By Shaf Mansour, not for profit solutions specialist at The Access Group.
The topic of inflation and its impact on the cost of living is dominating the news agenda at the moment. Impacted by the war in Ukraine, spiralling global energy prices and the financial aftershock of the Covid-19 pandemic, the BBC reported the cost of living in the UK has risen at its fastest rate for 30 years.
The Bank of England now predicts that inflation will hit 8% in April, and could peak at 10% later in the year. As a result, rising prices for essentials such as food, energy and fuel, will only continue to impact household budgets.
This could have a dramatic effect on the income of charities, which may also face spiralling costs themselves at the same time. Given that many organisations’ income relies on donations from individuals, continuing to donate to a charity could be harder to justify if people need to cut costs for essentials — however worthy the cause. A report by Kantar found that subscriptions services have already seen an unprecedented rise in cancellations as households prioritise where they spend their disposable income.
Impact on the charity sector
Inflation won’t just impact the public’s willingness to donate. For charities that receive grants, the value of those payments will be significantly eroded in a comparatively short time. If an organisation was awarded a £100,000-per-year grant for the next three years then, by 2023, the value of the same grant would be worth just £94,000. That £6,000 drop in value could have significant knock on impacts for projects.
Because interest rates for savings remain so low, those donation pots of cash cannot hope to keep anywhere near the pace of inflation. There are options for charities to invest through specific schemes, which should counteract inflation, but this can come with the risk of lack of clarity on charities’ aims.
To combat this, a key priority for charities now has to be to broaden the scope of their appeal, and thereby expand the audience from which they receive their donations.
What charities need to do
The simple fact is that charities will need to increase the donations they receive — both in terms of the number of transactions and their amount — to combat the effects of inflation. For the vast majority of charities, technology is the best gateway to achieve just that.
For one thing, increasingly fewer people carry cash, and the days of dropping a pound in a collection tin at a supermarket or on the high street, have been disappearing for some time.
Covid-19 saw the almost complete abandonment of cash by some sections of society, as contactless payment was either strongly encouraged or made essential by many services to combat the risk of transmission. In 2020, only 17 per cent of transactions involved cash and inews reported in 2021 that 90 per cent of transactions were cashless.
As with so many things, people now want to be able to donate to charities online, instead. The difficulty is that, while some organisations have systems in place to accept digital donations, others don’t and need expert advice to navigate a path to digitisation.
How technology can unlock new donors
CRM solutions, such as those developed by Access, enable charities’ websites to work harder to convert visitors with a passing interest, into active donors. This allows the organisation to make it as simple as possible to set up a secure donation.
As anyone involved in consumer finance knows, simplifying and streamlining the payment process is crucial. Using the same ethos that online retailers employ to reduce cart abandonment rates, charities must reduce the likelihood of donors dropping out mid-transaction.
Using software to support simpler payment processes should allow people to pay in whatever method they prefer — removing the complexity of processing and administration for the organisation, and collecting data for the rest of the charity’s software suite to process and utilise.
The system can then gradually build up a detailed picture of the target audience who donate the most. As well as their demographic information, charities can understand what they do for a living, when in the year they’re most likely to give the largest donation, and how much they give on average. It will also record and analyse the responses from the charity’s various appeals — what works best, why, and critically, what their response might be in future.
From this, and by using the software’s capacity to analyse all this data, charities can then judge which audiences are best to try to expand their appeals to. Using Google Ad Grants to target new audiences can help fundraisers to secure new donors which reduces the overheads of doing this and allows for a better ROI.
As inflation continues to rise, we will start to see the impact on how consumers spend their disposable income and charities may feel the effects as a consequence. If donations become much harder to come by, turning to technology has the potential to help charities provide a more convenient avenue for donors and capitalise on invaluable data.