Direct vs Distribution Models

There are two models that work for digital fundraising and nonprofits need to understand both

Thanks for reading! Today is a bit of a concept piece (less stats) based on some thinking I’ve had for a while around Coca-cola’s business model and realisation that charities have a “distribution” problem if all they do is rely on their websites for digital fundraising. Enjoy and please share with any colleagues that might find it useful!

Everyone would prefer to work on Brand Ads

My background is in direct response digital advertising with International Development organisations. That means fundraising. It’s where I cut my teeth. In doing this I have met many people who don’t like direct response ads that “show the need” but would rather do amazing brand advertising.

We should “be more like Nike”.

(This is especially the case when people move from traditional ad agencies into nonprofit sector)

Of course, we’d all love to work on uplifting brand creative full of hope and joy vs hard-hitting direct response campaigns that show the hardship many people are suffering.

The reality is that direct response ads for fundraising work. By work I mean they produce a financial return. If you can stir people’s compassion, ask them to give and then take them through a smooth experience to donate they will work (most of the time). You can spend just the budget you have as every ad has to work for itself. It’s measurable down to the finest detail.

Brand advertising on the other hand takes a huge amount of budget to make an impact, is VERY hard to measure AND crucially relies on distribution.

Brand ads work when you have distribution

Let me explain.

In December, in the UK, on the run up to Christmas you will see a ton of brand advertising. Department stores, supermarkets, FMCG brands - all competing for your attention. The one that comes to mind as a good example is Coca-Cola. They do a lot of brand advertising at Christmas. Think polar bears, snow scenes and Santa and of course lots of shiny red colour.

But wait - there is no CTA (Call to Action). I’m not being asked to do anything. I just feel all warm inside.

All Coca-Cola have to do is associate themselves with Christmas. We like Christmas, Coca-cola hence we like Coca-cola.

This kind of advertising works for Coca-Cola because they have distribution.

Coca-cola is there at the supermarket (online or offline) when you are deciding what to get for the family coming over at Christmas. They are there if you go to the cinema. They are there if you pop in for a cheeky Big Mac. You don’t buy Coca-cola from their website. You don’t need to. They are everywhere.

Distribution is probably the biggest strength of one of the world’s biggest brands and it is a huge moat (competitive advantage) for them. If you have to build a drinks brand from scratch, the key problem you will face is distribution. This is why Innocent (the wholesome drinks brand) sold 10% to Coca-cola. To access their distribution networks. (Smart play by both companies).

It’s possible to have a successful business model without having customer data

If you think about it, Coca-Cola don’t get the contact data of their customers. I don’t have to give my email address when I buy a Coke! Imagine that. I’d just buy something else.

Sure they measure a whole heap of other data around their brand, sales and distribution - but they aren’t big into CRM.

Does this hold them back? Ah no - in 2019 they did $37 billion in revenue. They are not held back by “not having the contact data” 😂

So it seems there are two models going on here:

• Direct response - I get all the data

• Brand - I get no data but I have to have distribution

Do Nonprofits have any distribution?

You might think that nonprofits don’t have distribution but they do. Kind of.

If I’m in my local town of Stroud, Gloucestershire (I love Stroud by the way - come and visit!) at Christmas time and I take out a £5 note and throw it in the bucket of my local Youth charity who are fundraising on street - they got that donate because they had a person in front of me with a bucket. A point of sale. Distribution.

Every year Christian Aid mobilise thousands of volunteers to put the Christian Aid Week envelop through millions of doors. My wife Jenna actually used to do brand ads for this and they worked because of… Distribution.

If someone hosts a coffee morning and collects some small change from their friends - they got those donations because they act as a distribution channel. Distribution.

I’m sure you can think of other examples.

And similar to Coca-cola, you’ll notice there is no contact data for most these donations (there are exceptions like Face to Face fundraising, which is distribution where you do get contact data)

But how does distribution translate to a digital world?

What about websites - don’t nonprofits websites constitute distribution?

This reminds me of the classic line from the Kevin Costner movie Field of Dreams is often used by digital marketing consultants as an example of what NOT to do with your website.

“Build it and they will come”

ie. You can’t just build a website and expect visitors.

This is still so true.

You can’t rely on your website as a distribution channel. Websites are too passive. They require “finding” (which is why Google is such an amazing business). They are not in your face like the red Coca-cola labels attracting you from the shelf of your local shop.

What about fundraising that happens on other platforms that are less passive than websites? This is where I think things get interesting.

One of the most amazing things about Facebook fundraising is when nonprofits “turn on the tap”, then suddenly - whoosh. Donations fly in. I call it “magic money”.

So now we can actually say “Turn it on and they will come” - take that Kevin Costner! 😉

This is kind of a new type of online distribution and it’s not just happening on Facebook. Last week I wrote about PayPal Giving and how if your nonprofit shows up as someone’s favourite charity in the PayPal checkout, people are 5 or 6 times more likely to give.

Oktay Dogramaci (the VP of Giving at PayPal) said that PayPal was like:

giving all over the internet

Sounds a lot like the Coca-Cola model to me!

This time it’s less about Brand and more about Engagement

But being more specific here, what is happening is that the organisations with the most engaged community on Facebook are doing the best (fundraising wise).

A simple example of this is that when Facebook prompts people to set up a Birthday fundraiser the list of charities to choose from is based on my personal likes and engagement of their Facebook page. Not on their brand awareness. (Although a lot of the time the bigger brands have great engagement on Facebook meaning this point is overlooked).

But (and this is really cool) it’s NOT just the big brands that gain here. We know many smaller organisations who are more focus on social media engagement that have done really well by turning on Facebook’s giving tools.

In other words - in this new paradigm you don’t need a big brand, just an engaged community of passionate people. However small. As Seth Godin would say - your “tribe”.

“But how does it make money?”

For a long time nonprofit social media teams put up with the question “How do you monetise all this online community engagement?” (me included - hey, I’m a fundraiser!).

Not any more.

As 3rd party platforms get more into fundraising we are starting to see multiple models of how online community engagement brings in a financial return. And it’s way bigger than we thought.

As more and more giving happens on 3rd party platforms (the main trend this newsletter is about) we will see more and more distribution and for nonprofits it’s not brand that will help capitalise on this new distribution but instead community engagement.

And as part of this new distribution model (like many examples I mentioned above) the level of contact data you get is different to direct response.

Two models

So it seems like there are two models emerging for nonprofits when it comes to digital fundraising.

1. The Direct model

This is where people donate direct to the nonprofit and so the nonprofit has all the data. It relies on driving traffic to an “owned” website (usually direct response paid media)

2. The Distribution model

This is more reliant on building and engaging community (rather than just branding). As this is happening more on 3rd party platforms there is less contact data for supporters (similar to a coca-cola as we discussed above)

And you need both!

Where I think nonprofits sometimes get it wrong is that they think of digital fundraising as ONLY direct. They are not willing to accept that there is ALSO a growing distribution model online where they can engage their communities and build really powerful long term but in a different way.

I’d love to know what YOU think.

I’d love to know what you think. This concept is still forming in my head.

Anything I haven’t considered or that you see differently? Would love to know - comment below and let’s discuss! 👇