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What you may not know about how the arts in the US are paid for …

Kara Larson is the founder and principal of Arts Knowledge, a marketing consulting firm specializing in the arts. She has worked in nonprofit administration for over 20 years, and held senior staff positions in marketing and communications with arts organizations across the US, including Carolina Performing Arts, San Francisco Opera, and the Glimmerglass Festival. In this post Kara dispels a few myths about how the arts in the USA is funded.

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First, let me say I’m sorry. After a career in US nonprofits, I have to admit that my colleagues and I may be partly to blame for the trouble you find yourselves in. If we hadn’t gotten so good at funding the arts through private contributions, it might never have occurred to your current government to meddle with your funding. Mea culpa.

The DCMS report; Funding of the Arts and Heritage says that ‘there is more potential for arts and heritage bodies to gain extra funding from philanthropy and private investment’. And many of you wonder; is there?

I suspect that there is, but first,  two things have to happen; a lorry-load of misconceptions about US-style fundraising needs to be cleared up, and UK arts administrators need to think differently about why and how people donate, and why and how to ask them.

What you think you know – just ain’t so …
Repeated misconceptions about US fundraising include:

  • most of the money comes from corporations (in reality, it’s 4%);
  • most of the money comes in major gifts from wealthy people (in reality, average gifts are $100-200);
  • fundraising events bring in lots of money (in reality, they lose money hand over fist);
  • Americans give because of favorable tax laws (there’s some truth in this, but only some);
  • and Americans have a culture of giving absent in the UK (in reality, 2-4% of people anywhere in the US donate to the arts).

It is the people who value the arts who give to make sure their arts organisations thrive. The amount of corporate support for US charities across the board is small:

  • 75% of charitable giving comes from individuals (this figure does not include bequests, which of course are also gifts from individuals)
  • 4% of charitable giving comes from corporations1

Yes, wealthy people in the US donate to the arts. Once or twice every year, newspapers trumpet multi-million dollar gifts-but keep in mind that they make news because they are unusual. Overall, 30-40% of individual gifts come from households earning less than $200,000/year.2 And, wealthy donors may not be giving that much more than others. For donors with annual income:

  • less than $50,000 the average gift is $344;
  • $50-100,000, $326; and
  • $100,000+, $574.3

With regard to special events, Dame Vivian Duffield told the DCMS, ‘I was in New York last week and there were three fundraisers every night …. It’s an absolute nightmare’. She will, I’m sure, be comforted by the news that, with all due respect to those who love them, charity fundraisers are a bust.

In the US, charities spend $1.33 to raise $1 in special event contributions; arts organizations spend an average of $1.80 to raise $1.4 This of course immediately raises the question of why they persist in putting on these events. (The study cites ‘raising awareness, rewarding members, cultivating prospective donors, PR exposure, brand building’ as reasons: I leave it to you to decide if there are more cost-effective methods of achieving those results.) 

I strongly suspect that the tax benefits of charitable giving are given much more credit than they are due. Amounts donated to charities may be deducted from US total income before taxes are figured, but for all but the largest givers, the amounts are small compared to other deductions (for home mortgages, health care costs, retirement savings, etc.). Deductible donations are limited, and the alternative minimum tax exists, in part, to make sure that taxes are levied despite large deductions. Ed Zakreskie, chief development officer for the Shakespeare Theatre in Washington, DC, says, ‘I have never heard in any conversation with any donor that the tax deduction is a primary motivation for giving’.

People often point to year-end giving as evidence of a tax effect (assuming that donors hurry to give before the end of the tax year), but data on motivations for giving show that of donors giving in the last 6 weeks of the year,

  • 38% say that they gave in the ‘spirit of the season’
  • 30% say they gave in response to a charity’s year-end appeal, and
  • 10% say they gave for tax reasons.5 

You already have the answer
Let’s face it, some things you can change and some you can’t. It is possible that there are quantities of donors out there who can give very large gifts but who aren’t already. It’s possible that UK corporations will step up and begin funding the arts fundamentally differently than they have. And it’s possible that the government will perform a brisk about-face and restore arts funding. But you can’t make them.

But regular ordinary people are a resource you have in abundance. And you can change them, at least some of them. You can turn them from patrons into donors.

In 2009, Arts & Business surveyed arts organizations outside London to learn about their donors who gave in modest amounts6. The results (which I had not seen until I started writing this blog) mirror every study I have seen regarding donor motivation and habits in the US.

Low- and mid-level donors (under £1000) give, can be motivated to give more and are already beginning to do so. I know that there are cultural differences. That people in the UK are less conditioned to donate to anything, but there are approaches that get patrons to give and give generously.

People give money to organizations they believe in, value, and attend. Ninety percent of the donors in the Arts & Business survey attended the organization to which they donated three or more times in the preceding two years. The top motivators for giving were preservation and development of the art form, a personal connection to the organization, civic responsibility, personal appreciation of the experience, and being asked directly.

Fundraising at this level is fundamentally an exercise in marketing. Your product is your organization. If you aren’t putting as much effort into cultivating your patrons as you do into acquiring them in the first place, you should:

Tell people that you need them
It’s very likely that most of your patrons and supporters don’t know where your money comes from. And it may not have occurred to many of them that you need their help. Start explaining to your patrons what the support of individual donors means to you. Of the barriers to giving cited by organizations in the Local Pride study, number three was ‘donors unaware of need for support’.

Give them reasons to give
Charitable giving can be purely altruistic, but it can also be a matter of self-interest. People are quicker to give when they get something out of it. Friends schemes, donor benefits, and loyalty programs are all ways of making sure that people who give more get more. Rewarding donors with access, insight, or priority powerfully motivates giving. If the transactional nature of the resulting relationship bothers you, try thinking about it this way; people give from a personal connection to organizations, and these are ways to connect with them. Donor-only lectures, priority ticket buying access, special service at the box office, parking passes, invitations to rehearsals etc., when tied to donor status can all be reasons for people to give. Small donations should accrue small benefits, larger donations more.

Ask nicely. Now do it again.
How many times do your patrons get asked to give? One of the doubts about UK arts being able to approach a US style fundraising program has its roots in a perceived ‘culture of giving’ in the US. It’s possible that what the US has is really a ‘culture of asking’. We ask each and every patron to give: to add a gift at the box office or on their order form, to click a ‘give now’ button on our website, to respond to annual (or more frequent) mailed appeal letters, to make special gifts in support of specific programs. And then, having received, we ask again.

Say ‘thank you’
The most successful US fundraisers spend as much time saying ‘thank you’ as ‘please’. Very large organizations have full-time employees whose job is processing and acknowledging gifts. It’s a chore, setting up systems that ensure that every gift giver is fulsomely thanked, but a worthwhile one, don’t you think?

Every patron who buys a ticket to see what you do, every parent whose children benefit from it, every person who cares about your city’s reputation as a good place to live or work, every business whose roots are deep in your community can and should be asked to give. Demanding support won’t work. Lamenting the lack of support won’t work. Making connections with everyone who cares (or could be made to care) and asking, in the spirit of humility, for support can work.

I would never suggest that modest individual gifts could fill the gap left by lessened government spending. And spending the time to ask for, process, and acknowledge quantities of small gifts can be taxing. But overdependence on one source of revenue is dangerous. It’s not your job to foster a national culture of giving. But it is very much your job to foster a local culture of giving to you.

1Giving USA 2009 (a report compiled by the American Association of Fundraising Counsel)
22010 Study of High Net Worth Philanthropy, published by the Center on Philanthropy at Indiana University
3American Express Charitable Gift Survey, 2007
4 Charity Navigator 2007 Special Events Study
5 American Express Charitable Gift Survey
6 Local Pride: Individual Giving to the Arts in England, Arts & Business 2009

Permission to fail

Replanting the garden

The garden has been re-planted. In most parts it’s looking remarkably similar to before, (albeit with ‘pruning’ and reshaping). However, there’s also an experimental patch of new species which may or may not cross-pollinate with the rest of the garden and of course there are now some significant holes.

It’s not our place here to assess the strengths and weaknesses of the various funding decisions made by Arts Council England or to make political statements. We should also remember that there are three other countries in the United Kingdom with their own systems and that there are also arts organisations which exist outside of the subsidised funding system. Nevertheless, there are some interesting trends of note for arts marketers.

As has been extensively reported, none of the Audience Development Agencies in England were successful in their National Portfolio bids. There was a strong statement in the Audiences UK blog and since the original announcements, Arts Council England has said they will be funding the agencies in other ways.

It’s worth point out though that there seems to be a trend away from ‘agencies’ in general. Is this part of a drive to ditch anything that could not be thought of as ’frontline services’, one of the more dreadful terms to have been banded about in the last couple of years?

Roadworks 
 

On the Frontline

Frontlines are easier to defend in the current climate because they tap into a media driven agenda about supporting ‘Bobbies on the beat’ and nurses as compared to the pen pushers of the NHS or police bureaucracy. I’m not sure what the arts version of this is but I suspect it might involve ‘audience development’ given what Eric Pickles said about the matter last year.

‘Frontline services’ is a military metaphor; it divides our brave heroes from the cowardly commanders who send them to the frontline. But it’s worth remembering that an army’s frontline does not exist in isolation. ‘An army marches on its stomach’ as Napoleon apparently said; reminding us of the importance of supply chains, the people who run the payroll, supply the medicines, look at best deployment of resources, stimulate the audiences …

Many of the now established theories and practices of arts marketing were created, paid for and developed by the network of audience development agencies over the last two decades. Do you remember ‘Test Drive the Arts’, produced by Arts About Manchester way back in 1993? Or ‘Fast Forward’ co-ordinated by Eastern Touring Agency in 1996? I know these are ‘a long time ago’ but it shows how embedded the ideas from these sorts of projects have become in our work now. Have a look at the conference reports from any Arts Marketing Association conference and you will see the influence of the agencies.

Permission to fail

Seth Godin, in his book, ‘Free Prize Inside’ says: ‘the more you to try to play it safe, the more likely you are to fail’. In the 2003 project ‘Not for the likes of you’ (Produced by Morton Smyth and commissioned by Arts Council England, the Museums, Libraries and Archives Council the Heritage Lottery Fund and English Heritage) there is a lovely quotation from David Fleming, of National Museums Liverpool: ‘I know I’m going to make at least six mistakes every day.  Why would I expect any less of my staff?’

These points are incredibly important, yet as arts marketers we are under pressure to keep delivering audiences, visitors, participants, customers day in day out without much room for experimentation. No-one likes failure when it means the embarrassing empty house, the loss-making event, the difficult partnership, but I’m afraid we have to remember that making mistakes is part of being successful.

The audience development agencies have many great roles but I’d like to point to a key one here – which is their role in leading ground-breaking initiatives, trying things out that might fail, and then discerning the key learning points and passing these on to us as arts marketers.

We need to keep trying out new ideas and practices otherwise how will we make progress? This is where audience development agencies come in, so let’s not get carried away with these backward ideas about frontline services.

I think we are all looking forward to finding out how the audience development agencies will continue to be supported.

Jonathan Goodacre

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