Cause-related Sporting Events as a Fundraising Tool for Non-Profit Organisations

Abstract

This report investigates physical activity running events as a fundraising tool for organisations in the Third Sector. With circa 50% of non-profit organisations relying on income generated from special events, physical activity fundraising events are becoming more and more popular. Staging fun runs is one of the most employed formats of physical activity fundraising events. By collecting information and evidence from academic literature, the aim of this piece of work is to explore the opportunities and challenges posed by physical activity running events for Third Sector organisations. With an in-depth literature review, this empirical work highlights the three main objectives of this fundraising tool: (a) the aim for revenue generation, (b) the key aspect of raising awareness of the non-profit organisation and its cause, and (c) the goal of attracting as well as cultivating financial contributors. The findings imply that running events are not the most cost-efficient fundraising tool and sometimes initially cost more to raise a dollar; however they have many advantages and offer lots of opportunities to Third Sector organisations. Yet, many organisations fail to exploit the full spectrum of potential benefits offered by physical activity running events.

1. Introduction

The idea of staging marathon fundraising events has become more and more popular over the last decades. The concept was first introduced at the London Marathon and established itself in the USA during the late 80s and early 90s (Allison 2010). Utilising sporting events as a fundraising tool is a relatively new method compared to the traditional fundraising events such as coffee mornings and small-scale town celebrations (Crane and Williams 2004). With the increasing number of mass- participation running events (Nettleton and Hardey 2006), the question arises whether or not running events are a successful fundraising tool for non-profit organisations (Higgins and Lauzon 2002). This report provides evidence from academic literature to elaborate on the research question. It will detail on the advantages as well as disadvantages of this fundraising concept for non-profit organisations.

2. Methodology

This report focuses on secondary research building upon existing data. By collecting information and evidence from academic literature, the aim of this piece of work is to explore the opportunities and challenges posed by physical activity running events for Third Sector organisations. The Literature review will detail this fundraising tool without discussing the impacts of sponsorship and volunteering at physical activity running events. By doing so, the information provided by others will be evaluated critically and, hence, highlight the positive as well as challenging aspects of special fundraising events (Steward and Kamins 1993).

3. Fundraising in the Third Sector

Non-profit organisations need to generate revenue to support their charitable causes (Saxton, Burrows and Wolff-Ingham 1996). As non-profit entities are resource dependent, it is necessary for them to attract funds from external sources to survive in the market, sustain their existence and to develop (McGee and Donoghue 2009). Donations are the main source for revenue, and to attract such monetary funds, organisations engage in fundraising activities (Jacobs and Marudas 2006). Fundraising is defined as “the activity or profession of obtaining money for charitable organizations” (Goldblatt and McKibben 1996, p. 77). For most non-profits fundraising operations are vital as such organisations could not operate sufficiently without receiving voluntary funds (Mullin 2002). Hence, it is the main goal for them to make fundraising activities as effective and efficient as possible (Aldrich 2009). Not-for-profit entities operate in the same competitive environment as for-profit companies (Freedman and Feldman 1998). In these surroundings, organisations compete for donations as people usually contribute to the non-profit they perceive as most matching to their giving interest (Saxton, Burrows and Wolff-Ingham 1996). The market for not-for-profits is becoming more and more intense as an increasing number of organisations are part of the Third Sector (Ciconte and Jacob 2009; Weberling 2012). As of 2008, over 1.5 million not-for-profits were registered in the USA (Wing, Roeger and Pollak 2010). In England and Wales a total of over 162,000 charities were registered in the first quarter of 2012 (Charity Commission 2012). The intense competition is not only a result of the number of participants in the Third Sector; it is also linked to the challenging global economic climate. In a recent survey 31% of 1,600 non-profit organisations stated that contributions dropped in 2011 compared to the previous years. Further, 41% of the survey respondents revealed that they did not meet their fundraising goals for the fiscal year 2011 (Flandez 2012). With a total of $290.89 billion in charitable contributions in the USA alone, the non- profit fundraising sector is clearly significant (Giving USA Foundation 2011).

4. Fundraising Events

There are many fundraising concepts and strategies, which can be utilised by organisations. In recent years online giving has been the most popular instrument. However, special events remain the second most popular fundraising tool (Flandez 2012). A fundraising event is “an event whose purpose is to raise funds for a charitable cause and to identify new sources of support” (Goldblatt and McKibben 1996, p. 77). In 2010, the total charitable contribution from American individuals, corporations, foundations, and bequests accounted to $290.89 billion (Giving USA Foundation 2011). In the USA about 50% of non-profits rely on income generated from special events (Higgins and Lauzon 2003). As such events are cause-related, they are not only established to raise monetary funds but also to promote the cause of the organisation as such (Getz 2007). Events are popular fundraising methods as they offer people something in return for their money. This creates a more tangible benefit than merely making monetary contributions for the charitable cause (Levy and Marion 1997). As this format of making charitable contributions is similar to a traditional market transaction, this type of fundraising is attractive for organisations as well as donors (Higgins and Hodgins 2008). Within physical activity fundraising events, fun runs are the most popular type (Higgins and Lauzon 2003). Sport fundraising events link the popular aspect of sports participation and the consumer shift towards social awareness together (Filo, Funk and O’Brien 2010). Hence, an increasing number of these special events involve some form of physical activity (Higgins and Hodgins 2008). Running events with a fundraising purpose can be found for different causes such as cancer, multiple scleroses, diabetes and stroke. In such events, the participant is required to raise monetary funds via donations and pledges. Further, participants usually pay entry fees to guarantee their involvement. Sponsoring a sport fundraising event participant has become one of the most common forms of donations (Wood, Snelgrove and Danylchuk 2010). Donors have a wide variety of different fundraising runs to choose from. For instance, the Avon Walk for Breast Cancer is a marathon walk which is staged over the course of a weekend. Event contestants have to raise a minimum amount of $1,750 (ONS News 2003). In 2010, 22,000 people participated in the event that benefits the Avon Foundation for Women and raised an average of $2,500.00 per runner. Relay for Life of the American Cancer Society is the biggest charity sport event with over 3,000,000 participants in 2010 who raised a total of $416,500,000 (SmartMoney 2011). Relay for Life is a sport fundraising event where members of each team take turns walking or running around the track for the duration of the event (American Cancer Society 2012). Step Out: Walk to Stop Diabetes is a fundraising walk organised by the American Diabetes Association. Over 150,000 people participated in over 130 walk events to raise over $20 million in 2011 (American Diabetes Association 2012). There are many more sport fundraising events with the top thirty run, walk and ride fundraising programmes raising $1,698,711,122.39 in 2011 by staging over 36,000 events with over 11,616,000 participants. This clearly shows the magnitude that physical activity fundraising programmes have in the setting of non-profit organisations (Run Walk Ride Fundraising Council 2012).

5. Objectives of Fundraising Events

Generally, special events with a fundraising goal have several objectives which also apply to physical activity running events. Firstly, they aim for revenue generation. Secondly, a key aspect is to raise awareness of the non-profit organisation and its cause (Taylor and Shanka 2008). The third key aspect is to attract and retain financial contributors (Webber 2004). These three objectives, the advantages, and disadvantages of special events to achieve these goals are to be highlighted in the following section.

5.1 Revenue Generation

Generally, special events simply create an opportunity for participants to make monetary gifts (Cox 2010). However, as special fundraising events are a short-term effort with an unknown pay-out, the effectiveness and productivity of this tool for revenue generation is becoming an increasingly important factor (Higgins and Lauzon 2003). As sporting events gain popularity within the setting of non-profit organisations, their cost-efficiency as a fundraising tool has been emphasised (The Chronicle of Philanthropy 2011). With a break-even analysis the contribution of a specific project to a cause can be determined. For an event to break even, the sum of contributions must equal the overall costs. Fundraising events can be considered a risky venture as they have a lower probability of breaking even than other fundraising activities. To generate a profit, contributions must be greater than the cots (Sayer 2007). Deductively, an event is not worthwhile if its costs exceed the net yield generated as the resources invested failed to produce a productive fundraising event (Higgins and Lauzon 2003, Webber 2003). In many cases, 50% of the funds raised are eliminated by the costs of staging the event itself (Levy and Marion 1997). Due to these overheads, not the entire amount of money donated actually benefits the charitable cause (The Chronicle of Philanthropy 2011). For a one-day fun-run the funds would typically be allocated as follows: runner supplies 19%, structural items such as tents and toilets 16%, security 15%, and fundraising commissions 2%. This leaves 48% as net proceeds to the charity itself. Consequently, it is not surprising that special events are one of the most expensive fundraising methods with a cost of 47% to 50% every dollar raised. As other methods like direct mail and accepting major gifts are less costly with a loss of only 10 to 22 cents per every dollar raised, one can expect a greater return on investment from them (Kadet 2011). On the other hand, studies have shown that if donors are actively involved, they are willing to contribute about ten times more than those who are not. Hence, engaging in sports fundraising events and encouraging donors to participate might reap lucrative sources of income for the future (Higgins and Lauzon 2003). Yet, when staging an event, there is always a financial risk that has to be taken into account. Problems can arise and might be out of the control of the organisation such as interference of a new competitor, other events being staged, unforeseeable weather conditions and natural disasters. Those factors can then have a negative impact on the event itself and especially its financial viability (Warnett 2004). Furthermore, there is also a risk of fundraising dependency if an organisation’s existence is reliant on one particular event as it attaches itself to a sole source of financial revenue. Other sources of revenue could be government grants, membership fees, interest from investments et cetera. By not relying on only one source of income, the financial risks of a non- profit organisation is spread out and not as much pressure is put onto the success of one particular event (Zappala and Lyons 2006). This section clearly highlighted that special events are not the most cost-efficient fundraising tool as staging them is connected to high costs. At the same time, risk factors have to be taken into consideration.

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