Insight Report: The Economic Outlook for Fundraising

Insight #1: Inflation Is Still a Factor

For the full year 2023, the rate of inflation was 3.4% over the prior year. While an improvement over the 6.4% increase in 2022, it’s still higher than the Federal Reserve’s target of 2%, which is why they are keeping interest rates at their current 23-year high to bring inflation down further. While improving, inflation’s impact on fundraising is far from over. In Q2 of 2023, the DonorGraphics study found that half of American (and Canadian) donors said they gave less over the past year due to inflation eating up more of their income. In Q4 2023, it increased a few points, to 53%. Inflation impacted the giving rate of younger and lower-earning households the most. While older generations are less likely to report cutting their giving due to inflation compared to younger demos, a weighty 50% of Boomers and 46% of Seniors said they gave less over the past year because of it. Giving from higher income households was the most resilient. As household income (HHI) is a primary demographic predictor of charitable giving, it’s noteworthy that just 29% of the highest earning households ($250K+) reported giving less due to inflation in the past year, as of Q423. Older and more wealthy donors are two prime giving segments for The Salvation Army and other human services organizations. While their giving was less impacted due to inflation, the still-sizable reduction means the post-pandemic letdown has an additional headwind.

Insight #2: Look to Seniors, High-Income Donors

Seniors and higher-income households are two valuable giving segments. Unfortunately, they are also naturally smaller in size: Seniors represent about 5% of the U.S. population, and households earning $250K make up 7% of households according to the U.S. Census. With negligible overlap between these segments, and an average of just under three people per household (minus children under 18, present in about 40% of households), this means that charitable organizations are vying for support from these prime-giving segments representing roughly 10% of the U.S. population, or 13% of U.S. adults. Thankfully, support comes from adjacent segments: those younger than Seniors, and in households who earn less than the top 7%. While their charitable giving dollars are less than the highest segments, and they are potentially less sheltered against a pending recession, they do bring in the bulk of individual fundraising dollars for most organizations.

Insight #3: Evaluate Your Data

At TrueSense, our Full-Circle Fundraising framework begins by discovering who your donors are — and what’s important to them. Applying research and analytics to your own donor file will provide a solid foundation for data-driven strategies to grow support in any economic outlook.

1. Finding Your Own “Younger” Supporters

While Seniors, also known as the Silent Generation (ages 78+), are a valuable segment, they represent just 5% of the population. The rallying cry of all charitable organizations to “attract a younger donor” is clear, since many donor files are aging and losing valuable supporters, reflected in lagging multi-year donor response rates. But what is “younger,” and how will you make your communication strategy relevant to this segment? Using appended data, a simple analysis of not only current supporter age but also your organization’s five-year longterm value by generation results in your unique fingerprint of who the most valuable supporters are for your file. Each market and program is different, which means “younger” for one division might be younger Boomers, while for others, the most valuable segment to grow might be Millennials. Of course, supporters include volunteers, who naturally skew younger. Large brands like the American Red Cross rely on volunteers for 90% of their humanitarian work and monetize their value in real-dollar terms.

2. Using Household Income

Household income is readily available with age and is inexpensive to append. While HHI is a part of optimizing ask arrays (along with other wealth indicators, plus charitable giving behaviors), it is perhaps best applied to predictive models, including mid/major identification and cultivation, as well as acquisition. From research on why people give — and why they don’t — we know that the number one reason adults don’t give is because they say they cannot afford it. This sentiment naturally reduces at higher income levels, so seeking out new sources of charitable givers means that overlaying income and other wealth indicators is critical to identifying new higher-value donors.

3. Find What’s Relevant to Your Target

Once you’ve determined your ideal growth targets, whether a certain age, income, or other characteristic, be sure you use donor research and/or feedback to identify the aspects of your program they are most passionate about supporting. By researching your donor demographics and understanding what inspires them, you can align your vision with their passions to foster stronger connections and more loyalty. The Salvation Army runs many programs and services, support of which varies predictably by age, income, religion, ethnicity, political affiliation, etc. This is particularly critical when talking about relational fundraising, which has the benefit of direct communication from the donor, as opposed to inferring through segmentation — most common for mass-market fundraising.