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Transactional vs. Transformational Giving

Develop Donors Who Passionately Share Their Resources to Advance Your Mission

Non-profit organizations and their donors have unwittingly created a culture of “transactional giving.” Today’s approach to fundraising is formulaic: offer a simple proposition describing what a specific donation will achieve.

  • $30 provides three laying hens for a family.
  • $38 per month sponsors a child living in poverty.
  • $100 rescues a child from human trafficking.

This style of fundraising has become industry standard because donors consistently respond to appeals that have a well-defined personal or altruistic benefit. But at what cost?

 

Transactional Giving:  making a charitable contribution in response to a proposed benefit or result.

 

The 2018 Fundraising Effectiveness Survey Report of the Association of Fundraising Professionals calculates an average donor retention rate of 45.5%. According to the report, “Every $100 gained in 2017 was offset by $96 in losses through gift attrition.” This crisis in donor attrition is a direct result of fundraising models that elevate the giving transaction over the donor relationship.

Don’t get me wrong; the transactional approach has a legitimate place in fundraising. The traditional ask is quick, simple, and reasonably successful. It is ideal for direct marketing campaigns. Transactional appeals are also good tools for increasing general awareness, and have the additional benefit of creating warm leads for further cultivation. Unfortunately, the transactional approach has seeped into major donor fundraising.

Because the culture of “transactional giving” has become pervasive, some of the most experienced fundraisers are convinced that high net worth donors prefer transactional investments. So, the method remains the same; only the size of the ask changes.

  • $2,500 grants the wish of a terminally ill child.
  • $50,000 adds a vital piece of equipment to a hospital.
  • $2.5 million provides naming rights to a science building.

Consider a well-known organization that provides high-end retreats to the families of children suffering from cancer. This twenty-year-old charity uses the transactional model to raise $5 million from individual donors and corporate sponsors. The ask is straightforward: $10,000 provides a life-changing retreat. Although the organization has more than 50,000 donors in its database, the vast majority are one-time givers. In addition to struggling with donor retention hovering around 45%, the charity rarely receives major gifts. Fewer than ten people have provided more than $50,000 in lifetime giving. Unless something changes, this organization will never receive a high-capacity gift that could substantially alter the trajectory of its work. (This information has been modified to protect the identity of this organization.)

While these larger transactional asks carry some of the same benefits as lower level proposals, this approach ultimately fails to bond the donor to the organization. Transactional appeals prevent the donor from seeing the organization’s vision and appreciating the long-term impact of partnership. The result: poor engagement, limited giving, and low retention.

Based on years of experience and research, we believe high net worth philanthropists do not prefer transactional appeals. On the contrary, they are eager to become long-term partners with organizations to change the world in dramatic and extraordinary ways. Our approach to fundraising, therefore, begins with a fundamental shift in perspective. Unlike the transactional approach, transformational giving cultivates an ongoing relationship between a non-profit organization and a donor who passionately shares his/her resources to support the organization’s mission.

 

Transformational Giving:  an ongoing relationship between a non-profit organization and a donor who passionately shares his/her resources to advance a shared mission.

 

Developing this type of donor relationship requires an organization to (1) build the complete case – emotional, intellectual, and transformational, (2) build bridges of trust between the organization and the donor, and (3) build a community of support – a new tribe in which your donors share a common purpose.  By using this approach in Westfall Gold’s major donor events, we have seen organizations accelerate and deepen donor relationships resulting in 70% gift participation and a $115,000 average gift, virtually all of which are unrestricted.

Transformational giving offers significant benefits for both the non-profit organization and the donor. The organization receives greater, more sustainable funding at a much better return on investment, and the donor receives greater satisfaction that his/her investments are transforming the world in positive ways. The result of cultivating a long-term philanthropic relationship is a donor who passionately shares his/her resources—assets and time, reputation, and network—and becomes an active advocate for your organization. This transformational donor will identify with the organization’s mission, believe in its impact, and trust its leadership.

 

Insights for Westfall Gold Clients

A major donor weekend is designed to move your donors from transactional to transformational giving. Every aspect of the event is purposefully crafted to deliver a compelling case through scripts, videos and testimonies, build trust with your donors, and create community with and among donors. Intentionally developing transformational donors requires a strategic approach and investment of time. Bringing a group of high-capacity donors together will accelerate and deepen your relationship with them. Most importantly, it will set the stage for the on-going relationship that can result in a significant life-time giving and engagement with your mission.

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About Robert Yi

Robert Yi | President and Chief Operating Officer

Robert leads strategic initiatives and day-to-day operations through the talented members of Westfall Gold. Previously, Robert was the Chief Operating Officer and General Counsel of ECCU, a $3.5 billion financial institution serving churches and nonprofit organizations. He also taught operations and strategy courses as an adjunct professor at Biola’s Crowell School of Business. Robert holds degrees from UC Berkeley, Loyola Law School, and the Wharton School. Currently, Robert serves on the boards/advisory boards of International Sanctuary, Town and Country Manor, Biola’s Startup Competition and FUSION Leaders.

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