An ArtsProfessional feature in partnership with Pro Active Resolutions

Effective fundraising is similar to developing a new product or service – it too requires a stepped approach using business techniques, says Mahmood Reza.

Illustration of thinking man with colours swirling from his head

Fundraising plays a significant role in the arts world, and some of that innovation and excellence was highlighted at the recent Emcees Fundraising Awards. The examples of fundraising showcased and stories told prompted me to reflect on the link between fundraising and developing new products and services.

Ideas and SWOT analysis

First, gather together ideas from a variety of stakeholders including colleagues, volunteers, donors, partners, users, competitors and beneficiaries. Brain storming (or if you prefer, ‘thought showers’) is a technique that can be used to generate ideas. At this stage, nothing is rejected.

Promotional activity will keep your campaign in the minds of those that may engage with your campaign

The use of SWOT analysis also plays a part. SWOT is a strategic planning tool that summarises the main issues from the business environment and the capability of an organisation most likely to impact on strategy development. It can be adapted to use as a basis against which to generate fundraising options and assess future courses of action.

The primary aim is to identify the extent to which the current strengths and weaknesses are relevant to and capable of dealing with the changes taking place in the business environment. The SWOT analysis is only considered useful if it is comparative - not absolute - and examines strengths, weaknesses, opportunities and threats relative to competitors or other organisations.

A SWOT analysis should help focus discussion on future choices and the extent to which an organisation is capable of supporting these strategies. The analysis and resulting actions can be summarised as follows:

  • Strengths: exploit
  • Weaknesses: rectify
  • Opportunities: seize
  • Threats: nullify

Idea screening

At this second stage, ideas are screened and selected. We should screen our ideas against pre-set selection criteria for those that should be progressed or dropped. The selection criteria will include and reflect the level of risk we wish to take on, required resources and capacity and our target return on investment.

Resources will include the following: financial, start-up funds and working capital; human resources to include numbers, demography and skills levels; and intellectual capital to include brand names, reputation, client databases and business systems.

A resource analysis needs to consider how resources are managed, deployed and utilised. For example, there’s no merit in having a good reputation and brand that cannot be exploited effectively.

Idea development and testing

Here we establish proof of concept, and see if our fundraising campaign will resonate with our target audience. We can test-pilot, get feedback and refine the campaign. Testing the idea amongst our own staff and colleagues can be a good way to evaluate the potential attractiveness of our fundraising initiative. Our staff and colleagues should provide feedback as potential donors; as our critical friend.

Let’s take the example of a participatory fundraising event such as an auction. We would look for feedback on the pricing of the event, the promotional messages used, the digital and other channels used and our target audience.

Business planning and performance

During the development process, we should develop a system of key performance indicators (KPIs), so that we can keep an eye on progress and implementation. This range of KPIs should cover cost and effectiveness, and provide valuable feedback. Example KPIs include the open rate of emails, conversion rate of enquiries, income per pound of spend, return on investment (ROI) and audience engagement.

Putting together a budget, cash flow and planning document will demonstrate that we have considered and tried to understand the risks involved, and considered how we may deal with those risks, all with the primary objective of realising and ultimately achieving our aspirations.

Arranging focus groups, and then forming test panels after the product or products have been tested, will provide you with valuable information allowing last-minute improvements and tweaks.

Implementation

At this stage, your fundraising programme has gone mainstream, donors are engaging, calls for actions are being heeded, progress is being monitored and the money is flowing in.

Promotional activity will keep your campaign in the minds of those that engage with your campaign, just as they would do with a new product. You then need to tailor and adapt your PR and marketing to promote the campaign. You should involve advocates and ambassadors as early as possible. Use social media and tap into all your communication networks.

Prepare a route map to manage rewards and recognition to donors and volunteers, and to monitor, control and evaluate post-launch.

Product pricing

A number of factors will have an influence on pricing our fundraising campaign, so it’s important to understand the different pricing approaches we can adopt. We should put as much research into our pricing as possible as guesswork can be a very expensive mistake, estimating demand and take up is also necessary.

Below are some of the broad pricing approaches.

  • Breakeven: This is where you calculate the point at which your income from fundraising and your costs are equal
  • Cost based: We calculate all the costs involved and then add a figure on top to give us a profit.
  • Competition: This is also known as a market-based approach and is based on the price that we think an equivalent/similar ‘product’ would be if offered by our competitors.

Within that we can look at a variety of techniques such as

  • Price discrimination: Different prices for different donor groups
  • Early bird pricing: A reduced price if a product is purchased earlier than usual
  • Premium pricing: The price is kept high to create the perception that your product is of the highest quality with unique selling points.

Let’s take the example of a ticketed fundraising event. If the total budgeted cost of staging the event is £2,000, then this will be our break-even point. If we relate that cost to the expected number of attendees we can calculate an average cost per attendee, we can then add a mark-up to that cost. If the price of the event does not match the market price, we can adjust accordingly.

Price charged and demand for the event will normally be linked, and so we need to be conscious of this. For example, if ten people attend the event then the average cost will be £200, if 100 people attend then the average cost will drop to £20. If we wish to add 50% to the costs, the price will fluctuate between £300 and £30.

Structure and vision

To help achieve success we need a clear definition of our goals and objectives at the outset, with contingencies considered for each major stage of the process. Structure and vision rather than straightjacket and gaze.

Mahmood Reza is Owner and manager of Pro Active Resolutions and Knowledge Grab.
www.proactiveresolutions.com

This article, sponsored and contributed by Pro Active Resolutions, is in a series sharing insights into accountancy issues in the arts.

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