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iThe Cone Communications Millennial Employee Engagement Study

Crowdfunding or Peer-to-Peer?

December 21, 2016

These terms seem almost interchangeable when you hear about fundraising these days. And although they do overlap in some areas they do have important differences. These differences are what makes one a better fit for specific fundraising functions.  

 

Crowdfunding is a way to raise funds using the power of Social Media in addition to your usual donor base. Generally, it is used to fund a specific project or maybe even a new program.  For crowdfunding to be successful you have to market your campaign and update your social media sites to keep your existing donors engaged and attract new ones. 


There is a fair amount of preplanning that has to occur, including a marketing plan which normally includes a video along with the written call to action. You will also want to rally your supporters to spread the word via their social media contacts as well as ‘prefund’ your campaign before you launch it. If you are going to ‘reward’ or thank your donors, you’ll want to establish the levels and gifts.  


The positives include accessing a new, larger group of potential donors, attracting media attention and the ability to analyze your results. On the downside – almost 70% of crowdfunding campaigns fail to reach their goals, you and your organization do have to invest the time to create and then execute the marketing and community relations plans. 


Peer-to-peer fundraising is more often utilized when your organization is having a run/walk or something similar. Platforms that support peer-to-peer fundraising allow each participant to have their own page and goal to raise money for the charity. These are very popular with school age children in the form of Jump-a-thons, etc. where the child raises money base on the number of jumps. 


The real benefit for the nonprofit is each individual advertises or markets on their own, so the organization does not have to do it. Because each participant is reaching out to their own family and friends, whether or not they are familiar with your organization’s mission is usually not important because the supporters know the individual asking for their help.  


Keep in mind that your nonprofit will likely have to train and support the individuals participating in the fundraiser.  These can easily require a big chunk of time on your part.  You also won’t be reaching these potential new donors directly so its highly likely that this will be a one-time donation.
 

There are similarities in these fundraising models, especially when you consider Team Crowdfunding. Team members have their own page and raise funds towards the team’s goals. Often there is a friendly competition between teams and the nonprofit may award prizes for most funds raised, largest # of donors, etc.  It is possible for a peer-to-peer funding campaign to attract media attention and for it to go viral which provides
the nonprofit access to a whole new donor base. 


So what should our nonprofit do – crowdfunding or peer-to-peer?  Probably both at some point.  If you have a specific project to fund, a crowdfunding campaign using Social Media to spread the word is a great solution.  As stated above you have a much larger footprint, you reach more potential donors and you can add them to your role of supporters.  But there are times when a peer-to-peer solution is the right choice such as with events and even a general fundraising campaign where you have supporters reach out personally to their contacts. You may lose the opportunity to add that donor to your roles, but more likely whoever brought them in will help you continue to contact them. 


We are fond of saying here at Digital Donations that crowdfunding should be another resource in your fundraising toolbox and so should peer-to-peer. The more ways you reach out, the more likely you are to raise the funds you need. 

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