The Evolution of Impact Philanthropy

For years, philanthropy was defined as the donation of money to nonprofit organizations. However, that trend has changed in today’s era as philanthropy evolves to the current giving platform and less industry-driven. 

This type of giving is called impact philanthropy and it focuses on transforming the social wellbeing of others through generosity. This definition acknowledges that philanthropy has expanded and democratized who is called a philanthropist and forces nonprofit organizations to consider why they integrate certain practices and how they do it on a larger systemic level. 

 Today’s philanthropy focuses on inclusivity, diversity, transparency and the demonstration of impact to secure their position. The average philanthropists of today also don’t want to be burdened with individuals soliciting them to meet KPIs. Instead, donors prefer authentic storytellers. They want to hear a story that they can empathize and relate to in some way. But within that story, they want to feel as if they are making a concrete impact on those beneficiaries. In general, people are inspired when they acknowledge the good they want to do and the person they want to become. The transformational experience of giving allows us to better define ourselves and our values. 

As these trends reshape the philanthropy sector, it remains to be seen when nonprofit organizations will fully integrate this way of operating. Perhaps it’s time for most nonprofits to redefine the mission, vision and values and start exploring innovative technologies. Decentralizing strategies for administration, communications and marketing could be a game-changer. Cultural change takes time, but the future of philanthropy is largely centered around community-driven impact initiatives. Nonprofits that wish to remain in the sector will need to evolve with impact philanthropy or struggle to achieve results with antiquated practices.

From Fundraising Pyramid to Community Funnel
The nonprofit sector has used the fundraising pyramid for decades as the standard to group donors. While it’s meant to represent philanthropy communities, it misrepresents how the philanthropic process works. But new evolutionary philanthropy practices challenge us to reimagine this standard.

Traditionally, it’s thought that a first-time donor will climb the fundraising pyramid to become a loyal donor or major giver. If the organization has done consistently well, it’s anticipated that the donor becomes a planned or primary giver. The idealistic setup is based on assumptions that donors will stay loyal to the nonprofit after causally donating money once. 

The more modern philanthropic approach is to go the route of least resistance. This is achieved by flipping the pyramid on its head and creating a community funnel system, which harnesses growth and more accurate identification for each stage of donor participation.

Engagement

The first step in the new model is engagement, the most essential layer an organization should focus on. These are the philanthropists who find themselves engaged or captivated by the stories organizations share through various mediums. This level sets the stage for the experience the organization provides and is a starting point for potential donors in the community. If the  engagement round is not successful, the bottom of the funnel shrinks over time.

The more relevant and customized organizations make their stories, the more likely donors will be interested in creating impact. Allowing community members to control their experiences indicates they may see higher engagement rates with their promoted stories. It’s a great catalyst for newer but engaged philanthropists to progress to the next stage of philanthropy: participation.

Participation
In this stage, community members have taken some actionable movement toward participating in nonprofit work, not just monetary giving. They may have volunteered time or committed social capital to the organization by sharing and endorsing stories. These locals are the voices that community activists hear and participants use their voices to excite the engagement of other potential philanthropists in the previous stage. If these participants feel their contributions are appreciated, they are more likely to progress through the funnel to make a gift. 

In this layer, nonprofits should allow the participant or storyteller to share their experiences and build a connection with them. If they emphasize participation and growing a foundational community rather than being concerned about the size of the donor’s gift. It’s especially important that nonprofits allow beneficiaries to discuss their own stories with diverse communities, so the mission’s message can aim for higher conversion rates from this donor stage to the next.

First-Time Donor

Traditionally called One-Time Gift, this layer emphasizes navigating donors through the philanthropy pipeline to effective stewardship. Similar to the retail world, if a customer donates three times within 24 months, nonprofits should consider moving these philanthropists to this phase. It’s important that donors are stewarded to encourage more giving. Thank you messages, concrete acknowledgement and demonstration of their gifts’ impact, along with fiscal transparency, help bolster this relationship. This phase will ultimately determine if the donor becomes a Loyal donor.

Loyal Donor

Loyal Donors often remain in this phase for the longest time before maturing to make a larger gift. These philanthropists expect nonprofit communications to be personalized and require an omnichannel approach to marketing and stewardship. It’s great for nonprofits to remind these donors of their gift’s impact without repetitive messaging.  

In this realm, nonprofits must consider how they can give loyal donors a glimpse into the intimate interactions that major gift donors experience. This means reviewing and refining communications through various channels and tailoring it to these individuals. Nonprofits regularly conduct real-time wealth screenings to explore who the top prospects are from these groups to help refine their efforts.

Major Gift-Giving

This area focuses heavily on relationships. The authenticity of an organization’s rep will determine how much they influence the frequency and size of the gifts at this stage. Demonstrating faltheir impact, fiscal transparency and acknowledgment of their desire helps ensure that major gift donors give back each year. To increase impact, it’s important that nonprofits leverage donor influence to influence their peers to donate too. A lifetime of major gifts eventually leads to the principle or planned gift stage that memorializes a donor’s philanthropic legacy.

From a high-level perspective, this new funnel system that helps evolve impact philanthropy is a drastic improvement to the traditional fundraising pyramid, becoming more focused and granular with each donor phase and its sublayers. Integrating each layer requires unique solicitation and stewardship strategies. By carefully considering the local philanthropists at each donor stage, nonprofits can build upon the experience that drives sustainable ROI and philanthropic engagement in the long-term and improves donor and beneficiary lives across diverse communities.