of respondents receiving peer-to-peer donations also accept online donations. Moreover, 84% of respondents receiving peer-to-peer donations use at least one social media tool to communicate with their supporters. Gift Aid, a UK government programme that assists not-for-profits in claiming tax incentives from individual donations, represents more than 1 billion in annual income for UK not-for-profit organisations. For UK respondents in this year s survey, questions were asked that directly addressed Gift Aid. The 2014 SONI Survey found that: 4

5 On average, Gift Aid represented 6% of total income for not-for-profits in the UK, essentially unchanged from 4% in Interestingly, respondents reporting no income from Gift Aid also rose, indicating that while fewer respondents may be receiving Gift Aid, the amounts received may be increasing. The percentage of individual donations on which Gift Aid was claimed varied, although nearly 4 in 10 organisations stated that the majority of their individual donations included Gift Aid claims. Not-for-profits submitted Gift Aid claims via a number of methods or systems. Respondents most commonly used their donor management systems for Gift Aid claims submission. However, about a quarter of not-for-profits used spreadsheets, particularly among smaller organisations. ONLINE GIVING In today s challenging fundraising environment, the boom in online donations has often been held as one of the largest sources of encouragement for not-for-profits. In 2011, the Institute of Fundraising reported an 85% increase in online charitable giving over the course of the three preceding years. Given the rising importance of the Internet, fundraisers are working hard to better understand which tools and communication strategies are most effective to raise funds online. As we saw last year, more than 80% of respondents are currently accepting online donations. Larger organisations were more likely to accept online donations, with 90% or greater of all not-for-profits with more than 10 million in annual income incorporating online giving. Acceptance of online donations continued to be lower among small not-for-profits than larger organisations with nearly 63% of those with less than 250,000 in annual income accepting gifts online. Acceptance of Online Donations N = % No Yes 32% Online as a Percentage of Individual Contributions N = % 19% 18% 0-4.9% 5-9.9% % % % 82% 11% On average, not-for-profits from the sample survey estimated that they received 15% of all private giving from online donations. Higher percentages of online giving were most often associated with social care and services not-for-profits. The relative percentage of individual giving from online channels varied with over 30% of respondents estimating that online gifts represented less than 5% of their overall individual donations. There were even distributions of around 18 to 19% for most other percentage ranges. This is despite online growth to date. As seen last year, more than half reported an increase in online giving. 5

6 2013 Change in Online Giving as a Percentage of Individual Giving (Prior 12 Months) N = Change in Online Giving as a Percentage of Individual Giving (Prior 12 Months) N = 231 Decreased 59% Decreased 59% Decreased 55% Decreased 55% Stayed the Same Stayed the Same Stayed the Same Stayed the Same Increased Increased Increased Increased 35% 35% 39% 39% 6% 6% 6% 6% DIRECT MARKETING With the recent focus on online giving, it is important not to lose sight of the fact that most not-for-profit organisations still rely on traditional marketing channels for the bulk of their charitable income. A combination of traditional and new world methods seems to be the preferred approach for the majority of this year s respondents with a recognition that methods like social media continue to gain traction. Marketing Channels Used to Drive Individual Donations Scheduled Meetings with Prospective Major Donors (N=352) 64% 12% 24% Face-to-Face (street collections, direct dialogue) (N=351) 38% 54% 9% Social Networking (N=354) 81% 9% 10% Special Events (N=356) 82% 8% 10% (N=351) 79% 12% 8% Direct Mail (N=341) 61% 30% 9% Telemarketing (N=354) 26% 68% 6% Have used within the past 12 months Not using and no plans to use within the next 12 months Not using but plan to use within the next 12 months 6

7 For the third year in a row, special events, social networking and remained the most commonly used marketing channels to drive individual donations. Scheduled meetings with prospective major donors and direct mailings were also used over the last 12 months, although less often. Nearly a quarter of respondents indicated plans to begin using scheduled meetings with prospective major donors in the next 12 months, although they had not done so during the last year. This indicates potential growth within this approach. As seen in last year s study, special events and face-to-face marketing approaches were used frequently by lower-income respondents, particularly among social services organisations. Otherwise, the majority of marketing channels were used most frequently by organisations with incomes ranging from 1 million to 2.4 million. More than half of survey respondents reported an increase in online giving as a proportion of overall individual giving in the past 12 months. More than three-quarters of organisations did not use telemarketing within the last year and almost the same percentage do not plan on using it next year. However, organisations using this approach tended to be higher-income, as it was most frequently used in the 5 million to 9.9 million and 100 million or greater income ranges. SOCIAL MEDIA Use of popular social media tools, such as Facebook and Twitter, is widely accepted as an important donor engagement strategy in the UK and Ireland. A 2013 study by the Office for National Statistics (ONS) and Eurostat states that almost half of the UK s 33 million Internet users participate in social networks on a daily basis. While it is true that many organisations social media efforts largely target younger audiences, this same report reveals that 19% of social media users are aged 65 to 74, which corresponds with other studies, like the Next Generation of UK Giving. These reports indicate that an effective social media strategy can address multiple audiences. Continuing last year s trend, social media remained a popular outlet for engagement and interaction; in fact the percentage of respondents using some form of social media increased to almost 96% this year, compared to 80% in FACEBOOK TWITTER LINKEDIN YOUTUBE GOOGLE+ FLICKER PINTEREST INSTAGRAM FOURSQUARE 88% 85% 48% 43% 16% 12% 11% 10% 1% Facebook and Twitter remained the most widely used social media sites with little fluctuation from last year s percentages. LinkedIn also remained a heavily-used social network with 48% of respondents using the site. The main change from the 2013 study was the inclusion of YouTube in 2014, for which 43% of respondents indicated usage. Facebook was again popular with not-for-profits, as it is viewed to have the largest supporter reach. Respondents shared that it is the best place to engage with supporters because so many of them are on the social channel, which provides the ability to share multiple content types. Respondents frequently noted that Twitter provided quick and easy opportunities for broad reach and communication, while LinkedIn was favoured by some for its ability to connect more individually with supporters. 7

8 As seen previously, respondents using more than one social media site 80% of all respondents typically reported using both Facebook and Twitter. Those using the combination of Facebook, Twitter and LinkedIn the top three most-used social channels accounted for 43% of respondents. Organisations also using YouTube in addition to those three sites constituted 24% of respondents. Comparison of Social Media Sites Used: % 30% 29% Percentage of Organisations 25% 20% 15% 10% 14% 9% 25% 26% 16% 19% 11% 10% 5% 6% 5% Total Number of Sites Used This year s study indicated a potential shift towards greater numbers of social media sites used per organisation. However, the inclusion of YouTube in the 2014 study seems to have caused this shift; if it had not been included, the distribution would have remained nearly identical to Nonetheless, the percentage of organisations using one to three sites decreased in 2014, while the percentages for four or more sites increased. The number of organisations that used 5 or more social media sites increased approximately 10%. Most respondents indicated that either Facebook (47%) or Twitter (32%) was the most impactful social media site. However, several organisations indicated that the ability to visually demonstrate a mission or cause is very compelling and a key reason that they view YouTube as influential. This could indicate why it appeared within the top four social media sites used to communicate with supporters in Not-for-profits are seeking ways to improve the results and impact of their social media efforts. During the last year, 62% added staff or responsibilities that focused on social media. One-third of respondents are already tracking social media success metrics, while another third anticipate doing so in the next year. A little over half plan to put more financial resources towards social media in the next year either through the purchase of social media monitoring technology or by increasing their social media budget. More than 96% of all organisations using some form of social media to communicate with their supporters. But not well: More than 60% rated themselves lower than 7 out of 10 on a scale of effectiveness. 8

9 Actions Taken to Improve the Impact of Social Media Efforts N = 399 Purchased Technology to Better Monitor What Is Being Said About Organisation 64% 12% 24% 23% 55% 22% 38% 54% 9% Increased Social Media Budget 24% 53% 24% 81% 9% 10% Used Specific Metrics to Track the Success of Social Media Efforts 34% 36% 30% 82% 8% 10% Added Staff Roles/ Responsibilities that Focus on Social Media Efforts 79% 12% 8% 62% 19% 19% Have already taken this action Plan to take this action in the next 12 months No plans to use within next 12 months When asked whether their social media efforts had been successful, nearly 40% of respondents rated themselves a 7 or higher on a scale of 1 to 10. However, a greater number said their efforts were not successful at all (7%) compared to those that saw efforts as very successful (2%). The majority of organisations rated themselves less than successful, indicating that expectations may be higher than results when it comes to social media impact. MOBILE TECHNOLOGY Like social media, a focus on mobile fundraising has grown in recent years. Since 2010, access to the Internet via mobile devices has more than doubled in the UK. A report by ONS found that: In 2013, 6 in 10 Britons used mobile devices, including smartphones and tablets Of those users, 94% were aged 16 to 24 Current use of these technologies was more pronounced among larger organisations but still highly present with all respondents. Proper design and mobilisation of websites for mobile devices is either in place or planned for the majority of respondents, indicating these features may become more of a necessity in the near future. While mobile usage has increased over the years, it is still fairly heavily focused on SMS and text giving. As seen last year, nearly To Access Donor/Alumni Database Information For SMS/Text Giving To Collect Funds Outside the Office (face-to-face, special events, etc.) Overall Mobile Usage N = % 27% 11% 31% 22% 47% 61% 23% 17% No, don t plan to Not yet, but planned Yes, do currently 9

10 70% of not-for-profits either already do or are planning to begin using applications or technology for SMS or text giving from mobile devices. Meanwhile, slightly more than 60% of respondents are not currently using and do not plan to use mobile applications for either donor database access or for fund collection outside of the office, such as at special events. Nonetheless, there was a slight increase in planned or current donor database access on mobile devices and in current use of fund collection outside the office, which rose to 17% vs. 12% in Continuing the trend seen in 2013, larger organisations were far more likely to be currently using mobile technologies to fundraise, although organisations of all sizes commonly voiced some intent to use mobile technologies in this manner in the near future. Healthcare and social services not-for-profits were more likely to use text giving and mobile device fund collection; the use of mobile access of donor databases was mainly associated with healthcare organisations. There was a slight increase in respondents either using or planning to use mobile technology to access the donor database or collect funds outside of the office, such as at special events. PEER-TO-PEER FUNDRAISING Peer-to-peer fundraising continues to rise in the UK. Listed as one of Blackbaud s top five technologies to impact UK not-for-profits in 2013, peer-to-peer fundraising is defined as any activity where supporters raise funds on behalf of an organisation. Respondents in this year s study noted a slight increase in peer-to-peer fundraising (69% in 2014 vs. 60% in 2013). This was particularly true in the UK, which represented the vast majority of those organisations reporting use of a peer-to-peer fundraising approach. Although it was seen across not-for-profits of all sizes, peer-to-peer fundraising was most often used by organisations reporting 1 to 2.4 million in annual income or those bringing in less than 250,000. Healthcare and social services organisations combined to account for nearly 40% of organisations accepting peer-to-peer donations. The amount of donations received from peer-to-peer fundraising varied widely, ranging from under 10,000 to several million pounds; the median amount raised was 45,000. Use of Peer-to-Peer Fundraising to Drive Donations N = 318 No Yes Use of Peer-to-Peer Donor Contact Information N = 107 Follow up/thank You/ Donor/CRM/Future Contact 31% 36% 17% 8% Unsure/Do Not Use Other 69% 39% 10

11 Ways in Which Respondents Enable Peer-to-Peer Fundraising N = 205 Encourage Those Who Raise Funds to Thank Their Donors 10% 13% 77% Provide Guidance on How to Utilise Peer-to-Peer Fundraising Tools 22% 25% 52% Offer Supporters Access to Online Peer-to-Peer Fundraising Tools 21% 21% 58% Host Peer-to-Peer Fundraising Events 17% 16% 67% No, don t plan to Not yet, but planned Yes, do currently Organisations enable supporters to raise funds on their behalf through peer-to-peer fundraising in a variety of ways. The most commonly used peer-to-peer tactic was to encourage those raising funds on their behalf to thank their donors, with over three-quarters of respondents currently using this approach. Not-for-profits also directly host events to drive peer-to-peer donations. These hosted events are once again expected to grow over the following 12 months. Respondents accepting peer-to-peer donations tended to be the same organisations that are also leveraging social media and online giving tools. More than 77% of respondents who receive peer-to-peer donations also accept online donations. The percentage of respondents receiving peer-to-peer donations using at least one social media tool to communicate with their supporters is also high at 84%. In line with other modern forms of communication, peer-to-peer activities often provide not-for-profits with a wealth of information on their supporters. Unlike other means of giving, peer-to-peer donations often involve the use of third-party technology providers and other intermediaries. Sixty-seven percent of not-for-profits shared that they receive contact information on individuals who donate through peer-to-peer fundraising, which is relatively unchanged from last year s study. Respondents accepting peer-to-peer donations corresponded well with those leveraging social media and online giving tools: More than 75% of respondents receiving peer-to-peer donations also accept online donations. Moreover, 84% of respondents receiving peer-to-peer donations use at least one social media tool to communicate with (particularly to thank!) their supporters. Of not-for-profits receiving contact information on peer-to-peer donors, 39% said they use that information to send a follow-up or thank-you letter, or some other form of acknowledgement. Others said they stored contact information in their databases for future communication or donor development. Generally, information was used to drive future communications in hopes of acquiring the peer-to-peer donor as an ongoing supporter of the organisation. Interestingly, 17% of respondents vs. 10% in 2013 advised they either do not use this information or are unsure of how it is used. 11

12 GIFT AID For not-for-profits in the UK, Gift Aid has been an important tax incentive since the early 1990s. Administered by the HM Revenue & Customs office (HMRC), Gift Aid is a government programme that assists not-for-profits with claiming back the element that would have been paid in tax for a donation by a UK taxpayer. Today, Gift Aid is worth nearly 1 billion per year to UK not-for-profits and their donors. UK not-for-profits in this year s survey took advantage of the Gift Aid programme in varying ways, with nearly half reporting Gift Aid income, a slight decrease from last year. For those that did process Gift Aid claims, when asked what percentage of gifts received from individual donors included Gift Aid claims, answers were widely distributed ranging from a small fraction to a majority of individual donations. Percentage of Individual Donations that Included Gift Aid Claims 23% 15% N = % 28% 13% 0-19% 20-39% 40-59% 60-79% % On average, Gift Aid represented about 6% of total income for UK respondents, holding close to the level from Interestingly, UK respondents reporting no income from Gift Aid also rose slightly to 50% of respondents vs. 42% in 2013, indicating that while fewer respondents may be receiving Gift Aid, the amounts received increased. The percentage of individual donations that included Gift Aid claims varied; although nearly 4 in 10 estimated that a majority (60% or more) of their individual donations included Gift Aid claims. Given the potential for additional income from Gift Aid, processing claims was a priority for many not-for-profits. Changes were put in place by the HMRC last year to allow for easier processing of claims using several replacement options for the R68(i) form currently used to claim the basic income tax portion of a donor s gift. These changes now allow organisations to submit claims online or through authorised fundraising software. Tools Used to Generate Gift Aid Claims N = 262 Gift Aid Declaration Storage N = % 3% Paper Files Fundraising/Donor Management System Digital Files Stored Specialist Gift Aid System on Organisation s Server Accounting System Digital Files Stored 16% Online/Cloud Service Spreadsheets Other Other 43% 1% 45% 20% 38% 10% While about 43% of respondents are using fundraising or donor management systems to process their Gift Aid claims, nearly a quarter are simply using spreadsheets. Accounting systems and special Gift Aid processing systems were also commonly used. 12

13 Although seen across not-for-profits of all sizes, larger organisations with incomes ranging from 1 to 10 million were most likely to report using fundraising or donor management systems, accounting for about half of organisations using that approach for Gift Aid claims generation. Organisations in this income range were also likely to use accounting systems. Perhaps not surprisingly, spreadsheets were most typically used by respondents with less than 250,000 in annual income. Nearly half of those respondents using Gift Aid today store Gift Aid declarations in paper files; many use paper files as their sole means of storage. The second most common method of storage was via digital files stored on a local server or some combination of this and paper claims. A growing number of organisations reported using cloud or online file storage, with 16% of respondents this year compared to 10% in Gift Aid represents more than 1 billion in annual income for UK not-for-profit organisations. Respondents most commonly used their donor management systems for Gift Aid claims submission. CONCLUSION As the global economy continues its recovery, not-for-profits in the UK and Ireland must consider the changing face of fundraising and how to best leverage both modern communication methods and traditional marketing approaches. These changes in the landscape represent both challenges and opportunities. As with social media, mobile web technology and online marketing may help propel not-for-profits forward; however, offline direct marketing methods still represent significant contributory income and, therefore, must be part of the process. Furthermore, supporters continue to become savvier both in the types of information they seek about their charitable causes and the ways they choose to engage with those causes. Therefore, successful not-for-profits will be considering offline and online technologies and best practices as they seek to improve fundraising efforts, maximise constituent engagement and deliver programmes to wider and more demanding audiences. Not-for-profits that can develop a strategic and cohesive approach to incorporating both offline and online methods as well as best practices should be better positioned to achieve their missions and financial goals. RESPONDENT PROFILE The vast majority of respondents to this year s study were from the UK. It s worth noting that the survey was open for one month this year as compared to two months last year. As a result, there was a 40% decrease in the number of responses received for this year s study. 3% Respondents by Country N = 423 United Kingdom Republic of Ireland Fundraising/Development professionals were the most frequent responders to the survey in both the UK and Ireland, with members of the Executive/Management team as the second largest responding group, followed by Marketing/Communications/Public Relations roles. The respondent population represented a diversity of missions with the largest percentage of respondents identifying themselves as Other, which included military support, professional organisations and more. The majority of organisation mission types were dominated by UK respondents. A large number of respondents did not provide details on their missions. 97% 13

14 Respondents by Functional Area N = 423 Accounting/Finance 5% Administrative Staff 2% Board/Trustee 8% Executive/Management Staff 28% Fundraising/Development 34% Human Resources 1% Marketing/Communications/Public Relations 8% Membership 1% Programme/Services Staff 7% Technology Other 3% 4% Respondents by Organisation Type N = 423 Arts, Cultural and Humanities 9% Education Higher Education 5% Education Primary and Secondary Schools 4% Environment/Animals 2% Healthcare (hospital, hospice, research, etc.) 13% International Affairs / International Relief 6% Public-Society Benefit 12% Religious (church, mission group, religious centre) 5% Social Care and Social Services 19% Trust or Foundation (private) 3% Trust or Foundation (public) 2% Other 20% 14

15 Organisational income size was diverse in both countries. As expected, the largest number of organisations generated less than 250,000 in total income per annum. Mid-sized not-for-profits were well represented with just fewer than 40% of respondents ranging between 1 million and 10 million. More than 25 respondents categorised themselves as having over 100 million in total income. Respondents by Total Income N = 392 Less than 250k 22% 250k to 499k 500k to 999k 11% 12% 1m to 2.4m 15% 2.5m to 4.9m 5m to 9.9m 10% 11% 10m to 24.9m 25m to 49.9m 5% 6% 50m to 99.9m 100m or greater 3% 4% 15

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