Crowdfunding: The Next Method of Traditional Fundraising

Almost anything we do today can be done online—from filing taxes using our laptops to paying for coffee with our smartphones. Fundraising is no exception, and crowdfunding is an increasingly popular way to do it.

What are the differences between crowdfunding and traditional methods of nonprofit fundraising? First, let’s look at their similarities.

Or rather, one major similarity: Both require healthy amounts of time to plan and execute. Let’s not let crowdfunding’s relatively immediate results fool us into thinking that little to no preparation is necessary; it takes a surprising amount of effort to make something appear effortless.

Having said that, you’ll probably spend less time executing a crowdfunding campaign than you would a traditional fundraising campaign. Now let’s compare the two in a bit more detail.

What is Traditional Fundraising?

There are a number of varieties and sources of traditional fundraising, including grant writing; major donors; planned to give; benefit events; direct marketing; and mass media marketing. All of the above happens mostly, if not entirely, offline.

These forms of fundraising require extensive investments of time, especially to build & to cultivate relationships with the high net-worth individual or corporate donors. For some of these methods, namely grantwriting and planned giving, a fair amount of expertise is also required.

So it’s safe to consider most of the above types of traditional fundraising as part of your long-term development strategy. Let’s evaluate direct marketing and mass marketing as the more viable options for a short-term campaign.

Costs of Mass Marketing

Right off the bat, we can rule out mass media marketing (advertising) for smaller nonprofit organizations because of cost:

• Magazine: $500-$20,000 (front cover of a national magazine: $500,000!)
• Newspaper: $200-$20,000
• Radio: Production – $300-$1000; Air time – $3-$500
• Television (local only): Production – $200-$1500; Air time – $200-$1500

Keep in mind that the costs above for print media don’t include the production costs.

Costs of Direct Marketing

That leaves us with direct marketing, particularly direct mail marketing. Let’s look at the monetary costs related to direct mail marketing:

• Mailing lists: If you’re reaching out to folks who aren’t already your supporters, you’ll need a mailing list. Depending on how tailored your target demographic is, the mailing list can range in cost from $0.03-$0.05 per name to $1.00 per name, according to Cathy Crone of SourceLink.

• Concept & Design: If you don’t have an in-house writer and a graphic designer, you’d have to hire one. Or you could DIY if you don’t have either on your staff, but we believe that investing in quality design is worthwhile:

From Colin Harman

• Printing: This will depend on the kind of mailing you send out. Postcards could set you back $0.15-$0.30 each; letters may cost $0.18-$0.50 each. Because you’re calling the recipient to act (read: donate), you’ll have to include materials, like a reply card with which they can give. The higher the volume of your mailing, the lower the cost per piece.

• Postage: This will also vary by volume and the kind of mailing you send out. This might set you back $0.28-$1.00 per piece. Then there are other options like “presorting” to consider. And if you’re including a reply card to accompany the donation, you’ll have to include an envelope, which means you’ll also have to decide if you want to prepay for postage. (And you should probably decide “yes”—would-be donors might be less inclined to give all because they don’t keep postage stamps on hand. And that would be such a shame.)

The U.S. Postal Service also lists costs related to a direct mail marketing campaign.

There’s also the amount of time consumed, and time equals money. You’ll need lead time for your writer and designer to conceive of and create the content. Then, after everything’s been printed and mailed out, you have to wait for the responses to roll in. If you receive checks, you’ll have to deposit them and wait for them to post. If they give you credit/debit card information, you’ll have to input that information.

The ROI of a direct mail marketing campaign will depend on your campaign’s scope and goals. Sometimes, direct mail marketing is appropriate and yields good ROI.

A Better Solution: Nonprofit Crowdfunding

But, we’d like to suggest that crowdfunding will soon become a staple in fundraising. Aside from our slight bias (we are an online fundraising platform after all), we find it yields comparable or higher ROI than some traditional forms of fundraising.

Crowdfunding—the marketing and the donating—happens mostly online. Many crowdfunding campaigns will center around an activity (e.g., running a marathon) but the call to action (namely, to give) will take place online.

By keeping communications online, you save some time and money that would’ve been allocated toward production and postage. With social media and email, it’s also much easier for your supporters to engage with and spread the word about your organization and the campaign.

Studies show that word-of-mouth marketing, which includes online and offline conversations, is correlated with the amplified impact of marketing efforts and increased sales. This applies just as well to the nonprofit world as it does in business.

Crowdfunding harnesses the power of word of mouth, which played a large role in nonprofits like Project Renewal raising $77,000 on Giving Tuesday, and in one man raising $8,000 in one day.

Crowdfunding is also relatively inexpensive.

• Social media is free; and most social media management platforms at their basic level are also free (paying a monthly subscription gets you more features).
• Email marketing platforms range in pricing. MailChimp is free if you have up to 2,000 subscribers and send up to 12,000 emails a month (you could send 6 emails in a month to all 2,000 subscribers); Emma costs $36 a month (that’s with a 20% nonprofit discount) for up to 2,500 subscribers and you can send all the emails you want. You may already use one of these or another email marketing platform as part of your general communications; so in a sense, this is also a form of prepaid postage.
• Online fundraising platforms range in pricing, too. Some charge a monthly subscription fee; most, if not all, charge a nominal fee per transaction. With these platforms, like CauseVox, you can customize fundraising pages to match your organization’s existing online presence.

One thing that crowdfunding via CauseVox offers that another online platform doesn’t (and probably what direct mail won’t, at least not as easily): new donor information. Crowdfunding, through its leverage of social media, not only helps you raise funds but expand your base of supporters.

We’re not saying to forget about conventional forms of fundraising, but that crowdfunding is well worth considering. Bottom line: Crowdfunding isn’t free, but it is great at unleashing the internet’s potential to reach and empower more supporters more quickly — and to do so more easily and more cost-effectively.

As you figure out how to incorporate crowdfunding into your overall development and fundraising strategy, try CauseVox!