Peer-to-Peer Fundraising

What are Challenge Gifts?

July 28, 2023 | 4 min Read

A challenge gift is a donation that creates an incentive for others to give by offering a financial reward based on an established contingency. Challenge gifts are issued only once a contingency, or “challenge,” has been achieved. Nonprofit organizations typically receive challenge gifts from trusts, corporations, or government agencies after the organization fulfills its unique expectations for the reward. Challenge gifts are commonly financially based, relying on donors to raise funds to accomplish the challenge’s goal.

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Challenge Gifts Examples in Nonprofit Organizations

Challenge gifts look unique to each nonprofit and feature varying predetermined requisites, but all challenge gifts have a few similar traits. Money-based challenge gifts will typically indicate an amount that is pledged, an amount that must be raised to complete the challenge, and a time allotment in which the nonprofit is expected to complete the challenge. A few examples of challenge gifts include: 

  • Matching “Dollar-for-Dollar” Challenge Gifts: A donor may agree to donate $20,000 if the nonprofit organization raises $20,000 within a given time. 
  • Fundraising Challenge Gifts: A corporate donor provides a gift if the nonprofit organization raises a certain amount of funds within a given time.
  • Donor Recruitment Challenge Gifts: A challenge donor asks the nonprofit to recruit a certain number of donors within a given time.

Importance of Challenge Gifts

Challenge gifts can be a force multiplier for nonprofit fundraising teams, not only in terms of dollars raised, but also in terms of engagement. As a tool for motivation  and inspiration,  a challenge gift is immensely beneficial for deepening the relationships the organization has with key sponsors and new donors, while also keeping cherished donors connected and involved. 

Providing enriching challenges for donors incentivizes giving beyond a nonprofit’s base of supporters. Another way a challenge gift serves as a powerful recruitment tool: Many donors suggest their close friends or loved ones also make a contribution to help achieve the goal in time to receive the challenge reward. 

Three Benefits of Challenge Gifts

Challenge gifts not only inspire larger donations but also first-time contributions. Nonprofit organizations seeking to grow their donor base will integrate challenge gifts into the donor cycle to keep donors engaged and motivated. Challenge gifts are a great way to encourage long-term growth while elevating fundraising efforts. 

Recruit New Donors

One of the most effective ways to cultivate sustainable fundraising is by maintaining current donors while simultaneously recruiting new donors. Challenge gifts provide a clear call to action for first-time donors, with a fundraising appeal centered around a specific time-sensitive challenge. These predefined expectations motivate prospective donors and often provide the nudge needed to prompt a contribution. Everyone likes a challenge! 

Increase Fundraising Impact

Not only do challenge gifts often recruit new donors, but they also maximize the impact of individual donations. Challenge gifts can double or even triple a contribution solely due to donors wanting to guarantee the challenge is met. Challenge gifts almost always have a time limit, and donors are more likely to make a sizable contribution if they feel like they’re donating at the perfect time.

Keep Donors Engaged

One of the most transparent benefits of challenge gifts is their ability to keep donors engaged and motivated. Establishing a clear goal and reward allows organization members to collectively rise to the challenge. There is always strength in numbers, and challenge gifts are a simple and enriching way to keep fundraising engaging.

Responsibilities for Rolling Out Challenge Gifts

Several factors need to align before an organization should market a challenge gift to potential donors. Here are the key considerations:  

  • Understand donor benefits: A challenge gift should always be centered around the donor feeling positive about their contribution. Donors should feel that they benefit from their donation and, by successfully meeting a challenge, they should feel positive about their contribution’s impact on an organization’s mission. 
  • Create a challenge proposal: The basis of every challenge gift is a set of predetermined contingencies. Donors  must be well-versed in the conditions needed to complete the challenge. Make transparency a priority: There should be no confusion when donors learn about the challenge or a grant’s expectations.
  • Identify potential challenge donors: Challenge gift participants will need to be recruited, whether within an organization or via new donors. An existing network of donors is invaluable for pledging new contributions, so make sure to connect with anyone who may be interested in playing a part in a challenge gift appeal.
  • Monitor challenge gift success: Once the challenge gift has been launched, the organization should monitor gift-giving activity and results to ensure its timely success. Many organizations also provide updates to challengers about the goal’s progress.
  • Celebrate challenge gift achievements: Keep team members and grant-making parties updated once the preconditions have been met for a challenge gift. Donors should always feel that their contribution is appreciated, so thanking donors for their role in the challenge’s success is paramount. 

How Challenge Gifts Are Implemented in Organizations

As part of a broader fundraising plan, challenge gift appeals are executed through a strategic marketing campaign. Before soliciting a challenge grant, the organization should develop a marketing plan to communicate its goals to potential donors. The challenge should be promoted to the organization’s current network and to the public to increase donors and expand awareness of the challenge’s goal. 

How Blackbaud Simplifies Challenge Gift Campaigns

Many organizations utilize donor management software to monitor progress toward their challenge goals.  Time is valuable when launching a challenge gift campaign and donor management software can simplify and automate many crucial responsibilities. As one of the most trusted user-approved fundraising and donor-management providers for nonprofit organizations, Blackbaud offers a range of tools that streamline challenge gift campaigns and make gift-giving, gift processing, and gift acknowledgment easier and more effective for organizations of any size. 

Simplify data management and enhance challenge gift fundraising with Blackbaud fundraising solutions. Elevate your organization’s challenge gift campaigns by requesting a demo with Blackbaud today.

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Blackbaud Staff

Blackbaud Staff

Blackbaud staff contributed this article.

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