Nonprofit Contributor Decision-Making

Over the past two decades, nonprofit organizations have undergone drastic changes. A large influx of new nonprofits are now contending for a limited number of contributions. In the wake of this competition, a new wave of professionals have entered the field and nonprofits are being run more like for-profit businesses (Barman). Each charity relies on government grants and generosity of individual and corporate contributions.

“Nonprofits vie with each other for revenues, board members, customers, contracts and grants, donations, gifts and bequests, prestige, political power and volunteers,” (Tuckman, 176). Nonprofit managers find specific fundraising techniques to maximize income. Individual donor contributions are relatively easy to solicit and, in most markets, have great potential to raise significant funds. With new nonprofits, in competition with one another, they cannot rely on altruism alone, but need to help potential donors ‘decide’ to give to their cause (Rimel). Fundraisers need to actively search for people who have decided to give, and sway them to their charity.

Garcia and Marcuello use tax deductions as a variable in donor decision-making. While a nice tax break that is given when an individual or company donates to a charity, in the United States, the deduction is the same across the spectrum of charities. The tax deduction method only helps explain one reason of why people donate, but does not dictate to what charity they will give.

Professional fundraisers and nonprofit managers need to understand why people decide to donate before they can affect changes in donor behavior or tap into it properly to gain the most from their community. In order for the research to aid nonprofit managers, it must go further than describing why people donate; it must include why they choose the specific charity they do (Ford, Sargent and West). Many, like Frumkin and Kim, argue that there are only a couple decision-making variables that nonprofits can control. In reality, there are many reasons people choose to donate to specific organizations. Nonprofit managers need to find the most important factors and remember to focus on outcomes of trial and error methods to find their niche in the contributions market (Rimel).

Many nonprofits rely heavily on individual donations, and Ostrander argues that although donors have the final say in their decision, fundraisers can influence these donations toward their cause through marketing, popularity and general information about the cause. Research by Frumkin and Kim also concluded that marketing the charity and the mission are positively correlated with individual donations. In order to market to the right people and use proper techniques, nonprofits need to understand why people choose specific organizations over others.

With so many nonprofits after the same contributors, what causes the donors to choose one organization over another? Since many organizations have similar or even identical goals, in many cases, donors must decide between them when making a contribution. This phenomenon causes many nonprofits to differentiate themselves to gain individual donors (Barman). Frumkin and Kim talk about administrative costs and marketing as variables in this differentiation. Tinkleman goes further to find that nonprofit annual budgets are relatively stable so decision making based on administrative efficiency and history from the previous year is predictive of how funds will be spent in the current year and therefore a good basis for comparison. (Most nonprofits publish annual reports based on the previous year; easiest information for potential donors to access). Frumkin and Kim’s research finds no conclusive evidence that low overhead costs, which many nonprofits strive for, are positively correlated with individual donations.

A very important variable, relatively untouched by previous research is personal connections to specific charities. Rose-Ackerman touches on this topic indirectly and finds that people first choose a category of philanthropy, such as health care or education. Then, like other researchers, She believes professionals can utilize specific types of marketing their cause to swing donations in their direction.

Another way nonprofits can influence donations is by retaining donations from individual donors on a monthly, annual or some other basis. Mistreated and under appreciated donors will think twice before giving to the same charity. Donor relationships need proper cultivation for donors to feel a commitment to the cause (Sargent and Woodliffe). This commitment causes donors to choose the same charity every time they decide to donate. Sometimes, they feel they are an integral part of the team and obligated to refill their contribution on a regular schedule.

This commitment also comes with personal link, which is mentioned by Sargent and Woodliffe. They fail to use