Evaluating Relationship Fundraising Strategies of Nonprofit Organizations - An Empirical Analysis of Donor Priority and Upgrading

Abstract

In regard to recent developments on the donation market, nonprofit organizations seek to find innovative ways for effective and efficient fundraising. To rethink their actual fundraising practice becomes necessary due to a growing number of nonprofit organizations, stagnating donation volume, and decreased governmental support enormously increased competitive pressure on nonprofit organizations. Under these new conditions, nonprofit organizations need to develop fundraising strategies in order to maintain a lasting donor base. These developments on the donation market have been acknowledged by fundraising researchers who have consequently focused on the management of donor relationships in recent years. This dissertation ties in with the need for relationship fundraising research, exploring and evaluating promising relationship building strategies. In Chapter 2, this dissertation presents an extent literature review on the research field of relationship fundraising and identifies a development from studies including partial models towards two dimensional models. However, relationship fundraising studies with multidimensional models barely exist. Based on these findings, a theoretical framework of relationship fundraising was derived. This holistic model embraces the multidimensional relation of fundraising activities, psychological, and behavioral effects on the donors and economic output. Moreover, future research areas for empirical studies are indicated. In particular, a lack of research on relationship fundraising strategies became apparent in existent literature. Whereas psychological factors and concrete instruments are examined, distinctive strategic approaches which are able to develop the relationship with donors are missing. The review of the relevant literature on relationship fundraising has led to the motivation to analyze the relationship fundraising strategy “donor priority” in the following chapters. In Chapter 3, donor priority strategy is examined on the organizational level. In order to realize a fundraising strategy, nonprofit organizations generally have to decide whether to prioritize the donor base or to treat them all equally. The underlying assumption of this strategy is that different and preferential treatment of donors according to their donation amount positively affects their fundraising performance. However, it is still questionable whether the donor priority strategy indeed leads to higher fundraising success. This part of the dissertation addresses this issue and a propensity score matching study is conducted to analyze the fundraising strategies of 73 organizations from the cultural 4 sector in Germany. The empirical findings are discussed and complemented by qualitative data from 20 interviews with fundraising managers and private donors. The results show that nonprofit organizations that apply a donor priority strategy outperform organizations that treat their donors equally in terms of fundraising performance. A donor priority strategy ultimately leads to a 125 Euro higher total revenue per donor and a 87 Euro higher profit per donor because cost savings are realized due to a better use of fundraising resources. The purpose of Chapter 4 is to extend the evaluation of donor priority strategy by conducting an empirical study at the individual level. Using partial least squares modeling, empirical results on the effects of donor priority strategy on higher- and lower-prioritized donors are presented based on a sample of N = 804 donors of a cultural organization. The results show that donor priority strategy positively affects donor satisfaction and donor loyalty of both higher- and lower-prioritized donors. Significant effects for voluntary behavior are evident for higher-prioritized donors. By testing for moderating effects of different donor motives, empirical findings reveal that satisfaction of higherprioritized donors is affected by a high level of the motive “enjoy art”, whereas lower-prioritized donors are more satisfied having a lower level of the motive “altruism”. In the light of donor priority that is associated with an implementation of different donation levels, the task to upgrade donors from a lower to a higher donation level becomes apparent and is elaborated in Chapter 5. Research into relationship fundraising has mainly focused to explore loyalty of donors without looking into the potential to improve fundraising success by upgrading existent donors. However, upgrading is an important challenge for nonprofit organizations in practice. This chapter of the dissertation analyzes (1) the donor characteristics to describe donors with a high probability for upgrading and (2) the donor behavior to identify potential donors for upgrading. Based on survey data of N = 897 members of two cultural membership associations, this study uses relogit regression analysis and gamma regression to test actual upgrading behavior and upgrading intention. Results show that donors who are motivated by social network and obtain higher income are more likely to upgrade. Furthermore, results identify relationship length, additional donation, membership category, and frequency of visits to the cultural organization as important behavioral factors which indicate upgrading behavior.