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How will opt-in affect small charities?

FSI’s Alex Hayes investigates, How will opt-in affect small charities

Will smaller charities miss out with the advent of the opt-in rules, or are they in a stronger position than larger organisations to keep their supporters engaged? The FSI’s Alex Hayes investigates

 

The fundraising landscape is changing for charities of all sizes due to a variety of factors including the new Fundraising Regulator and Fundraising Preference Service. There has also been increased scrutiny on charities and their fundraising practices and the unpopular forms of fundraising often undertaken, dare I say it, by larger charities.

 

I realise this may not be a popular point of view (depending on the size of charity you work for!) but 97% of the sector is made up of small charities, yet the majority of the income goes to larger charities, and seemingly the majority of the negative reactions were to larger charities.

 

As a result of this and other factors, trust in the sector is down (trust for charity chief executives currently stands at just 47%).

 

But how has this affected small charities?

 

The FSI surveyed its members as part of the Small Charity Index at the end of 2015, and we found only 10% of the small charities surveyed felt that negative coverage in the press (and the large proportion of this focused on fundraising) had impacted on their ability to raise funds.

 

However, there are changes coming into force, so what do these mean for small charities? Will they miss out with the advent of opt-in? What are the challenges – and the opportunities – that opt-in will present for smaller charities?

 

According to the most recent NCVO Almanac, which looks at charity income from 2013-14, charities with a turnover of up to £1m received £1.6bn from individuals. This represents about 22% of the income from individuals to the sector. By comparison, these charities receive 20.8% of overall voluntary income and 20.3% of overall income, which shows that small charities do relatively well in raising money from individuals. But will the amount raised by small charities drop when the opt-in rules kick in?

 

Gerald Oppenheim of the Fundraising Regulator said at the recent Fundraising and Regulatory Compliance Conference: “We appreciate that reviewing and renewing donor databases to ensure proper consents are in place will be resource intensive and could lead to a loss of income in the short to medium term… But it is unavoidable, it is a legal requirement and compliance is what all three regulators (Fundraising Regulator, Charity Commission and Information Commissioners Office) expect”.

 

So there is the potential that some income may go down in the short to medium term, but these changes should still be seen as an opportunity for small charities (which will be discussed in more detail later).

 

Making the most of the opportunities

 

Some larger charities are already taking the bull by the horns and making the most of the opportunities that opt-in presents. Leading the way is the RNLI. I think their experience will be interesting for everyone in the sector, including small charities.  

 

In October 2015, the RNLI were the first organisation to move to entirely ‘opt in’ fundraising, and from January this year they are no longer contacting people unless they have actively given their consent to do so. They thought this would cost them around £36m over 5 years. To put this in context, if they raised the same amount every year for the next five as they did in 2014, this would be a 4% drop.

 

They contacted donors three times in 2016 to ask them to opt in to receive fundraising communications. They had around 2 million records on their database but only sent this to 900,000 (I realise these numbers may be eye-watering to lots of small organisations, but the scale of their success can be replicated). They decided the other 1.1 million were not engaged and it would cost too much to contact them. Do you still send communications to people who never respond?

 

Currently, around 450,000 have opted in (around 50%, which was double their estimate). While this represent a loss of ‘donors’, how engaged were these people?

 

When they sent their first appeal to those who had opted in, not only was the response rate tripled (from around 10% to nearly 33%) but the average donation was also tripled.

Alongside this, the cost of the appeal was lower.

 

This shouldn’t be too surprising. People who have specifically agreed to hear about fundraising are obviously more engaged and probably more aware of the importance of it too.

 

Another charity moving to this model is The Children’s Society. They are reducing the number of solicitation communications and increasing engagement communications (with no direct ask). They hope this will build longer-term relationships with their donors.

 

Think of this in terms of the ‘donor pyramid’. You may have fewer supporters, but they are more engaged and with good stewardship, it may be possible to move more people up towards legacy giving, which would increase their overall lifetime value. Only time will tell if this is possible.  

 

What are the opportunities and challenges this represents?

 

Without wanting to sound too contrite, all challenges like this should be viewed as an opportunity for small charities. This is a time to be proactive, build trust from your donors and start to look longer term. It is a chance for small charities to be ahead of the curve and ready themselves for opt-in – potentially differentiating themselves from larger counterparts.

 

Small charities will almost certainly have fewer people on their databases (or spreadsheets) and are likely to be closer to these donors. It is thought that those who really know their donors and who can show they are following best practice are more likely to get supporters to opt-in. It may be less of an administrative burden for them to complete too. So in fact, small charities have an opportunity to get a higher opt-in ratio than their larger cousins.

 

So, once you have had undertaken an exercise to get all your current supporters to opt in, (also ensuring that every new supporter is opting into receiving fundraising communications), you may be having fewer conversations, and therefore need to make sure that these conversations are more meaningful.

 

Show people what their donations have actually delivered for your beneficiaries. Demonstrate the impact of their donations and the changes you have been able to make, while highlighting the ongoing need for support.

 

Finally, if you know that you are going to have a drop in income, think about how you can diversify income by looking at new areas and other opportunities. I recently wrote about how to diversify income, which might be useful.

 

A few practical things to do:

 

  • Ensure you know all of the new rules from the Fundraising Regulator, Fundraising Preference Service, Information Commissioners Office and General Data Protection Regulation (the new data protection laws due to come into effect). I realise this might be a lot, but it will help in the long term.
  • Have a system in place for checking updates (for example, the Code of Fundraising Practice is currently under review and a new version should be in place by 28 April 2017).
  • Do not share your supporters’ data.
  • Move from a short-term fundraising strategy to a long-term one.
  • Ensure you get consent to all forms of marketing (letter, e-mail, phone etc.)
  • Let people know they can opt out, but deliver them stories of your impact and the impact of their donations – it might encourage them to continue to receive your fundraising communications and this is the way to build deeper, longer-term relationships with your supporters.

 

Alex Hayesis consultancy and development manager at the Foundation for Social Improvement. They offer in-depth support through their consultancy service as well as training and advice to small charities. For more info get in touch at alex@thefsi.org

 

You may be interested to know that the Fundraising Regulator will be presenting an update on changes to data protection and consent issues at the Successful Fundraising & Donor Cultivation conference on 27 April. Tickets are available for £295.00 which includes lunch, refreshments and plenty of networking opportunities. Click here to book your place.

 

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