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Crowdfunding: Fundraising or Marketing?

|August 06, 2018

Crowdfunding is not a perfect science—today’s giving environment is competitive and demands a certain level of risk-taking to be successful. This often requires non-profits to dive in headfirst without having all of the answers.

A few years ago I completed my master’s thesis on crowdfunding in Canada’s non-profit health sector. I learned a lot during the program but found the most enlightening sessions to be one-on-one interviews conducted with various stakeholders and organizations. Through those conversations, three key themes began to emerge and I would like to share those today to offer some insight as non-profits assess the risks, contemplate their next fundraising campaign, and take the leap into the world of crowdfunding.

1. If we build it will they come?

  • It is not a secret that non-profits are looking to engage and acquire a new generation of donors. And young people live on social media, right? Using that logic, why not try crowdfunding? Many non-profits feel that they are well-positioned for success in crowdfunding solely based on strong social media followings. And although this may be an important ingredient, more is needed to be successful. As with any fundraising initiative, you can’t launch with minimal promotion and expect big gains. Foundational fundraising principles still apply as donors, regardless of vintage or channel, still need a compelling reason to give and a simple tweet or two isn’t going to do the trick.

2. Should donors be rewarded for altruism?

  • Some non-profit organizations continue to express concern around “rewarding” their supporters, or backers, for giving. But in the world of crowdfunding, the growth and success of the rewards-based model far exceeds all other models and has attracted a new type of donor to non-profits.

  • The argument “the gift itself is the reward” is a valid one. However, “rewards” or “recognition” present in a variety of ways in fundraising. I’ve heard the argument that a tax receipt, or other forms of donor recognition, are in fact rewards. Non-profits who decide to leverage a rewards-based model don’t have to provide donors with a free t-shirt or gift card. Think of the rewards as another donor engagement opportunity that further promotes and strengthens your cause—a special tour, a meet and greet, or a behind the scenes experience. If you dive in don’t ignore what works and leverage every new opportunity to learn more about your donors and what they care about.

3. Is my cause “sexy” enough for crowdfunding?

  • This question came from a non-profit that did not reach its crowdfunding targets and I’ve never forgotten it. Quite simply, it was suggested that the cause itself was the reason for the failure. It’s interesting because it not only paints crowdfunding with a marketing brush but also begs the question: Is crowdfunding primarily a fundraising tool or is it part of the new marketing mix for non-profits? Meaning, is it a way of making your organization feel shiny and new?

  • Crowdfunding has a reputation of attracting a different kind of donor with great storytelling, engaging content, and tangible goals that are used as lures on social that generally tend to attract a broader audience. If you look at successful campaigns from recent years, you may start to agree that successful crowdfunding is really about effective marketing.

  • For example, many successful crowdfunding campaigns highlight the importance of seeding campaigns prior to public launches. This is typically achieved by leveraging existing stakeholder relationships and donor bases. As a result, organizers experience “explosive” campaign starts and with that excitement comes social media buzz and earned media attention which then, and only then, results in new money, and new donors, for the cause. Many non-profits do not have endless marketing budgets so this kind of attention and awareness can often prove invaluable. When executed correctly, a new donor acquired via crowdfunding, can be made to feel like they are part of something bigger than themselves and that their small contribution is making a big difference. A lot of times, these campaigns provide donors with the accountability and transparency they crave from other causes and charities. And even though a new donor may have been acquired through a crowdfunding campaign, I believe that with customized stewardship, they can be converted into long-term supporters for a cause.

    Whether non-profits decide to leverage the crowdfunding model or not, it is important that they continue to take risks in the online environment. And even though the giving landscape continues to change and evolve every day, it’s important that non-profits continue to ask their donors what is important to them and how they prefer to engage the cause. Not all donors are created equal and fundraising strategies need to reflect that. Interested in learning more? These articles are a great place to get started:
    Crowdfunding: A Healthy Practice?
    It’s here: The World Bank Report on Crowdfunding
    Strategy Magazine: SickKids takes back the fight
    Dan Pallotta: The way we think about charity is dead wrong