Creating a cause with real mass appeal ...

"The economy, stupid."

Those are now (in)famous words from Bill Clinton's fiery campaign strategist James Carville. Carville wrote that curt reminder on a list posted in Clinton's campaign headquarters during his initial run for President. It's pithy advice that always holds true, but is rarely regarded as much as it should be. The economy affects everything, even those places you might not expect.

I recently read an article regarding the impact of a poor economy on charitable gifts. Common sense would say that once an economy worsens, the fat is trimmed. The luxuries cut, the necessities kept. Now, while charitable giving certainly isn’t a luxury, it certainly isn’t a necessity, either.

I’d like to see non-profits adopt a model closer to the one employed by the Obama campaign this past year and a half (seems eternally longer than that, I know). Many charitable organizations use a rule of thumb even more extreme than most commercial corporations. For-profit organizations use a ratio called the Pareto Principle (PP), which states that 80% of total sales comes from 20% of the customer base. It’s applied across most industries and holds true a surprising amount of the time. Seems a bit extreme, huh? How can 80% of Coca-Cola sales come from 20% of the company’s customers? Well, you should see the pyramid of Coke Zero Vanilla cans that I see each night when I come home, only to be razed and rebuilt each tomorrow. Sure, caffeine is an addictive substance, but I’d argue that most products have habit-forming qualities. Vanity, greed, gluttony … you decide.

Anyway, the PP is astonishingly applicable and reliable in most industries. Seems wild, right? Well, the non-profit industry typically uses a different ratio, 90:10. Yup, typically 90% of total donations (that means total moolah going toward initiatives) are given by 10% of donors. That means keeping that small fraction of donors happy, engaged, and active is essential to a non-profit’s ability to accomplish its goals. And, moreover, its livelihood. During an economic downturn – or recession or depression or however you want to classify this current Bushian Blooper – that 10% gets wary. The 10% are typically wealthy philanthropists and they didn’t get rich by disregarding the economy and its markets. I think this is a fair and accurate generalization: most got rich by investing and being smart with their monies. They weren’t all entrepreneurs and lottery winners. Not to mention, a small, but sizable chunk of donors were born in or grew up during America’s Great Depression.

So, despite having inordinate amounts of money they likely couldn’t ever spend, they have stingy habits. They flinch when the economy is suffering and reach for their wallets only to check if they are still there. They’re not stupid or ignorant, they’re frugal and very, very prudent. Unfortunately, that affects philanthropic organizations enormously. A perfect example is the recent Bear Stearns (of bailout fame) debacle. Within that organization, a former chairman had set an admirable example and standard for its senior managers: 4% of their annual compensation went to charity. Well, seeing the recent turn in Bear Stearns’ fortune, I’m not sure that tradition can be continued. That’s the dilemma. Non-profits rely so heavily on 10% of their donors that any fluctuation amongst that group is detrimental and potentially fatal.

This is getting too long, so I’ll try to wrap it up quickly.

Charitable organizations would do well targeting larger groups of smaller donors. A significant number of $20, $10, even $5 donations can be aggregated into significant sums. The challenge is obviously reaching those prospects and mobilizing them to donate. I think the solution is in establishing a structure of civilian advocates for causes and certain non-profits. For example, Oxfam International is a non-profit relief organization that I’m particularly familiar with and fond of. There are many proponents of the causes and solutions the organization supports and those supporters should be harnessed. They are the advocates, they are the “cause evangelists”, they compose the foundation for a truly fertile network of funds.

More practically, one of them, say me, finds five friends to donate $5 each month. $5 each month. That’s all. Those friends can determine their own levels of involvement in the cause. Anywhere from minimal (simply donating $5), to optimal (finding five other friends to donate $5) participation within that structure. All of the advocates make their pledge each month and each of the six members is given examples (maybe even specific with contributions to families or children) of what difference his or her contribution makes. It’s truly that simple. Is it easy? Not entirely, but it’s not impossible by any means. It’s a concept everyone can get on board with and a program most people can afford. If an individual was to contribute that amount on his or her own, $30 (which honestly isn’t a much, let’s face it) can be equated to a phone bill or a new shirt. The outflow is equated with an expense that is significant in the contemporary consumer’s mind. $5, however, is equated to what? A smoothie? A pair of dress socks? Or, my favorite, a McRib Value Meal? (Just kidding anymore.) In my opinion, it seems like an easy sacrifice to make. And, what I feel, is a reasonable sacrifice in the mind of most consumers.

So, if the groundwork can be established for this new structure among the current and potential facilitators, it could prosper. I’m almost positive. Not without work, but what does? I’m going to use a banal phrase that I hate, but a paradigm shift needs to happen. Charitable organizations that receive the majority of their funding through donations need to explore other streams of fund-raising before their current ones run dry. A little can add up to a lot if organized correctly. Who knows, maybe a first-time, five-dollar donor takes that feeling to the next level and donates $10, $20, or even $100. It only takes one time. You’re hooked. Gratification may be the most addictive substance in the world … and why it should be used to change it.