Tuesday, August 2, 2011

The commoditization of fundraising

Have you ever looked at a fundraising direct mail letter that comes to your house and say "I've seen this before"? You know that that can't be true. The letter is from an organization you haven't heard from or who hasn't sent you something lately, but you could swear you've seen that exact same letter before. What gives?

The letter looks familiar because depending on the issue, you have seen the same pitch, the same design, the same appeal and the same beneficiary many times over. There are too many charities communicating to too many donors with same same techniques about the same causes. It all looks the same. The result is the commoditization of fundraising.

What is commoditization? It's when a good or service loses differentiation. Most often, this happens because a fundamental change in production. Usually, it involves intellectual capital. Smarter thinking or a wider use of superior techniques results in the ability to make things faster and/or cheaper, and that leads to a flood of the good or service in the marketplace. An example would be generic pharmaceuticals and silicon chips. Both moved from premium margin products to a commodity status. There's plenty of them and they're cheap.

And that's what we're seeing in fundraising, at least in certain categories. There are so many fundraising organizations doing mostly the same thing that the dfferences between them have begun to blur. A good example in Canada, and likely in the US, too, is cancer. There are literally dozens of cancer charities in most large centres. There are the big ones, such as the Canadian Cancer Society, and the specialty ones, such as the Canadian Breast Cancer Foundation. But there are also hospitals and some universities that raise money fcor cancer research and treatment. And there are small grassroots organizations that raise money for everything from cancer patient groups to individuals with cancer. They all have the same issue. They all have the same goal, more or less. And many of them use the same techniques -- direct mail, major gifts, planned gifts, events, etc. The case can be made that in categories like cancer, fundraising is sold in bulk.

The issue of price is important to commoditization. Usually, prices fall when the market is flooded with products available in bulk. Is that the case here? One could argue that there has been an impact on price if you look at what competition has done to asks. We have seen a movement in fundraising to more gifts at lower amounts. An example would be the explosion in online, email and social media giving. More asks are being made this way, and for significantly less than what major giving or even some direct mail uses.

The net effect of commoditization will be lessening of marketing, both in seek-and-find and in retention. When everything looks the same and reads the same, the value of the communication is lowered. It will take more effort and cost more money to create something that will breakthrough to donors.

1 comment:

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