BIG’s Blog: Join the 1%

The Pareto principle rules today, but for how long?

What’s the Pareto principle? Back in 1906, and Italian economist by the name of Vilfredo Pareto observed that 80% of the land in Italy was owned by 20% of the population. Wondering if it was a fluke, he checked other countries in Europe with pretty much the same results. Then he started looking at all categories. When he observed that 20% of the pea pods produced 80% of the peas, he published his findings. Today we know it as the 80/20 rule.

Today the Pareto principle works in nonprofit fundraising as well . . . but for how long? Are we headed into a time when a few dominant nonprofits… maybe 1%... dominate 99% of the donations?

The Internet is changing everything, including…possibly… the Pareto principle???

If that happens, where does your organization fit? In the 1% of winners, or the 99%?

Maybe the better question is, how could this happen?

Actually, it is already happening, and in quite an ingenious (as well as scary) way for those on the other side. The “new class” of growing fundraising organizations focus -first and foremost - on developing relationships.

“But…but”… you say, “we focus on relationships too.”

No you don’t. You focus on raising money, on closing transactions.

Your number one focus is raising money. Honestly, the relationship is a “nice to have,” but your focus is “on the money.”

You’re using the same fundraising model that your predecessor used and her predecessor before her etc. Your fundraising model is a “transaction-based” model that is at least 80 years old. And just like when we were kids and there were only three television networks… CBS, NBC and ABC… we lived that world, because that is all there was. Until recently, your transaction-based model was essentially the only model there was because the world was organized the way the world was organized.

But things really began to change for fundraisers five years ago, and in the last three years they have really begun to accelerate. That was when everything technological came together (high speed broadband, smartphones and tablets, social media, etc.) and hit critical mass. Even pricing structures for technology accessed through the cloud is bringing down costs dramatically.

So what is the “new fundraising model?” Like I said earlier, it is a “relationship-based” model.

Look around. What does it cost to generate a friend online? Even if you are not personally engaged much online, you know, for instance, it costs nothing to set up a Facebook page. So humor me . . . what do you think it costs to build a relationship online?

You say, “it won’t work for nonprofits, nobody will develop a serious relationship online with us?”

Really?

You have heard of Match.com or eHarmony? Online match-making Web sites?? I’ve got news for you, not only are people developing serious relationships online, some are actually finding life partners and getting married. How does the seriousness of the marriage relationship compare to the seriousness of a nonprofit supporter relationship?

Keep focusing on transactions and watch your numbers keep declining. Or, start developing relationships and join the 1%.

Think you can’t change?

Join us.

-Mike

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