A Guide to Different Types of Fundraising: Pros and Cons

A Guide to Different Types of Fundraising: Pros and Cons

Types of Fundraising

A lot has been written about the type of fundraising campaigns over the years in nonprofit circles. The sheer magnitude of tips and guidelines only makes sense seeing that nonprofits, by their nature, depend on fundraising to deliver their mission and keep their doors open.

There are many different types of fundraisers out there and no ‘one-size-fits-all’ approach. Every nonprofit organization is different.

However, in the article below, we list ten different types of fundraising methods and share some of the advantages and drawbacks of each type of fundraising.

fundraising types


Before You Get Started:

A. Understand your donors.

When you understand your donors and what matters to them, you’ll be able to connect to them in a meaningful and relevant way.

If it’s helpful, create donor profiles or donor personas to visualize your typical supporters. A donor persona is a representation of a typical donor that incorporates their demographic information, goals, passions, and their preferred communication style.

Think about your donors. Where are they located? What’s their average age? What’s the best way to reach them? How do they like to be addressed? What’s their communication style? What do they care about? What drives them and motivates them?

B. Segment your donors.

Donor segmentation is the process of categorizing donors based on characteristics such as demographics and interests. You can segment your donors according to a variety of characteristics, depending on your nonprofit’s mission and size.

For example, you can segment your donors according to how they were acquired, according to their gift size, engagement level, the frequency of giving, and more.

C. Set goals.

To successfully raise funds, your nonprofit needs to set donor acquisition goals.

A good first step to take is to pull data from the past 5 years and take a look at your fundraising results from the past. Additionally, review the goals of your organization for the next year(s), as well as any mission and vision statements.

Understand how much money you need to raise this year to progress towards your mission, balancing that out with results from the past. Make sure to set a timeline for these goals.

types of fundraising


10 Different Types of Fundraising Methods (Including Pros and Cons)


1. Direct Mail

Donations made by direct mail are usually made in the form of checks. Donors who use this method are usually older and prefer a more traditional giving method. It’s useful to know that there are still donors that feel more comfortable sending in a check over making an online donation. Direct mail can be used by anyone as long as you provide a self-addressed envelope.

Direct mail - types of fundraising

Pros

Direct mail enables nonprofits to reach donor segments that online fundraising might not reach. If your nonprofit has an older donor pool, it’s possible that you will find direct mail fundraising highly effective. This fundraising method is also particularly useful for local nonprofits who have strong ties to their community.

Direct mail also gives a lot more room to work with compared to some forms of online fundraising, hence you can give your donors a lot more information. Direct mail gives you a chance to provide in-depth information to your donors – that can’t be conveyed in a text, Tweet, Facebook ad, or even an email.

Cons

Direct mail can be expensive, especially when compared to e-mail marketing, for example. Direct mail also takes time – you have to write the letters, hone the list, track responses, remove people from your list, keep the addresses up to date.

Postal mail also doesn’t pack quite the same punch as it once did, with many donors tossing their mail aside after a cursory glance. To capture attention, you need to stand out; and to stand out – you need to pay money (e.g. for a graphic designer to design a compelling postcard).


2. Events

Fundraising through events has become increasingly popular in the nonprofit community. Whether a nonprofit is hosting a walk-a-thon, gala dinner, art exhibition, concert, silent auction, field day, or a hike-a-thon, events provide an avenue by which donors and potential donors can interact in person and learn more about the organization. Event donations are contributions that donors make during a fundraising event. Depending on the type of event, the money raised might come in different forms.

fundraising events - types of fundraising

Pros:

Donors are more likely to give if they can put names to faces. Since events are generally perceived as fun, they usually attract a large number of people. Events also help raise an organization’s visibility and brand. They help build up the mailing list and can boost online fundraising too.

Events help build camaraderie among the constituency, help organizations meet and dazzle new prospective donors, as well as deepen their relationships with key donors.

Cons:

Events are usually labor-intensive and require a lot of detailed planning. An event can also be ruined because of the weather, a competing event on the same day, a guest not showing up, and many other details over which you have little control.


3. Online Donations

“Online donations” here refer to a dedicated donation page on your website.

SSIR learned from their data analysis that the amount of individual donor revenue raised from online giving grew from 17 to 24 percent in just two years. This means that about one in every four fundraising dollars from individuals is now generated online.

Therefore, a donation page, alongside an online donation platform, is the single most important thing you need to invest in if you want to acquire donors online. Make sure the experience a prospect has on your website is user-friendly and smooth.

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Donation page made using Donorbox

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Pros

The barrier to entry is low. It’s very simple to set up a fundraising platform, as well as Facebook, Instagram, and Twitter accounts from which to drive traffic to your website.

Online funding reaches a much wider market than conventional direct mail or in-person solicitation while providing a virtually instantaneous flow of cash. Properly executed, online fundraising also is simple and easy for donors. Online giving is quicker and more convenient. A donor doesn’t have to sit down, write out a check, and put it in the mail. They can punch in their information and click a button. Online fundraising reduces costs over mail and in-person solicitation for organizations too.

Analytics tools make it possible to review statistics, data, and details so it’s easy to understand how the campaign is performing.

Pro Tip: Choose a powerful fundraising site for your nonprofit website and start accepting online donations.

Cons

The explosion in online giving campaigns and donation requests can lead to “donor fatigue.” The fees for online fundraising platforms and payment processing fees can add up quickly.

Furthermore, for online fundraising campaigns to work, they need to be imaginative, immersive, and targeted. Finally, regardless of what platform is being used to lead donors to your donation page, it’s absolutely crucial to have a large, robust, and engaged audience online if your fundraiser will have any guarantee of success. This might mean months, if not years, of curating and creating great content and building your reputation and online/social media presence. Finally, as organizations look to save time and money by encouraging online giving, they could unintentionally be recruiting donors who give less.


4. Door-to-Door Solicitation

Door-to-door fundraising has diminished over the years due to its resource-intensive nature. However, this type of fundraising technique is still successfully utilized by many organizations, especially political organizations. Door-to-door solicitation in general works best for campaigns or programs that directly affect the people being approached.

Pros

Door-to-door can be targeted in terms of audience, which can result in lower donor attrition. Door-to-door canvassing enables a one-on-one, face-to-face interaction with potential donors/constituents that’s unattainable through direct mail, e-mail, and the Internet.

Cons

Door-to-door canvassing is one of the top reasons people have a poor impression of nonprofits. Some donors cite door-to-door solicitation as intrusive. A full-time, door-to-door canvassing operation is also quite labor-intensive and requires salaried, full-time employees or very enthusiastic and educated volunteers (which is also hard to achieve).


5. Phone Solicitations

Through the years, fundraising via the telephone has been used by many organizations with varying degrees of success. Phone solicitations are donation requests done over the phone, ranging from one employee making a couple of ‘thank you’ calls to large telemarketing campaigns. Prioritize calls to those individuals most likely to give you a positive response. The more people know you and are already engaged or invested with you, the greater your likelihood of success.

Pros

Phone calls are as personal as it gets. If done well, donors will feel valued and respected. With phone solicitation, gifts are often large.

Phone solicitation can support every other type of fundraising and can boost direct mail response. It’s scalable, as the numbers can grow over time. Calling donors can increase a fundraiser’s current donor base and increase gifts, get lapsed donors back on board, improve retention, convert donors to monthly donors, and is the perfect way to welcome and say thanks plus generate feedback from donors.

Cons

Phone calls are very labor-intensive. The fundraiser also needs to be well-prepared, skilled at fundraising, enthusiastic about the organization, and willing to make the ask. Some donors are also quite averse to phone solicitation. Therefore, if fundraisers using phone solicitation are not tactful and skilled, they can do more harm than good.

Finally, not everyone who pledges money over the phone will actually deliver.


6. E-Mail Marketing

E-mail marketing has, at times, been chastised for being a thing of the past, but study after study puts email marketing as the most effective way for nonprofits to build awareness, acquire leads, raise funds, and retain current donors.

Pros

E-mail marketing services are generally free for smaller nonprofits. And even when the email list grows in size, e-mail marketing remains very cost-effective. E-mails are also easy to send. E-mail marketing tools have become so intuitive – with professionally designed templates, drag and drop features, and other easy-to-use editors – that one doesn’t need to know a line of code to use them.

Compared to other types of fundraising techniques, e-mail marketing acquires customers, supporters, donors, and volunteers faster. E-mails are also easily customized/personalized, and it’s very easy to track their effectiveness.

Cons

We are swamped by dozens of emails every day, including fundraising and advocacy emails. Therefore, even though the number of subscribers is growing, the engagement rates are dropping. This means organizations need to become increasingly skilled at capturing their readers’ attention.


7. Text-to-Give

text to give - types of fundraising

Text donations are donations that donors can make via their mobile phones. Usually, donors text a keyword and/or an amount to a dedicated number. They are then usually sent the link to the organization’s mobile-responsive donation page. Once a donor fills out their info on this form, they never have to fill it in again.

There are also text-to-give platforms that don’t require filling in a form (where donors can confirm the donation by simply texting back “yes”).

Donorbox now offers a robust text to give feature to help nonprofits raise more funds with mobile-giving. See how it makes mobile-giving seamless for donors.

text-to-give

Pros

Text-to-give is easy and convenient. Nearly everyone has a smartphone and uses it on a daily, if not hourly, basis. Donations by text are somewhat like impulse purchases; they involve little to no research on the part of the donor, which means that nonprofits don’t have to capture donors’ attention for very long. The speed and simplicity this type of fundraising provide remove most of the hoops the donors usually have to jump through, so they are less likely to abandon the process.

Cons

Software, licensing, and transaction fees can potentially add up to 5-10% of the total donations received. It can sometimes also take a while until an organization receives the funds. There’s no built-in option for recurring gifts. Additionally, there’s often a cap on all donations; some providers will only process donations as low as $5 and as high as $10.

There’s no system for capturing donor data to help you keep building on the relationships initiated through text-to-give. With text-to-give, the organization is usually left with a faceless phone number and donation.


8. Crowdfunding

crowdfunding

Crowdfunding is all about many individuals each giving a (usually) small donation — $5, $10, $50, $100. It has become a popular type of fundraising with corporate organizations and nonprofits alike.

To get the most out of donation-based crowdfunding, post regular updates, use compelling images and videos, offer incentives, share via e-mail, and on social media. Make sure to tell a story – a story is what fuels a crowdfunding campaign.

Pros

Crowdfunding often helps an organization promote its campaign and its brand. It can help get a nonprofit known to potential donors that otherwise would not have known about the organization. Crowdfunding allows organizations to leverage many small donations to raise a larger total amount. Also, a lot less time and money goes into generating donations and connecting with donors when compared to traditional fundraising.

Cons

If an organization doesn’t already have a large audience, it can take a considerable amount of time to market the campaign. Constant communication with donors is needed, sharing progress updates and major and minor setbacks. Crowdfunding appeals are also very time-consuming when done properly. Additionally, although the setup is free, crowdfunding sites charge fees for the privilege of collecting donations through their site.

Finally, due to its growth, crowdfunding is a saturated market.


9. Partnerships/Sponsorships/Grants

Partnerships have always been a staple of nonprofit fundraising. Between matching gift programs, grants, and sponsorships, major donations can come from companies partnering with nonprofits. And the relationship is mutually beneficial. Nonprofits benefit from the resources companies have to offer, and companies benefit from being associated with a charitable cause.

Pros

Grants, sponsorships, and endowments can often amount to incredible sums of money. This allows for the execution of major projects that other types of fundraising might not have been able to fund. A single grant could secure the foreseeable future of your nonprofit activities.

Furthermore, partnering with like-minded organizations can increase your brand awareness.

Cons

Sometimes, grant-giving organizations can be difficult to deal with, due to their inherent bureaucratic nature. This type of fundraising might require you to invest a lot of time and energy. For example, it takes time to develop winning grant-writing skills, it takes time to write a winning application, and then it can take time for you to gain access to the funds.

Some organizations find this type of fundraising too cumbersome and restrictive seeing that grants and sponsorships often come with ‘strings attached’. These conditions apply to things like how exactly you can use the money and also to specific reporting requirements.

Here’s a detailed guide on how to find grants for your nonprofit.


10. Peer-to-Peer Fundraising

Peer-to-peer fundraising is a crowdfunding method that utilizes an organization’s donors’ existing networks. These types of fundraisers encourage supporters to reach out to their peers (friends, co-workers, and family members) and ask them to donate.

With peer-to-peer fundraising, every individual supporter/fundraiser sets up a personal fundraising page where they accept donations. On these pages, fundraisers lend their own voice to the nonprofit’s mission, sharing with their networks why that specific cause matters to them. These donations are ultimately received by the nonprofit.

Pros

Peer-to-peer fundraising allows nonprofits to reach varying pools of supporters that would have otherwise probably been inaccessible.

It’s an efficient donor acquisition strategy because it utilizes already existing donor bases and their networks. It’s also cost-effective since supporters fundraise on behalf of the organization.

Peer-to-peer fundraising helps build social proof. We are more likely to trust the recommendations of friends or family members. This can help nonprofits acquire more donors and acquire them much faster.

Cons

One of the major drawbacks of peer-to-peer fundraising is the effort it takes to teach the existing donors/fundraisers. Not only do they need to know how to use the fundraising platform, but they need to know how to effectively raise funds – even if they’re raising from their personal networks. It can also be challenging to clearly articulate and transmit the nonprofit’s mission, vision, and values to dozens of individuals so that they can continue sharing it in the same way.

There is also the time it will take to address concerns or questions and inspire and motivate the fundraisers to go out there and solicit for donations.

ways to raise funds


After: What to Do

A. Build relationships with your donors.

Building relationships with donors is the basic tenant of donor retention, regardless of which type(s) of fundraising you choose.

Do your best to understand your donors, prospective, and current. Becoming a donor-centric organization is a pivotal step your nonprofit needs to take in order to boost fundraising.

Here are 9 ways to build strong donor relationships.

B. Measure and evaluate.

It’s incredibly important to measure and evaluate the success of your fundraising strategies and activities. As you decide different types of fundraising and strategies you’ll put into practice, create metrics (KPIs) related to your goals. These metrics should be key indicators of goal achievement and can be either quantitative, qualitative, or both.

Based on the timeline you created when you created your goals, consistently measure and evaluate your progress. Doing this tells you whether your strategies are the right ones (having in mind your goals).


Conclusion

The process of raising funds can be very challenging and certainly requires nonprofit organizations to use a variety of methods and unrelenting hard work to be successful, especially when the pressure is high and deadlines tight.

With so many different types of fundraising available, it becomes even harder to discern the right fundraising strategy and funding model.

While opinion varies as to what’s the “ideal” nonprofit funding model, utilizing several different types of fundraising is generally a good practice. To find yours, however, it will take trial and error!

Remember that, to acquire and retain donors online, you need to ensure their donations are processed smoothly and efficiently – so don’t forget about a donation management system!

If you want to learn more about fundraising, visit the Donorbox Nonprofit Blog for more tips and resources.

Wagisha Jha is the content overseer and writer at Donorbox. She is a marketer specializing in early to mid-stage startup growth. In her free time, she can be found writing, caring for animals, or indulging in fine arts. Say hello to her on Linkedin or Instagram.

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