Charity feedback loop.

Let's say you donate $100 - what happens to that money?

A small chunk ($9 to $15) goes to administrative/fundraising costs and the rest is deployed for aid. After the money is deployed, it goes through several channels, organisations, service providers and partners - each taking a cut before it finally reaches the intended recipients. 

One can assume these are necessary cogs for the charity engine to function. Only problem being that this charity engine is worth $360 billion annually in the US alone - and inefficiencies in each cog costs a lot of money that could be put to better use. For perspective, the entire apparel and clothing industry in the US is worth about $225 billion annually.

Given the obvious inefficiencies and opportunity to make real world impact, its strange that there is very little innovation taking place in this sector. Sure, companies like Watsi, Kiva, Gofundme, Zidisha and the likes are breaking new ground - but they seem to be focused on the collection end of things. Putting more money into this incredibly leaky funnel. Cost of acquiring donors is rising rapidly and getting people who've already donated to do it again needs re-selling.

This seems terribly inefficient. One notable company trying to innovate around the traditional model is "Charity: water", who've separated their operating costs and donations into two "wells" - operations are funded by high net worth individuals and 100% of the donor money is deployed. The donor is also supplied with a report detailing how their money is being used - this feedback would help a great deal with repeat donations.

I'm going to pen a few ideas around this. If some of these already exist or if you have any thoughts to share, please do let me know. A quick sketch:

As you might have already noticed, there are some obvious issues with this model. How do the donations reach the recipient? Who documents this? etc. The latter could perhaps be solved by funding people specifically to document progress of donation targets. Fundamentally, this is less about a particular charity model and more about a few specific metrics and forming models and solutions around them: Lifetime Donations, Donor Virality, Impact Factor, Effective Impact Factor.

At present charity organisations carry out a marketing drive every time they need to raise funds - pummelling precious donor money into PR, ads and fundraising events. A casual donor is unlikely to repeat without prodding as the novelty wears off and the effectiveness of the act becomes less clear over time.  Charities need to focus on these metrics to drive viral growth, increase donor retention organically and effectively increase  donor satisfaction over time:

Lifetime Donations: How much a user has donated or is likely to donate depending on income level, demographics, intent etc. All donation drives must optimize triggers, messaging and actionables based on their target populations' estimated LTD.

Donor Virality: How many donors does one acquired donor bring along? How does this affect the math around donor acquisition costs? If a particular campaign or cause results in donors with an average value of say, 2 - which means each acquired donor brings along 2 new donors - it makes sense to focus on that campaign and increase available resources to help it grow exponentially. 

Impact Factor: How many lives has a donor impacted? This is a critical metric, optimising for which could result in better / repeat donations. This could also help with driving donors to compete or measure value of donations in lives impacted over just pure dollars.

Effective Impact Factor: If a donor enabled the creation of a business for the head of a family of 7, the effective impact factor is 7. If the business employs another head of a family of 4, your effective impact factor is 7 + 4, 11. This will help a great deal with identifying most impactful donation targets / campaigns / donors immediately -along with tons of other useful ramifications.

This is purposeful over-simplification of a data driven approach towards increasing efficiency of providing/extracting value to/from donors - there are tons of other factors you can measure and inform your approach with. Digging deeper (which I'll attempt to do in another post) will reveal more nuances, aspects to consider (emotion, health etc) and challenges that come with executing a new way of doing things, especially in the credibility and prestige driven charity industry.

Other posts: