Better or Worse?

Sherri: Welcome to Cahoots Commentary where we share our comments about what to do and, most importantly, what not to do in your nonprofit communications. Thanks for joining us.

We are recording this just before Halloween and it’s coming right up and we felt this commentary would be appropriate. Our topic for this commentary is: Trick or Treat? Are matching funds a valuable giving incentive in your development strategy? 

Let’s get started first with the definition so we’re all on the same page. Matching funds are a contribution from one donor that is used as a matching incentive to solicit funds from other donors. The incentive is generally presented in a couple of different ways, and you’ve all probably heard one or two of these throughout your lifetimes and your professional careers. 

“So Mr. and Mrs. Goodall have given $10,000 as matching funds. So give today so we can reach that $10,000 level and receive this generous donation.” 

Now that’s one way that is presented another way and we actually think that this is more appropriate and more transparent way is a contingent appeal and those are presented this way. 

“Mr. and Mrs. Goodall have given $10,000 as matching funds. So give today and your donation will be matched dollar for dollar up to their $10,000 gift.” 

There’s a big difference between the two and those. The transparency about what we see all the time and don’t see is really what we’re going to talk about. So, trick or treat? Let’s start with treat. 

Katie: That second example would be more of a treat than a trick in the way that we would see it. The treat being that money is granted for any amount that’s donated up to that $10,000 versus in the first example, unless you hit that $10,000 marker, you don’t get anything. 

That’s the big difference. Money still comes, people still match it, and it’s just matched for what donors can get to versus absolutely nothing is given if people don’t reach a certain marker. 

Dee: And it seems simple enough that any donor would love to give a donation that would be twice as big as the one they’ve given because there are matching funds available. 

Sherri: It’s a treat if it’s true. For the most part, matching funds are a treat, a real good tool if you are presenting your campaign and that call to action to an audience, that includes new donors. And the reason I say that is because we know for a fact that new donors, people who haven’t given to your organization or your ministry before, are highly motivated by this kind of an incentive.

But for those people who are regular donors, for example, if you’re a ministry or a church where you’ve got people who are giving as a matter of tithing or they are, you know, they’re vested. They are giving because of a faith motivation, this kind of incentive really isn’t as effective and isn’t as appealing. They’re giving for a different motivation. 

It isn’t because of something they’re going to get in return or something that needs to be incentivized. They’re giving because of a matter of faith. But you can actually raise with new donors, this incentive can raise up to 50% more. The other kind of downfall of that, even though it’s a treat to get 50% increase in new donors out of this, which of course anytime you can create new relationships, that’s great. The downside is, if you track it, you’ll find that those new donors who came in on this type of a giving incentive, A matching fund incentive, don’t give again. 

They don’t get engaged in a way that gives them staying power as a regular relationship and a regular donor. And again, you know, the numbers go back for years demonstrating that fact. So yeah, it might be a treat. And we could see where this could be valid or an option if right now your nonprofit is a little upside down where you really, really need an infusion of cash. 

But just know that you’ve got to be making this appeal someplace in some kind of scenario where you’re going to be able to reach people who have not given to you before, that’s where you’re really going to see the biggest return on the investment and that kind of an appeal. 

Dee: I think too, that matching funds can be a big incentive to the organization that is the one that’s appealing for funds because it does motivate them to reach their audiences and encourage them. Like we said earlier, you know, it’s pretty simple that every donor would want their funds that they’re giving or donating to be twice the amount, right? 

Sherri: And for that donor who is giving the nonprofit or ministry that gift, it gets the ministry and nonprofit off the dime. It is an incentive for them to want to incentivize additional donors. It’s a neat proposition in the sense of if the motivation to use the gift as matching funds comes directly from the donor. There are a lot of scenarios. 

I mean, we’ve seen it year after year where Mr. and Mrs. Goodall come in and they’re going to give a gift and then the executive director or the development director say, “Hey, you know what? Why don’t we use your gift as matching funds for the fall campaign?” 

That happens all the time. And we’re not saying that’s unethical. It’s not unethical. But where it’s really lovely is where the donor comes and says, we would like to give you a sizeable gift, but we want it to be used as an incentive for other people to come alongside us and to give. And I think that’s one of the ways that we’ve seen, again, a real treat is when those donors will also actively play a part in the appeal. 

For example, Mr. and Mrs. Goodall are part of a podcast or they’re part of a written testimonial that’s on the website where they just say, you know, “We love this organization. Here’s the reason why we do. We’re giving this money because we absolutely believe in the ministry or the cause, and we would like you to come alongside us and support the organization.” 

There’s just nothing that really is more appealing than having a donor appeal to a donor. You know, you expect the people, the administration, the leadership and stuff like that of a nonprofit or a ministry to ask for funding. I mean, let’s face it, they’re nonprofit organizations. But when the donors come alongside and do that, it has a lot more credibility because nobody’s paying them. They’re not on staff. It’s not their job. It is truly something that they believe in and they feel strongly about. So that’s a treat in that regard. 

Katie: It’s especially effective if you do it at an event as well, not just in print. It’s great for other donors to be able to put a face to the name, see them in person. It kind of brings it into a different dimension a little, if you will. So if you can do it at an event and have them on stage, actually talking to other donors, that can bring a real boost. 

Sherri: I know we’ve used, not so much in the matching fund scenario, but the reason why we know that a donor appeal is so effective. If you’re doing a big fundraising special event or something like that, that one of your key donors is the one that actually does the appeal at the end of the event, encouraging people to give at the event. Just like you’re saying, Kate, it is a big deal where they go, “Wow”, because nobody wants to be the first donor to any kind of campaign. 

That’s always, always a deal where nobody wants to be the first donor. Like, “I don’t know, what are we doing? What is this going to look like?” We know that one of the really effective ways to be able to, again, have a donor who is really wanting to do something to encourage others to give is to actually plan around that whole concept. 

Dee: Over the years, our clients who want to use a matching fund incentive, it’s because they’ve seen another nonprofit use it, they’ve heard about it through somebody else or they’ve gone to an event and the perception is it works. But generally they are working off the perception that everything went great and it was a huge, wonderful fundraiser. Most have not even asked other organizations what the pros and cons were of the type of program. So a lot of times what’s perceived as being successful and they raised all the money, especially if it’s not a contingent appeal, is never really addressed after that point, after the event. So it can be somewhat of a trick because you never really know what the outcomes are. 

Sherri: And the copycat thing, and we say this so respectfully because we know that our nonprofits and ministries, the reason why they copy this kind of fundraising program from others is because they don’t have the funding or the resources or the staffing to be able to really look at themselves and go, “What are the best ways for us to raise money? What do our audiences need to hear from us?” 

And so they just are looking for any other opportunity possible. That’s why you see people do all kinds of events that have fads and then they wear off and things like that. And matching funds is one of those. 

So if you’re still thinking about it, we’re not trying to discourage someone if you’re sold on it. But here’s what you really need to be thinking about and you need to determine right out of the gate: did the donor already provide the gift? In which case this isn’t a match, it is an incentive. Or we have given the first half of the campaign, we’ve received the first gift, but that is not a matching fund. You get the match when it’s done, not when you’re just starting. 

And did the donor still give the gift even if the matching funds didn’t reach the goal? Being transparent about that, I think that’s the thing that’s been the most heartbreaking for us is when they didn’t reach the goal, the organization didn’t reach the goal, but the donor still gave the gift, which was generous and wonderful, but it’s never disclosed that the campaign didn’t meet the goal. 

“Well, we don’t really want people to be disappointed or anything like that.” And, just, God doesn’t honor that, you need to be totally transparent about that. And the truth is, if you didn’t meet the goal, you’re probably giving someone who would come alongside and give more generously to help you meet it after the fact. 

And you know, again, did your nonprofit really report the results of the program? Were you transparent about it? And that’s where a treat quickly becomes a trick when it’s not fully transparent how it actually turned out. 

Every instance when we had a client deciding to use a matching fund incentive, the donor that provided the incentive still gave the full amount. I don’t think there was ever an exception to that. They always gave the full amount and even, probably more sadly is, the nonprofit typically in these scenarios didn’t share that that’s what happened. There’s really much better ways to go about doing that. 

And that’s, I think, where the next obstacle that comes out of that trick, if you will, that needs to be addressed is what now happens, And this does happen. Donors come up and say, “So how’d it go? We were really excited about that and we gave to it.” If you already have the money and you didn’t reach the goal and you have not shared that with anyone, there will be a reckoning. Somebody’s going to catch you at lunch one day with someone or at church or something and ask you. 

So just know if you make the decision not to be transparent, that someone’s going to ask you and you’re going to need to have the answer. And what the obstacle can be is then still not being transparent. So like it keeps getting worse and worse rather than better. I think the long and short of all of it is as nonprofits, and especially if you’re a faith-based ministry, your “yes” needs to be a yes, and your “no” needs to be a no.

When you shadow things, tuck them back, don’t fully divulge what’s going on, aren’t transparent. It comes back around and you have to remember it. And nobody’s got that good a memory. 

Katie: Not only will the staff of the organization be approached by people wanting to know how it went, the donors themselves will probably be approached too. And it’s the same thing where they’ll be approached by somebody who maybe gave or just wants an update on how it went. 

And the donor then either has to say, “Yeah, it was great, we met the goal” and then they’re totally fine. Or they go, “Well, no, you know, we didn’t meet the goal, so we didn’t give the money.” And the other person is going to be like thinking to themselves, “You had $10,000 and you didn’t just give it to them?” That puts them in a really bad position. 

And even if the project didn’t reach its goal and they still gave money, they say that to the other person saying, “Yeah, you know, it didn’t reach the goal, but we still gave the money.” The other person is going to walk away thinking, so did it even matter? You already were going to give it. What’s the point?” And that’s when people start thinking it’s a gimmick and a trick. It can snowball really fast. 

Sherri: Because it seems so good and it sounds so good to everybody when they’re hearing it. But everything that surrounds it is really what the big deal is. It can look, like you said Kate, like a trick and all the things that surround it can be. You’ve got to watch every single bit of it. 

Dee: We go to a lot of fundraising dinners because of our profession, being in the industry of nonprofits. And we see multiple, multiple copycat type appeals and fundraisers like the golf tournaments, the auctions. And I can say a lot of the people I know who are donors go to a lot of them as well. They are people that are generous givers and it means a lot to them to be a happy giver, right?

Sherri: God has blessed them to be able to hear blessing, right? 

Dee: Yeah. So I know a lot of times when I go to an event and then I go to another one, and all of them are doing matching funds, for me it really isn’t very much of an incentive. I want to encourage everybody to be creative with how they appeal. The main thing is we are trying to tell our story, and the story is a motivator, and that is what we’re giving to. So the incentive of matching funds is that somebody’s going to double our generous donation, and that is a huge benefit. 

Sherri: But your mission should be the motivation, right? And we see a lot of times it is perceived by a lot of donors as a gimmick. It is because they know, especially people who are very generous and who are on the inside track of a lot of organizations, maybe they’re board members or they’re key donors to an organization. 

They know folks when they go to a fundraising event, they know they’re going to be asked for money and generous donors, those who’ve really been blessed to be donors that can give more, they generally go with a check made out or already knowing what they’re going to give. They’re very dedicated to giving and they make those kind of plans. 

So is it an incentive? Yeah, it can be a treat. But what you don’t want it to ever be perceived as is a trick. And one of the biggest ways that that can happen is if there just isn’t really good transparency and you’re selling yourself short just as a ministry in an organization when you don’t feel confident that your mission is worth supporting, there’s other ways. 

And we’d suggest that look at some of our initial training on what makes a good cause, where you can go back, kind of re-evaluate where you are and really beef that up. And I mean legitimately so to make sure that you’re doing something that other people are of like mind and spirit and want to support. 

Dee: I think a lot of donors, too, want to be giving to what we’ll call a winner. 

Sherri: Everyone loves a winner. 

Dee: Yeah, a lot of the original GoFundMe trends that everybody just, you know, where everybody was looking at going, “Oh my gosh, did you see what they made?” A lot of people get really excited when they see big things happening. They want to be especially for the organizations that are in their hearts and they want to be a part of it. Be able to fulfill the things that they’re out in the world for. 

So I think it can be motivating in that factor that they see that their funds are going to be doubled and they see that somebody’s already given, especially on a contingent appeal where someone’s already given the money. And so it’s like, OK, this is incentive. 

Sherri: This is a motivation because nobody wants to be the first giver. We see that in capital campaigns all the time where we really try to encourage organizations to go out and find those people to give the initial support because if they’re supporting it, others want to support it because they see it as an endorsement, is really what it comes down. 

It’s like, “Wait, they just gave $100,000, I can give $10,000. I mean, they must really believe strongly and that there’s got to be a legitimate thing and you know, learn more.” 

But again, you’re going to get a lot of those first time givers and they won’t give again. So relationship is key when it comes to development. You want to have people become fully engaged with your organization and become consistent donors. Like we said, the treat part, we think, is you can take the same concept and as I mentioned a little bit earlier and actually turn it into something that works well. 

And Kate, you mentioned that too, where the donor becomes an active part of the whole process or of the gifting itself. But we have a way that we approach it a little bit differently. And it sort of helps ease everything out where you don’t have to have a million excuses or reasons or figure all of it out. You can just be completely transparent. 

Begin with determining a goal for what you really need to raise. That’s just being truthful. That will always, always play better. And be easy to remember, easy to retain. And it’s honest. It’s just plain honest. 

Next, if you present the appeal with some details on what you need and why, and then let donors know that you’ve already received an initial gift towards your goal, that, as we said, everybody loves to not be the first giver, but to also know that someone else has already given. And it’s a great motivator. And that is a good motivator for existing donors as well. 

It’s like, “Oh, that’s really cool. Tom and Joe already gave something.” That is indeed motivating. 

Katie: “They’re already halfway to their goal.” That sounds really good, right? 

Sherri: And you’re still looking at that matching fund incentive idea. But it’s the presentation is really the big deal here. And you can even have the donor make the, like we said, the personal appeal for other donors to join with them. Those few words: “Join with us”. Only someone who’s given can say that because they’ve done it in giving and meeting the goal. This works really well because no one wants to be, like we said, the first donor. And seeing a generous gift of another is a genuine motivation for others, far more motivating than a match. 

Dee: I think we have found over the years that, say, your organization needs a bus, your youth organization, and you need to get kids from one place to another. Putting that out there as your goal of what that is and what you want to purchase is great incentive. People can really get their arms around that. It’s a tangible item. They love those types of things to give. 

And then if you exceed that goal, you can come back. And what a great thing it would be to be able to announce that, “Hey, not only did we meet the goal, we bought the bus, this is what it was, but we also were able to pay for one year of gas cards with the overage of the donations”.  

Sherri: Or underwrite the first trip to camp in the bus you just paid for. 

Dee: Yeah, five kids to go to this particular camp. But those things are great victory stories and an incentive is letting people know it worked and why it worked.  

Sherri: And it’s tangible. They can actually see the bus. But it’s just the truth. Every nonprofit we work with all need to raise funds. I mean, let’s face it, it’s the one thing that we’ve been focusing on for decades and we’re passionate about it. It all comes back to mission. What is your mission and how what you’re about to ask for and that generous donor is what you’re doing on mission. It’s not on mission when you don’t know exactly what you need and what you need it for. 

I can tell you this is the other thing that we see and why sometimes these kind of incentive or gimmick kind of fundraising initiatives are undertaken. It’s because an organization needs money for general operating. We call it “Go money.” That probably brings fear and trepidation into the hearts of more executive directors than we can even begin expressing. 

And it’s because there’s a notion that donors do not want to give money for general operations. What is general operations? Rent, paper for the copier, salaries. We do not know a generous donor who got generous without being good business people. The reason they’re making really good money and the reason why they can be generous is because they are good business people and they know overhead costs money. 

But the best way to present that is just, “Here’s the details on what our overhead is.” Those are the kind of things that you can get underwritten really easily. But again, matching funds, is it a great way to be able to do that? Only if you’re very, very transparent about it. You’ve got to let people know exactly what they’re giving to. And by the way, when you let people know exactly what they’re giving to, they’ll give more. The more transparent you are and the more specific you are, the more you’re going to get really good participation. 

Dee: I know we’ve talked in other podcasts about just remembering to have integrity in your appeals to your donors. They’re smart, lovely people. They have great hearts, and they do want to be a happy giver. 

Sherri: And live longer because that’s what happens, right? There’s all kinds of benefits. 

Dee: Yeah. So I don’t think using gimmicks, especially in the nonprofit world or copycat stuff, is something that is really going to benefit your organization. Be creative, be real, have integrity in your appeal and be surprised. 

Sherri: So instead, give your generous donors a treat by being totally transparent. Because you should never have to make excuses about how you raise money for your organization, your ministry, or your church. 

So, in summary, using matching funds as a development incentive is a treat if you use it the way we’ve just suggested. But matching funds are a trick if the full parameters and outcomes aren’t presented ethically. 

So if you’d like to learn more about how to plan and execute honorable and successful development programs for your organization, ministry, or church, we have training courses for that. Check them out on our website at cahootscommunications.com. Thanks for listening.