Every nonprofit needs money if they want to make a difference in the world. One of the most common ways nonprofits raise money for their causes is through pledges and donations.
In this article, we will explain how a pledge vs donation differs, as well as the benefits, challenges, and fundraising methods for each. We will also go over key considerations to help you determine which one you should pursue at your nonprofit organization.
Let’s get started.
Overview of the Topic: Pledges vs Donations
As you’re probably aware, the amount of income a nonprofit receives on a weekly, monthly, or even yearly basis can vary tremendously.
This is why diversifying your revenue streams—including through pledges and donations—is key to financial sustainability.
Definition of "Pledge" and "Donation"
Let’s begin by looking at the definitions of a pledge vs. donation.
In general, a donation is any gift—monetary or otherwise—that an individual or an entity makes to a nonprofit.
Donations tend to come with no expectation of receiving anything in return. While donors can choose to donate whenever they would like, donations are almost always given on the spot, which makes immediacy one of their defining features.
By comparison, a pledge is a statement that a gift will be given to a nonprofit some time in the future. Essentially, a pledge acts as a promise to donate. Pledges are often tied to specific campaigns or capacity building projects.
There are many differences, both big and small, between pledges and donations.
It is important to understand that these two types of charitable contributions have their own unique processes, considerations, and strategies associated with them. Because understanding these distinctions is key to creating an effective fundraising strategy, we will go over them in more detail later on in the article.
Now that we’ve quickly defined donations and pledges, let’s dig a little deeper into their concepts, processes, and benefits.
Deep Dive into the Concept of Pledges
As we established earlier, a pledge is a promise to donate something in the future. Both the value amount and the timeframe in which this exchange will take place is determined when the pledge is first made.
For example, in May at a fundraising gala, a person may pledge to donate $500 dollars by December 1st of that same year.
Typically, pledges can be separated into two different types. These are the unconditional pledges and the conditional pledges.
Just as the name implies, unconditional pledges are pledges made with no specific conditions. They are not necessarily tied to any specific campaign or project, and they are not necessarily restricted by other obligations.
Conditional pledges, however, typically come with specific conditions that must be met by both parties. For example, a donor may make a pledge to an animal shelter under the specific condition that said funds will be used to buy food for the animals.
On the flip side, an educational nonprofit might accept pledges under the condition that they will be fulfilled before the start of a new school year.
One of the most common ways pledges are made is through matching-gift campaigns, where companies pledgeto match whatever charitable contributions were made by their employees.
Before you can start taking pledges, the first thing you and your team need to do is create a tracking system that will allow you to easily monitor all of your different pledges.
Next, just like with other fundraising methods, you want to make sure it’s easy for your supporters to make their pledges.
For example, if they are going to fill out a physical form and send it through the mail, make sure to provide a stamped envelope with your address already filled out. Like with any fundraising strategy, don’t forget donor management best practices.
There are many ways in which a person or entity may make a pledge. These include, but are not limited to:
Pledge Cards:- Simple cards your donors can fill out with their intended pledge amount (these are best for in-person events like fundraising galas)
Pledge Forms - Forms your donors can fill out with their intended pledge amount plus space for their payment information
Phone Calls - Phone call solicitations where you reach out to potential donors and asks if they are willing to make a pledge to your nonprofit
Text-to-Pledge- Text campaigns where potential donors can opt to make a pledge to nonprofits via text message
Pledge Page - A page on a nonprofit’s website with information on how to make a pledge
Regardless of the method chosen to solicit the pledge, you need to ensure that you collect the following information:
Donation frequency (if applicable)
Any restrictions or conditions for the pledge
After receiving the pledge, you’ll need to send reminders to your donors (be it through letters, emails, phone calls, or all of those options) in case they either forgot about their pledge or lost track of time. It is important to determine beforehand when you’ll be sending out those reminders, though it is usually recommended to do so a few weeks before the payment is due, just in case the donor needs some time to prepare.
Follow-up emails can be sent if the payment doesn’t go through (after all, just because the payment is late doesn’t mean the donation won’t happen at all).
It is also important to demonstrate your gratitude toward those making pledges, as that will increase the chances of said donors making more pledges in the future.
The Potential Benefits and Challenges of Pledges
One of the biggest potential benefits of pledges relates to audience engagement.
Because pledges are not one-and-done affairs, they give you the chance to engage with the donor for a longer period of time. You can use that as a way to court the donor into becoming a continuous supporter, sending them updates on how the campaign is going or other projects you have in the works.
When creating your pledge strategy, try to think of all the different ways you can take advantage of this window of time to keep your donors actively engaged in your nonprofit. If successful, then that enthusiasm should outlast the pledge’s due date.
Another great benefit to pledges is that donors who cannot afford to give a lot right away or at one time can still do so over time. Consider perhaps a university student who is passionate about a cause but cannot afford to make a full donation immediately; a pledge might be a great way to secure their support while accommodating their circumstances.
Similarly, it could be that a person is expecting to receive a bonus from their work or even an inheritance in a few months; they might want to make a pledge before actually having the funds on hand.
That being said, one of the challenges you’ll be facing when taking pledges is ensuring they are fulfilled in time. For this reason, it is recommended you create your budget and projections with some wiggle room in case you are not paid or the payment comes a little later than expected.
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Now that we know more about pledges, it is time to dive deeper into the world of donations so that we can better compare these two forms of giving.
Deep Dive Into the Concept of Donations
Donations are the most common way nonprofits receive funding.
As we mentioned earlier, donations are an immediate, upfront payment given to support an organization and its cause. In most cases, they are a tax-deductible expense that can be made either one time or on a recurring basis. They can usually be given at any amount, from a few dollars to a few thousand.
For example, if you run a nonprofit animal shelter, you may accept donations of food and toys to keep the animals fed and entertained. If you run a nonprofit focused on promoting art education for children, you may accept donations in the form of art supplies.
Explaining the Donation Process
Just like with pledges, in order to accept donations you first need to ensure that you have the structure to properly process them. That means that if you are receiving monetary donations, you need to ensure that your bank account is ready to receive money from different parts of the country, and if you are taking item donations, then you need to have the space to store them until they are in use.
Like pledges, nonprofits can solicit donations at fundraising events, through annual appeals, with direct mail, and more.
One of the most important things to remember about the donation process is to provide your donors with a receipt so that they can use it as proof when they file their taxes.
Finally, be sure to send out an email or letter thanking your donor for their support.
The Potential Benefits and Challenges of Donations
The most obvious benefit of donations is their immediacy and simplicity. Easy to process and easy to see through, donations are quick affairs that make them especially suited for urgent manners.
Furthermore, with donations, you don’t need to worry about whether a payment will be made on time or not.
However, one of the biggest disadvantages of donations is that they don’t always engage donors for long periods of time. Because of their simplicity, it is very easy for supporters to make their one-time payment and then never think about the nonprofit again. This is one of the many reasons why having a smart outreach strategy is so important for nonprofits.
Now that we understand what pledges and donations are, it’s time to more closely compare them.
Key Similarities and Differences
The major similarity between pledges and donations is that they are both fundraising commitments that require an entity—be it an individual person or a company—to give money or assets to a nonprofit with no expectation of receiving anything in return.
And unlike grants, neither donations nor pledges require the nonprofit to go through an application process.
However, as you’ve probably gathered by this point, the main difference between pledges and donations comes down to timing—a pledge is a promise to donate at a later date, and a donation is a payment you make immediately.
As such, when creating strategies for these two different types of fundraisers, it is important to take the question of timing into account.
By looking at the World Wildlife Fund’s website, we can see real life examples of the different ways a person can donate now or pledge to donate later.
Factors to Consider When Choosing Between Pledges and Donations
While we recommend you incorporate both pledges and donations into your fundraising strategy, here are some factors to consider when deciding which one to prioritize depending on your goals:
Type of Cause or Campaign
Because of the timing difference, pledges and donations will be suited for different types of campaigns.
A pledge might be useful for a long-term project, such as a capital campaign. By contrast, donations are especially useful to cover urgent, immediate needs or causes.
Just as with everything else, it is important to consider your target audience when planning how to use pledges vs. donations.
Because donations require minimum engagement and commitment, they tend to be a great way to reach new leads. While not all of them will immediately translate to recurring donors, donation campaigns can be a great way to spread awareness about your work.
For the same reason, pledges are better suited for well-established supporters that you can trust to make their payments and who are already invested in your cause.
For tips on how you can harness your storytelling skills to reach your target audience, check out this post on our blog.
When it comes to financial considerations, pledges tend to encourage individual donors to give larger amounts of funds. This is thanks to the fact that pledges do not require an immediacy of giving and can be planned for well in advance.
However, as mentioned before, one of the main downsides to pledges is that they are less reliable than regular donations. You are, after all, taking someone’s words that they’ll be donating by the timeframe given. Therefore, while pledges may come in larger amounts, they can come less frequently and can be given by fewer donors.
Needless to say, timeframe is one of the most important factors to consider when deciding whether to prioritize pledges or donations.
In general, pledges work better for campaigns that are stretched out over a longer period of time. They lack the urgent immediacy one might expect from regular donations (though that does not make them any less important) and so, funds can be received within a flexible time frame.
On the other hand, donations are better suited for raising money quickly.