Marketing consultant suggests ways of inflation-proofing donations and legacies
Howard Lake | 18 May 2006 | News
Can fundraisers do anything now to counter the effects of a future period of higher inflation? Marketing consultant Andrew Papworth shares a few ideas in the latest edition of his occasional newsletter ‘Harvest’.
Papworth points out that, even with retail prices rising at around only 2% per annum, regular donations lose nearly 10% of their real value in five years. A period of higher inflation would erode that value even faster.
Indeed, we don’t need a return to the double figure inflation figures of the 1970s and 1980s for it to hurt: the inflation rate has only to creep up to 4% per year to inflict an 18% drop in the value of fixed regular donations over five years.
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What can fundraisers do to reduce the impact of such inflation figures? Papworth suggests testing the idea of asking donors to choose to index their gifts to Treasury forecasts of the retail price index (RPI) given in the Chancellor’s budget for the year ahead when they sign their regular direct debit mandates.
He cites the example of a charity attempting to achieve this result. The Whale and Dolphin Conservation Society recently raised members’ subscription direct debits by £1 per month unless they opted out of the increase. However, the charity received negative publicity in the press for the action. Guardian financial journalist Philip Inman claimed that the information about the rise was ‘buried’ on page two of the accompany leaflet.
The WDCS however pointed out that they’d received only three complaints in a test mailing to 2,800 donors and added that the price rise was mentioned as a postscript in the appeal letter.
Papworth suggests that a clear, genuine and transparent option for donors to tick to inflation-link their variable direct debits might just work.
In another article he looks at how legacies can be affected by higher inflation rates. He suggests that more effort is made in educating legators to leave either residuary bequests or leaving a percentage of the estate. Both of these are better protected against inflationary erosion which can quite easily turn a specific sum of money into a fairly paltry sum when the charity eventually benefits years later.
‘Harvest’ also includes Papworth’s critique of the new monday lottery from Chariot. He argues that the heavy bias towards charities concerned with diseases, disabilities or children negates the claim that the new lottery offers punters a real choice of beneficiaries.
”Harvest’ is mailed free on request to charity marketers.
About Howard Lake
Howard Lake is consultant editor of UK Fundraising. He founded the site in 1994 and successfully sold it in 2022. As director of Giving X Ltd he is exploring growing giving on a massive scale.
He is the founder of Fundraising Camp and co-founder of GoodJobs.