Nonprofit Marketing, Fundraising & Development – What’s The Difference?

Nonprofit Marketing, Fundraising & Development – What’s The Difference? is nonprofit management veteran Hall Powell’s take on important nuances when raising charitable gifts. Here’s what Hall has to share:

Daughter: “Daddy, what do you do?”

Father: “I am a Chief Development Officer”

Daughter: “What do you do, Daddy?”

Father: “Well, honey, I help people’s dreams and desires come true.”

Daughter: “Bobby said you are a fundraiser. What’s a fundraiser?”

Father: “Well, your brother is somewhat right….”

Daughter: “What do you mean?”

Father: “As a development officer I do fundraising…but it is so much more than that”

Daughter: “Like what…?”

Father: “Uh… Sweetheart, is dinner ready yet!”

Wife: “It’s only 3 o’clock!”

Marketing, Fundraising & Development – What’s The Difference?

Oh my! The “dad” above is in trouble. The little dialogue is meant to be humorous, but it does bespeak of the need to differentiate between development, marketing, and fundraising. While most people use the terms interchangeably, they are three very distinct disciplines, but all three are critical, essential for institutional development. Let’s take a look:

Marketing

Several years ago, our consulting firm was invited to make a presentation to a nonprofit hospital in Kentucky. I was representing our company and met with the Vice President of Marketing to discuss what it would take to establish a fundraising program for the large community hospital. They had never gone to the community for financial support, but found themselves in need of additional income/revenue to offset the reduced funding from the government and insurance companies caused by the government’s establishment, in the mid-1980s, of Diagnosis Related Group (DRG). DRG became the payment basis for Medicare’s hospital reimbursement system. All nonprofit hospitals in America were impacted by it. Patient revenue dropped considerably, resulting in revenue shortfalls and the need for outside funding (philanthropy included). As a result, many nonprofit hospitals began adding programs and staff to implement “fundraising.”

More and more hospitals began establishing supporting nonprofit organizations to be the fundraising arm of the hospital, primarily for the purpose of singularly- focused fundraising, and the non-mixing of patient revenue: keeping donor funds separate from hospital revenue, and protecting the intent of the donor-designated funding. They called them Foundations, or Endowments. These separate, supporting fundraising organizations were given a special IRS code 509 (a) (1) designating the hospital foundation as exclusively being a private foundation supporting a 501 (c) (3) hospital. The foundation could exist on its own, it must support another nonprofit organization. Ergo, our hospital in Kentucky.

The CEO of our prospective new client hospital desired to place “fundraising” under the authority of the Vice President of Marketing. After all, marketing is fundraising, and fundraising is marketing. Right? WRONG! He wanted someone on the marketing staff be assigned the task of fundraising, as a function of the marketing department. I had been the CEO of two hospital foundations, both of which I was the founding CEO, and knew that the best way for the hospital to effectively raise new donor revenue for the hospital would be through a separate supporting foundation of the hospital. The foundation would build a development program (more about that later) which would provide a comprehensive fundraising program in partnership with the marketing department. Here’s how that would work:

Wikipedia defines Health Marketing as “…an approach to public health promotion that applies traditional marketing principles and theories alongside science-based strategies to protect and promote the health of diverse populations.

The above definition has nothing to do with fundraising or development, other than it is somewhat like providing promotional information that could be used in a fundraiser’s Case for Support, which is a component of fundraising and/or a development program.

So many nonprofit CEOs perceive fundraising as marketing when it is not. There are some similarities in strategies, but a great difference in purpose. Fundraising is both an art and a science. A marketing department sending out direct mail appeals for charitable funds is not fundraising, it is soliciting, “tin-cupping.”  For a marketing department to put on a special event to raise money for a nonprofit cause is simply selling something to someone who wants something from the seller e.g., “buying” a place in a charitable golf tournament for the purpose of having fun and receiving “perks” while having a sense of “for a good cause.” That is not a bad transaction, it is just a solicitation through marketing. Marketing departments and /or marketers can solicit funds, but the solicitation is not the same as fundraising activity as a component strategy of an overall development plan. Permit me to explain and differentiate.

Fundraising

Fundraising, in most nonprofit organizations, especially the smaller ones, is all about establishing “giving activities to get a gift.” The focus is on providing annual giving revenue via various fundraising strategies. Or, fundraising could just be for trying to get funds for an immediate, one-time need. For instance, an annual giving program could use direct mail, special events, and grant seeking as tactics for gift solicitations from donors and potential donors without having to have personal, one-to-one contact with the givers. Fundraising staff may or may not need the support of marketing in order to successfully solicit funding. On the other hand, marketing departments or staff members might not need a fundraising person to “make an ask” as apart of their marketing strategy to promote and solicit funds. For instance: In putting on a fundraising special event, it is typical that Marketing will promote the event in various ways and sell tickets to people who want to participate. Direct mail fundraising usually uses a return card for giving, or an appeal to “please give”, along with how to give instructions. No personal contact required.

Note: So many of nonprofit organizations cling to special events, direct mail, and grant seeking as the preferred way to raise funds. Why? Because they do not have or want to get face-to-face with potential or current donors to make an ask (solicit). Most of the professional fundraisers have not been trained on the art of making the ask. Granted, some “fundraisers” may have prior experience in ‘making the sale,” or are naturally gifted in asking people for a gift or support, but those people are rare and without training in the nonprofit sector. By not having the skills or desire to “make the ask,” fundraising professionals do not afford their organizations the potential funding that is available for them.

Fundraising is primarily about generating philanthropic revenue, with the focus on being how to meet current needs, not about needs for the future. To do this, nonprofit organizations will hire a “fundraiser.” Who is a fundraiser? I was told about another large hospital in Florida, like the one in Kentucky I discussed earlier, that wanted to start a fundraising program for all the same reasons as I described previously. So, the challenge was:  How do we find a fundraiser? In this case, the Florida hospital decided that the best fundraiser would have to be a salesperson or someone that knew everybody in the community. So, they hired a retired minister, assuming he would use his influence to get people and businesses to give money to the hospital. It didn’t work out well. After he ran out of friends to “hit on,” he didn’t know what to do. It was a temporary “fix,” not a permanent solution.

Well, what makes a good “fundraiser? What is this “development” thing?

Development

Development In the nonprofit sector is more than marketing and fundraising.

Development, as it relates to a successful, ongoing process of developing and enhancing long-term relationships with potential donors must begin with the understanding that the underlying principle of successful, long-term donor relationships is the personal and institutional conviction that the best philanthropic gift is the one that meets the need of the donor to give, not the need of the institutional recipient to have.

By creating an environment of donor trust through earning the right to make the ask as the result of building lasting, long-term relationships with your donors, you make great strides in ensuring future and lasting income for your institution. Whereas, “fundraising” focuses on the “now” with no assurance of future gifts.

If you create and maintain relationships with your donors, made on the basis of trust, it will increase the probability that they will continue to support you organization personally and with their giving.

Development is about really knowing your donors, what their interests are, and what makes them feel good about their giving. For development to be successful, providing long-term relationships with donors, there must be comprehensive business model that includes organizational development of knowing who you are, what you want to do, and how to get there; and once there, how to sustain it. That is what I found when I was introduced to Major Gift Ramp Up through NANOE (National Association of Nonprofit Organizations and Executives). Their development model includes thirteen steps of ordering a strong, well-managed organization supported by a dynamic cultivation plan to discover and involve prospective donors in a long-term relationship of generous giving, assuring the success of the organization’s mission and purpose. The plan designed to focus cultivation strategies primarily on individual giving, augmented by corporate and foundation giving, creates a base of solid, faithful individual donors, many of whom are capable of making “major gifts.”

Development helps to ensure the long-term financial health and stability of an organization while also championing the organization’s culture and purpose. Development helps to attract donors whose personal values are in harmony with the organization’s values, thereby creating symbiotic organizational and donor relationships.  This result is long-lasting relationships with the donor and the institution.

In a very real sense, the development officer for an institution/organization becomes the “honest broker” between the organization and the donor, and the organization and the community in which it serves. What do I mean? The development professional must focus on the institution’s commitment to its purpose (mission) and impact. This means that for a nonprofit organization, that requires philanthropy as the sole or important component of its annual revenue, must build a culture of philanthropy into the entire organization while developing long-term relationships with prospective donors who subscribe to the organization’s purpose, and perceive it as the desired destination for their largesse. The honest broker brings the two participants in the partnership together.

Summary

Body, Soul and Spirit. As human beings we are made up of these three realities: We have a body that houses a soul, and given life by its spirit. Please allow this old development/fundraiser to make a wild analogy: In a very real sense, in the “person” of a nonprofit organization, development is a type of “body.’ It represents the organizational structure in which within is a need to exist in order to ensure that the purpose of the organization will be fulfilled. Marketing is similar to the soul inasmuch as it presents to the world what we want it to see. Like a human soul it (marketing) has emotion, a mind, a will, and a perceived purpose. Marketing makes the organization known, expresses its thought to prospective customers, clients, etc. Like the human soul, marketing is how the body (organization) gets attention, is made known. Once the body is made known via marketing, the spirit, fundraising, provides life for the body. As my friend Jimmy LaRose says, “Money is oxygen.” What he means is that without money, the nonprofit won’t live; not well, anyway. Fundraising provides the positive results of development and marketing (“body and soul”) by bringing life in the form of donors. The point being: We need all three components to be complete for the purpose of our being.

Father: Yes, my sweet girl, I am a development executive. I help to develop successful comprehensive fundraising programs with all the combined assets, strategies, activities of institutional development, marketing and fundraising combined, and backed by a sound, proven plan of success. And in doing this, institutions achieve their goals and donors satisfy their need to give. And you, young lady, have a better world in which to grow up.

Daughter: “I love you daddy”

Father: “I love you too”

Marketing, Fundraising & Development – What’s The Difference? was first posted at NANOE News

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Henry Hall Powell, Jr. is an ordained Christian minister and has served as an expository preacher and teacher since 1974. His book, The Missing Link, reflects his ongoing commitment to provide insight into the practical application of biblical truths for those who seek true spirituality. Mr. Powell received an A.B. Degree in Philosophy and Religion from Guilford College, attended Columbia Graduate School of Bible and Theology, and earned a M.B.A. degree from Winthrop University. He lives with his wife Melinda in Kure Beach, North Carolina and they have three married daughters and eight grandchildren. Hall also serves as a veteran fundraiser as Senior Vice-President of Development Systems International

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