Applying the Pareto Principle in Fundraising
In the early 1900’s, an Italian economist named Vilfredo Pareto noticed that 20% of the pea pods in his garden contained nearly 80% of the total peas in his crop. He later went on to observe a similar trend in real estate, noting that 80% of the land in Italy was owned by only 20% of the population.
The Pareto Principle is significant in fundraising too. In any campaign (large or small, annual or capital) you can expect most of the funds you raise to come from a disproportionately small number of your donors.
But don’t get caught taking a short-term view of your donors and the impact that they can have on your organization. While one donor may not have the capacity or inclination to make a large gift today, it doesn’t mean that they won’t do so at some point in the future. In fact, many institutions’ largest gifts come from donors whose initial gifts were significantly smaller or made many years earlier.
Good annual giving programs prioritize participation and stewardship at every level. They underscore the importance of lifetime value and they understand that while today’s seemingly insignificant gift may not be critical to reaching your goal for this campaign, it may be critical to the success of the next campaign.
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