by Todd Cohen

To raise money in the deepening economic gloom, nonprofits need to work harder to better understand donors, educate them about urgent community needs, and help them see how supporting their organization will help address those needs.

And community problems are escalating as the broken economy hurts a growing number of people who then turn to nonprofits for help.

So in addition to rising costs, anxious donors and uncertainty about the best way to raise money, nonprofits also face growing demand for services.

Three recent reports suggest the fundraising climate will continue to be bleak, while two others suggest the best fundraising strategy will be to connect donors to community needs in ways that reflect a deeper knowledge of donors and their interests and values.

In June, Giving USA reported charitable giving grew slightly last year after dropping for two straight years, but that it still trails pre-recession levels.

And if its growth continues at last year’s pace, giving still could take five to six years to return to pre-recession levels, according to Patrick Rooney, executive director of the Center on Philanthropy at Indiana University, which prepared the report in partnership with the Giving USA Foundation.

The Philanthromax Atlas of Giving also reported last spring that while giving grew in April from the previous month and from April 2010, it would begin slowing in June and keep dropping throughout the year.

Finally, a recent study conducted by Campbell Rinker for Dunham+Company reported that nearly seven in 10 Americans would give less to charity in coming months, and one in 10 planned not to give until the economy begins to recover.

Now, two new studies suggest the kinds of approach nonprofits should take with donors.

The 2011 Fundraising Effectiveness Survey Report, an initiative of the Association of Fundraising Professionals and the Center on Nonprofits and Philanthropy at the Urban Institute, says nonprofits did a better job acquiring and keeping donors in 2010 but continued to lose money because they lost donors and secured gifts that were smaller than in 2009.

Andrew Watt, president and CEO of the Association of Fundraising Professionals says nonprofit lose nearly 60 percent of their donors each year and depend heavily on new donors, a dynamic that represents one of their biggest challenges.

Because it costs a lot less to keep and “inspire” existing donors than to find new donors, he says, “charities should focus on stewarding their current donors and reducing losses there.”

The other new report, by the Center for Effective Philanthropy, finds a “gap between rhetoric and reality” in the strategies community foundation use to work with donors, a gap that may be driven by competition for donors and may result in “a focus on donors as an end in itself rather than as a means to an end.”

In contrast, the report says, community-foundation CEOs who are strategic “seek to educate and inform donors, rather than being simply responsive to what donors prefer.”

One lesson from all these reports is that nonprofits should stop wasting time pandering to donors or treating them like automated teller machines, particularly in this grim economy, and instead should be working hard to get to know donors, help raise their awareness of community needs, and show them how supporting their organization can make a difference in helping to fix community problems.

Todd Cohen is editor and publisher of Philanthropy Journal; reprinted with permission.