14 November 2019
NFPS (Not For Profit Sector), also known as the Community Sector, Third Sector, and Social Sector consists of a variety of organisations which engage in a variety of activities, generally trying to improve health and education, social welfare, or religion. Types include (but are not limited to) hospitals and community services, religious groups, counselling services, animal protection services, traditional charities, and social enterprises.
Where’s the money going (and why)?
Over the past two or three years, tax deductible donation claims dropped 7.2%, from $3.1 billion to $2.9 billion. The top three causes favoured by Australians appear to be:
- Health related causes
and the top three reasons for donating are:
- “it’s a good cause” (38.5%)
- “I respect the work they do” (20.5%)
- “I have sympathy for those they’re helping” (13.6%)
While the overall preference is for traditional charities over social enterprises (54% vs 15% respectively), the trend is towards the latter, as 26% of Generation Z prefers to give to social enterprise over charities, as opposed to only 6% of older donors.
Wait – what’s the difference between a charity and a social enterprise?
A charity must meet strict legal outlines as regulated by the Charities Act 2013, and have a specified ‘charitable purpose’ that serves the public benefit. Charities can apply for Deductible Gift Recipient status from the ATO (which means that any donations they receive are tax deductible for the donors), receive certain tax benefits, and must not be for-profit. If (as is often the case) a charity makes some profit, it must be reinvested into the organisation to further their specified cause.
A social enterprise, on the other hand, doesn’t have such strict legal parameters. In fact, ‘social enterprise’ isn’t considered a legal term so both their structure and their legal obligations are the same as for any other business. Think of them as a business with a good cause. Because of this (relative) legal freedom, social enterprises have more flexibility with what their goals are and how they approach them. They can also choose to have either a for-profit or a non-profit structure.
What can (struggling) traditional charities do to keep up?
There’s no one-size-fits all approach to this. There are, however, certain common factors which should be taken into account.
The following factors have been found to encourage donations:
- Impact of donations clearly communicated
- Organisation’s values align with those of the donor
- Vision and mission of the organisation are clearly communicated
- Personal connection
- Cost effective organisation
- One-off donations with flexible amounts
- Simple giving process
While the following factors have been found to actively discourage donation:
- Already giving/ oversaturation of charities
- Lack of transparency or doubt about where the money (actually) goes
- Not seeing impact of donations
- Intrusive donation requests
- Regular or frequent donations with fixed amounts
- Variable income and rising cost of living
- Donor fatigue (constantly being asked for donations)
The list shows the numerous factors contributing to the trending preference towards social enterprises over charities, however many of them can be attributed to branding and marketing strategies. Those points, therefore, can also be addressed with branding and marketing strategies.
It might feel…off somehow, for a charity to do the same. Surely the worthiness of the cause would speak for itself? The thing is, these days, it won’t. With all the things we’re constantly exposed to in the media, ‘something bad is happening’ isn’t enough to move people to donate these days. Older donors valued ‘transparency’ very highly, however the up and coming Generation Z are looking for a personal connection to the organisation they donate to. How do you build that personal connection? A robust marketing strategy.
Here’s the crux of it
Social enterprises have a business structure. Businesses know their branding is important. That their marketing is important. They actively work on brand loyalty and create campaigns to lead potential clients through a structured and optimised sales funnel.
Perhaps it’s time traditional charities did the same.
MIH are proud of the support we provide NFPs. To find out more about we might be able to help you contact us today for an obligation free chat.