Song Around the World “Stand By Me”
Archive for March, 2009
“Inflection Point” has long been a term in calculus for a point of change. I started seeing it in economic and social commentary late last year, and Thomas Friedman has now put it front and center in his New York Times article “The Inflection Is Near?”
Friedman applies it to the idea that an economy based on ever-rising consumption is nearing its end times. We’re approaching a “Great Disruption” … an economic sea change in personal and political expectations, good-bye consumerism, hello hug the trees.
This resonates with Richard Sennett’s “The Culture of the New Capitalism” and the “New World, New Capitalism” now under discussion among Sarkozy, Blair and Merkel.
All possible, but read Amartya Sen’s “Capitalism Beyond the Crisis” to regain a grip on the terminology and reground yourself on where capitalism really stands.
When judging an Inflection Point, let’s look more closely for cycles.
Is Obama a breakthrough? Maybe just a cycle back to Carter? Or Kennedy?
Carter was drummed from office for telling Americans to lower our expectations … suggesting that we could no long afford to accelerate consumerism at the same pace. This lack of cheer, along with a recession following a spike in oil prices, are his legacy.
Kennedy suggested “Ask not what our country can do for you. Ask what you can do for your country.”
Reagan responded with “Are you better off now than four years ago?”
Obama sounds like Kennedy in his call for service and, dare we say, sacrifice. And like Carter in acknowledging that we must tighten our collective belt.
An “Inflection Point”? Maybe not.
Another consideration. Looking at the US economy from God’s point of view, and you’ll see that government spending has hovered right around 30% of Gross Domestic Product (GDP ) since the late 1950s. A bit higher in Republican administrations (33% under Reagan & Bush).
Under Democratic administrations, spending did not increase as a percentage of GDP. But federal budgets moved toward balance. Even surplus under Clinton.
Obama’s budgets push us to 33%, or 34% if all spending were to occur in 2009, and some think would better spur the economy.
In these terms, “Inflection Point” may be too strong. We may just be experiencing a bump in an established cyclic trend.
An alternative definition of “Inflection Point” is: realizing that past predictive models are no longer reliable.
Colleges and universities are worrying about this right now, because they’re predictive models of conversion in their recruitment programs are now in question. In the past they could reliable predict that X% of high school student who inquire will apply. Y% of applicants will be accepted. Z% of those accepted will enroll.
But the faltering economy has changed the terms of decisionmaking for students and their families. Surveys show that prestige has been replace by affordability as the prime driver of the college decision. Continuing job layoffs will only exacerbate this.
Predictive models may no longer predict with any accuracy, so planning is difficult.
They, like many nonprofit organizations, have also relied on market and interest earnings on trusts/investments to support them. These all took a big hit in the last six months. Current holding are now much lower, and no models for annual growth can be trusted.
What about charitable giving?
Mal Warwick’s outfit published a study of 2008 Q4 donations to direct mail fundraising appeals. An 18% decrease in aggregate revenue. Acquisition response down 12% overall, acquisition revenue down 33%.
Yet house-file response increased by 6%! But average gift decreased by 9%.
Not shown in raw numbers are trends to (1) cut back on acquisition, mailing fewer, therefore diminishing revenue and (2) tightening targeting in house-file mailing, focusing on better donors, which would lift response even as the economy diminished average gift, yet by only a little.
I don’t hear enough to judge, but I’m not detecting any sea change in the fundraising marketplace, nothing that indicates an “Inflection Point” that destroys predictive models, but instead modest shifts attributable to economic downturn, not unlike those in during the 1970s.
Yet we all might have an Inflection Point on the near horizon, based on a seismic demographic change.
Obama would have lost if voting was limited to those over age 30. Younger voters favored Obama over McCain by 68% to 30%. Not a tight race.
Conservative David Frum wrote a nice article for Newsweek: Why Rush Is Wrong … one small point in which was that the Republicans need to loosen up on their social positions. When an overwhelming majority of the young favor equal rights for gays and lesbians, an anti-gay or anti-gay-marriage stance is not smart for the long run.
What’s this mean for fundraisers? Learn from cyclic trends over the last few decades. Don’t fear an Inflection Point just yet.
And remeber that nobody can save their way out of a recession … invest in smart acquisition and house-file appeals. Nobody gives when nobody asks for a gift.
Continuing my review of the big batch ‘o fundraising mail I amassed recently, two recurring approaches …
1) Renewing those long expired. And I do mean LOOOONG expired.
I donated $15 to the Republican National Committee in the early 1990s. A good investment, since they test a lot, mail a lot, and keep sending stuff even though I don’t send them money. They’ve been trying to renew me annually ever since. I received hard membership cards annually for quite a few years. Renewals finally tapered off a few years ago, after about 15 years of appeals and renewals.
They’re not the only ones. Other groups I know to be very smart fundraisers have continued to renew me for more than five years after a gift. This does not make sense to me. Many groups who test find that renewal to expires work for a while, but with diminishing returns.
Generally, the find at some point that it’s more cost-efficient to roll old expires into the recruitment mailing. Most do that.
But some just keep plugging away. The only thing that could make sense: Cheap packages and large quantities make it work.
2) I received quite a few renewals from organizations I have never contributed to.
This makes sense if it works, of course. Many of these are small groups that probably don’t test, but gut-level if nothing else it must be reasonable effective and at least seem cost-efficient.
Most if not all of these fall into two groups: animal welfare and wildlife/environmental.
In my own small focus groups, I get the reading that animal welfare donors give to the appeal, rather than the organization. They love and feel very protective toward animals. When they’re moved by an appear, they give. When asked, they cannot identify the organization, only the appeal. These are beyond core causes, like local shelters and, maybe, PETA.
To the degree that that’s generalizable, it makes sense that a renewal/appeal could get a nondonor to, in effect, join.
Also: I get so much mail from so many animal welfare groups, include small and local-focussed groups from out of state, that I can appreciate any tendency for an animal lover to lose track.
The same dynamic could be at work for wildlife/environmental groups. Mostly wildlife, each group protecting a different species. Not much different from animal welfare, eh?
In any case, renewal as recruitment is prevalent, suggesting that it works.