The Impact of Digital Transformation on Fundraising for the Arts

Introduction

Arts organizations typically follow three golden fundraising principles in their everyday practice that third-sector organizations adopt across domains (Hopkins & Friedman, 1997; Byrnes & Martin, 2009; DeVeraux,

2015) .

The very first principle is known as the “people” rule. Based on this principle, one of the key successful factors in fundraising is building relationships because, according to the well-known adage, “People give to People for other People” (Rosso, 1991). The arts are no exception to this rule. In fact, socialites who enjoy fundraising events and give because it is a major part of their social life and standing (Prince et al., 1994) are a significant part of the donors’ bases of arts organizations. Socialites typically rely on their social networks to increase support for their preferred organizations, a treasure that fundraising units in the arts organizations nurture and renew very often. The importance of relationship building in arts fundraising is evident, in some ways, if we look at another important segment of prospective donors in the arts: dynasties (Prince et al., 1994). The value and importance of philanthropy and giving are instilled in this type of donor beginning in childhood. They typically support organizations that are important to family traditions. However, they are also driven to increase their reputation among peers, which motivates donations, involvement, and engagement in the social fabric of arts organization.

The second principle that arts organizations typically adopt in raising funds is the so-called “constituency” rule (Worth, 2016; Tempel et al.,

2016) . Based on this principle, stakeholders who are closer to the organization set the pace of giving. As a matter of fact, arts organizations in the United States have hybrid funding formulas mixing features of “beneficiary builders” and “member motivators” type of organizations (Landes Foster et al., 2009). On one side, a large proportion of arts institutions’ revenues comes from the “price” (i.e., the ticket) paid by the beneficiaries of the service (i.e., the audience). Admissions or ticket sales do not cover the cost of the service delivered (Baumol & Bowen, 1966), and arts institutions engage

The impact of digital transformation 245 in development strategies that typically begin by “upgrading” ticket buyers to members and donors. On the other side, theater and museums increase contact with members (and donors) with a program of educational opportunities and social gatherings that fulfill members’ social needs and further drive donations.

The third fundamental principle in arts fundraising is what might be labelled as the “mission” rule (Hopkins & Friedman, 1997; Byrnes & Martin, 2009; Weinstein, 2017): arts organizations typically rely on their mission to attract and retain donors interested in the arts. Leveraging the overall mission of the organization may open new territories of philanthropic endeavors for arts organizations. This implies a change in the “transactional” relationship with ticketholders and subscribers; a focus on the social outcomes achieved by the organizations outside the artistic production; an exploration of new segments of donors less interested in the arts per se and more interested in the philanthropic engagement of the arts organization in the community; and the development of projects that “use” the arts to achieve other social impacts like social justice, improved well-being and healthcare, and community inclusion (Radbourne & Watkins, 2015; Tur-rini et al., 2020).

As it will be clear in the following, digital technologies offer complementary tools that substantially support arts organizations’ offline fundraising strategies revolving around these three main principles. Social media such as Instagram, Twitter and Facebook might be more used with more sophistication to enhance social interactions between nonprofit organizations and prosocial donors or ticketholders. Fundraising platforms such as peer-to-peer fundraising might satisfy arts patrons in their search for reputation from peers. Digital donor management systems and artificial intelligence (on one side) and e-newsletters or digital interactive reports (on the other side) might help cultivate and turn ticketholders or free visitors into novel donors and might help in strengthening the relationship with constituents such as major leadership gift donors. Virtual walls might be forms of gift recognition resulting in higher donor retention rates; and, finally, e-appeals, crowdfunding or mobile technologies might attract the interest and facilitate gifts of online donors who are not part of the arts’ folks but might be sensitive to the outcomes arts institutions aim at achieving inscribed in their overall social mission.

On these grounds, the aim of this chapter is to describe how new technologies might support arts organizations in developing strategies that rely on the above-mentioned key principles to achieve success in fundraising in the arts. After a brief overview of the state of the art in the adoption of new technologies in fundraising by arts organizations, this chapter describes how new technologies might improve the efforts of arts organizations in attracting new donors, transforming ticket-holders into first-time donors and cultivating existing donors and members. The chapter then outlines which digital tools might be implemented to increase the visibility of artsorganizations in the virtual space and to drive traffic to the arts organization giving page. It suggests how new communication technologies might support the retention and upgrading of existing donors, especially when developing graded recognition programs, such as membership programs and giving societies in the arts. The last two sections focus on arts crowdfunding campaigns (which recently received a growing attention in the field) and the application of new technologies and Artificial Intelligence (Al) on arts institutions’ donor management systems, which play a fundamental role in understanding arts constituents’ needs, and providing opportunities that fit new and old donors’ wants. The chapter concludes with a reflection about how arts organizations should change in the future to fully exploit the potential of new digital and communication technologies in order to achieve success in fundraising.