Despite the fact that strategic philanthropy has established itself as a permanent part of the corporate donor/nonprofit landscape, a large percentage of charitable and cause organizations have yet to realize how to maximize its revenue potential, and instead are continuing to give away valuable marketing benefits.

That fact is made clear in the findings from the second annual IEG SR Strategic Philanthropy Study conducted last month. Most startlingly, the survey revealed that eight out of 10 nonprofits continued to give benefits traditionally reserved for sponsors to contributors who requested them without attempting to recoup the value of those benefits (see Chart 6).

In their attempt to appease donors, those properties fail to realize the jeopardy into which they are putting their sponsorship programs. By not accounting for the value of their marketing rights and benefits, not to mention the time and resources devoted to servicing them, nonprofits risk not being able to sell sponsorship at all.

This will happen when current sponsors realize that other corporations are receiving the same benefits and servicing in return for restricted donations that are not as valuable to the nonprofit as a sponsor’s unrestricted funding, or when potential sponsors recognize that the development department often delivers benefits for a lower price than does the sponsorship or marketing department.

When donors that want to be strategically philanthropic are asked to make a fair trade, either through increased contribution amounts or, more typically, the allocation of additional marketing dollars that promote both the cause and the company’s support, the practice can be a boon to nonprofits. But as it stands, too many nonprofits are allowing it to become a way for corporations to get something for nothing.

Most Donors Thinking Strategically
The survey asked nonprofit managers about their corporate donors’ approach to strategic philanthropy and about their response to growing interest from contributors in receiving marketing benefits.

As in last year’s inaugural survey, more than half (54 percent) of the 98 responding nonprofit fundraising executives said that the majority of their business donors sought marketing or sponsorship benefits (see Chart 1).

More than a third of respondents (36 percent) said that at least seven out of every 10 donors wanted benefits usually reserved for companies spending money from marketing or promotional budgets. Fourteen percent reported than none of their contributors had yet jumped on the strategic philanthropy bandwagon.

However, the overall movement to strategic giving continues to gain momentum, as just about half (49 percent) of respondents reported that the past year was the time period when they saw the greatest rise in donor interest in marketing benefits (see Chart 2).

Donors Seek Higher Visibility Of Their Connection To Nonprofits
Nonprofits reported a shift in the types of benefits that corporate donors sought compared to the ’04 survey.

Although the top three benefits requested remained the same–credit on collateral materials beyond standard donor recognition; the right to promote the association with the nonprofit in the company’s marketing and promotions; and category exclusivity (see Chart 3)–sponsors showed more interest in receiving title to a proprietary program (47 percent in ’05 compared to 40 percent in ’04) and in additional tickets and hospitality opportunities (41 percent compared to 30 percent).

Conversely, donors were less interested this year in the right to conduct a cause marketing campaign (36 percent compared to 41 percent last year).

Causes Proactively Pitch Benefits To Donors
Nonprofits are keenly aware that most donors are seeking nontraditional recognition and thus nine out of 10 make benefits part of their initial conversations with prospective benefactors, according to the survey (see Chart 4).

The types of benefits most often included in the pitch to new donors align pretty well with those that donors seek (see Chart 5). In sharp contrast to the ’04 survey, 70 percent of nonprofits said they include additional tickets and hospitality benefits in initial conversations, an increase from just 46 percent who did so last year.

Part of the explanation for nonprofits’ failure to seek compensation from donors for marketing benefits may lie with the fact that uncertainty over how to value those benefits remains the primary challenge for respondents (see Chart 7).

It also is noteworthy that despite the growth of strategic philanthropy, significantly more survey participants this year said that colleagues within their organizations did not understand the need to provide benefits to donors (55 percent vs. 44 percent in ’04).

Finally, the survey revealed that no one department within nonprofits had yet taken the lead role in being responsible for strategic philanthropy, with 36 percent of organizations handling it out of marketing, 35 percent out of development, 11 percent out of sponsorship and 19 percent from some other area (see Chart 8).