3 Top Analytics Techniques Every Fundraiser Should Know, Part 2

[Editor’s note: This is part 2 of a three-part series based on a session, “Analytics in Plain English: 3 Top Techniques Every Fundraiser Should Know,” presented by Don Austin, director of analytics at Infogroup | Nonprofit, Lawrence Henze, managing director of Blackbaud’s Target Analytics, and Bryan Terpstra, vice president of client services at LW Robbins, at the 2010 New York Nonprofit Conference held Aug. 24-25. View part 1 here. Part 3 will run in next week's edition of FS Advisor.]

Who are my donors?
It’s impossible to target personalized messages and relevant communications to your donors if you first don’t know who they really are. But “how do you find out who your donors are?” Austin asked. The answer is crucial for identifying affluent donors for major-gifts campaigns and planned-giving prospects, as well as unearthing the proper marketing messages, corporate relationships — “Corporations want to work with organizations that have an overlapping market,” Austin said — and more.

That answer lies in analyzing the data that’s available to describe your donors, Austin said. So, what data is available to fundraisers?

• Census data: the least expensive and least accurate
• Geodemographic: PRIZM, for example, based on “neighborhoods”
• Compiled demographics and lifestyle: very comprehensive
• Purchase behavior: catalog, retail and Web transactions
• Social-networking data: number of friends, groups, etc.

Census data applies to relatively large geographic areas and does not provide insights to specific households, Austin said. Geodemographic data categorizes neighborhoods into many different segments, generalizing on known household data. Compiled demographics and lifestyle data provide very detailed and comprehensive information on household demographics and interests such as age, income, household composition, wealth, etc.

The type of data to use depends on your objectives, Austin said. For example: for planned-giving prospecting, you want to focus on age and income; for major-gift prospecting, age, income and wealth rating are important. Likewise, for marketing and corporate partnerships, focus on age, income and lifestyle data; for donor acquisition, age and lifestyle are crucial.

Once you have the data, you must know what you intend to do with it, i.e.:

• Simply describe characteristics of donors
• Incorporate it into my database to use for donor selects
• Use it for simple donor segmentation
• Develop complex segmentation for marketing

Simple descriptions are usually provided as frequencies and can (and should) be used to compare to the general population or specific population segments. For instance, you can use the data to find out that 9 percent of your donors earn less than $15,000 a year and 14.6 percent earn $125,000+ a year, compared to 14.6 percent of the general population earning less than $15,000 and 10.8 percent earning more than $125,000 annually. This gives you an understanding of how your donors compare to the general masses.

If you want to go further with your data, you must incorporate it into a database so you can gain even more insights. Ask yourself:

• What data do I need?
• Are fields available for the data?
• How will I access the data (for selects, analysis, etc.)?

Answer those questions, and record the data in your database to reference for further insights.

With your donor database set up, you can do simple segmentations such as segmenting donors by age and income, then tailor messages and cultivation strategies accordingly. Even better, you can use your database to set up complex segmentations, developing clusters of similar donors and creating personas to characterize donors.

This allows more personalized messaging, taking into consideration things like giving amount, giving history, demographics, etc., helping you predict future behaviors. Personas give you a better understanding of donor motivation and ability to donate.

Once you’ve identified donor clusters and created personas, you can do a cluster analysis. It should be driven by traits affecting donation behavior and requires specialized analytical tools, but it is an invaluable practice, so long as you “keep it manageable, but large enough to be representative,” Austin said.

He then provided the example of a cluster analysis a client he worked with performed, which revealed that the organization had five segments — 24 percent of donors were in their AARP years, 23 percent were younger couples and singles, 22 percent were affluent professionals, 18 percent were large settled families, and 13 percent were middle-class families. From that data, the organization learned the following:

Segment 1: Affluent Professionals

• The wealthiest segment, average age of 51 and 62 percent of household heads are 45 to 64.
• Average incomes is $143,000 and all earn more than $75,000
• 43 percent are in professional or technical professions
• 55 percent have children 18 years or younger in the household
• Average length of residence is about eight years
• Average donation is about $31, and 52 percent are $25+ donors

Segment 2: Middle-Class Families

• Average donor age is 52, and 63 percent of household heads are 45 to 64 years old
• Average income is $67,700, 56 percent earn $50,000 to $100,000
• 38 percent are in professional or technical professions
• 76 percent are married
• Average length of residence is about five years
• Average donation is about $19, and 32 percent are $25+ donors

Segment 3: Large Settled Families

• Average age is 57, and 69 percent of household heads are 45 to 64
• Average income is $86,200, and more than half earn more than $75,000 annually
• 41 percent are in professional or technical occupations
• 84 percent have teenagers or young adults in the household
• 94 percent are mail-responsive, the highest of all segments
• Average donation is about $21, and 32 percent are $25+ donors

Segment 4: AARP Years

• Average age is 69, and 93 percent of household heads are 65 or older
• Average income is $47,100, lowest of all segments
• 38 percent are retired
• 29 percent are single females
• 21 percent live in multiple-family dwelling units
• Average donation is about $17, and 23 percent are $25+ donors

Segment 5: Younger Couples and Singles

• Average age is 42, and 61 percent of household heads are younger than 45
• Average income is $61,200
• 48 percent are single females
• 92 percent of households have only one or two adults
• 28 percent live in multiple-family dwelling units, highest of the five segments
• Average donation is about $22, and 37 percent are $25+ donors

With all this data for the five different segments, organizations can tailor communications differently for each segment, personalizing and targeting each with relevant information.

Donor profiling can be invaluable for any fundraiser, but “have a reason to profile your donors in order to do it. Have a plan,” Austin said. “Then figure out how to make it actionable and base your fundraising campaigns on it.”

Check back next week for part 3.