How To Use Donor Data in Your Development Assessment & Fundraising Strategy
Welcome to article two in a five article series on the Importance of Data Assessments in a COVID Economy. In the coming months, I’ll continue to share insights and tips on the different phases of an assessment and how to use one to create a data-driven, actionable strategic plan for your nonprofit. If you haven’t already, catch up by reading the first article in this series, “The Development Assessment and why it’s vital to fundraising planning.”
A nonprofit fundraising strategy should always be driven by donor data. It’s that simple. Data lets you know which fundraising tactics are driving revenue and which are draining resources while providing little to no return. Unfortunately, though, nonprofits tend to let personal preferences or other non-data-based information lead the way as they set their fundraising plan each year. To make strategic fundraising decisions, quality donor data is crucial.
Quality data gives you a clear picture of which fundraising activities yield the biggest return.
Without solid data, it’s anyone’s guess as to what’s really driving donors to write a check each year. With data, you get a much clearer picture of why your supporters donate. This insight lets you know which tactics are driving the most frequent and highest donation amounts as well as which are working to expand your pool of donors. With this insight, you can lean into the activities that are making the biggest impact.
For example, I recently supported a nonprofit through a five-year analysis of their donors and donations as a part of their development assessment. The process showed them that they had 25% more donations than they had donors, indicating that many of their donors were giving multiple times a year. With this new understanding, they created a monthly giving circle and ended up encouraging and securing even more donations from their base as well as bringing new donors into their donor pool.
One of the most important and eye-opening results of compiling donor data during your development assessment is learning which activities aren’t working. If like most nonprofits your staff is made up of a small group of dedicated individuals with limited time to give, then you can’t afford to have them working on activities that aren’t performing. Having good data lets you correct or eliminate the fundraising activities that underperform and double down on those that generate the most revenue.
A great example of this is the annual gala that so many nonprofits traditionally host. Galas are extremely time-consuming for your staff and expensive to execute. If ticket sales have dropped over the past several years and the data shows that day-of gala donations aren’t driving the kinds of donations necessary to justify the investment, it’s time to reconsider your dedication to the event.
Good data can also help measure the effectiveness of annual fund campaigns and create clarity around which tactics are driving the most donations. For instance, I worked with a nonprofit that eliminated its direct mail campaign to save costs. After gathering donor data for their development assessment, they measured the return on the campaign and saw that direct mail generated $30,000 in donations that weren’t previously credited to that campaign. Now, they tie metrics to each fundraising activity so they invest their dollars wisely.
You can’t make good decisions with bad data
The beauty of data is that it lets you better understand your donors and create a plan around their giving needs. But, before you can do a proper evaluation, you need to make sure that your data is accurate, up-to-date and trustworthy.
How do you do this? Before I evaluate a nonprofit’s data, I evaluate their data collection process. I look to see how easy it is for the organization to extract 3-5 years of donor information from their database. I also want to see how clean and accurate the data is, and if there are immediate trends I can pull out to start to make recommendations for future fundraising efforts.
If your data gathering and entry processes are inconsistent from activity to activity, if the collection is infrequent, or if you can’t find pieces of your data, stop here! Your database is your data analysis baseline and it needs to be clean if your development assessment is going to give you the accurate and actionable insight you need.
There are 4 primary data points you want to look at once your data is ready to analyze
Once your database is clean, it’s time to slice and dice the data, find trends and draw conclusions, all of which will serve as the foundation for your strategic fundraising plan moving forward. Start by looking at these four data points.
1. Donor Categories
Place each of your donors into one of four categories – individual, foundation, corporation or bequests. This allows you to identify patterns and trends over time. Does one category of donors far outweigh the others? Is there an opportunity to grow a particular category that’s underdeveloped?
2. Donor Segments
Once you organize your donors into categories, you’ll want to analyze the donation segments within each category. I typically break donor segments into the following contribution ranges.
$0-$499
$500-$999
$1,000-$4,999
$5,000-$9,999
$10,000-$24,999
$25,000-$49,999
$50,000+
Look to see which segments within each donor category are providing your organization with the highest number of donors and dollars. This separation will also tell you if a portion of your donors are making multiple contributions a year – an incredibly important variable in your fundraising strategy.
Like many nonprofits, you may notice that the majority of your donors fall into the lower dollar levels of your donor segments. This could suggest that your fundraising efforts are best served by developing a major gift program or pursuing higher level grants from a foundation. If, however, you’re finding that your lower level donations are coming in behind the other donor segments in most categories, that could indicate the need to put more muscle behind individual donor acquisition to build your base.
There are a number of conclusions you’ll be able to draw once you line up your donor segments against your donor categories. This exercise alone provides incredible insight into the effectiveness of your fundraising efforts.
3. Fundraising Activities
Next, compare your fundraising activities side-by-side so you can draw conclusions as to which are driving the most donor engagement and dollars for your organization.
A big part of developing the right fundraising strategy is determining how your donors want to engage with your organization. To use the gala example again, if ticket sales and donations to your annual gala have declined significantly over the past four years, this may indicate that a gala is not the way your donors want to connect with you. Perhaps they prefer to make direct online contributions throughout the year, sponsor a program or simply write a check.
As you work through your activity evaluation, trust the data. Don’t be afraid to change or abandon an activity that’s no longer performing, even if it’s your signature event.
4. Non-Cash Metrics
Donor metrics are critical, but they don’t tell the whole story. In order to create a full picture of your fundraising efforts, you also need to incorporate non-cash metrics. This includes a few key indicators.
Mean, median and mode gifts
Retention rate
New donor acquisition
Number of pledges collected per year
Number of monthly donors
Your non-cash metrics provide context against which you can measure the other three categories. Retention rate and new donor acquisition are particularly important. The national average retention rate for a nonprofit right now is 46%. This means that most nonprofits are losing more than half of their donors from the previous year. More than half! Add to this the fact that the cost of acquiring a new donor is twice that of holding onto an existing one and you can see the downward spiral that can occur without a strong retention strategy in place.
Evaluating donor data as a part of your development assessment gives you the information you need to get ahead of your fundraising and grow your organization
Collecting such a large amount of data can be an arduous and time-consuming task. I promise you, though, that the work is well worth it! Once you have your data collected and analyzed, you’ll know which of your fundraising efforts are working and which need to be refined. This is the foundation of a strong fundraising strategy that will maximize your donation potential and grow your organization.
Once you’re done collecting and analyzing your donor data, it’s time to move on to the next step of your development assessment. In the next article, I’ll share how anecdotal data from your stakeholders is equally beneficial to evaluating your overall program.
Stay tuned and happy number crunching!