3 Top Analytics Techniques Every Fundraiser Should Know

[Editor’s note: This is part 1 of a three-part series based on a session at the 2010 New York Nonprofit Conference held Aug. 24-25. Part 2 will run in next week's edition of FS Advisor, and part 3 will run in the Oct. 5 edition.]

One of the recurring themes during the Direct Marketing Association Nonprofit Federation’s 2010 New York Nonprofit Conference, held Aug. 24-25, was the need to innovate and take risks during tough times. In one of the final sessions of the conference, Don Austin, director of analytics at Infogroup | Nonprofit, reiterated that theme. “Think about taking calculated risks in these times,” he said.

Austin, along with co-presenters Lawrence Henze, managing director of Blackbaud’s Target Analytics, and Bryan Terpstra, vice president of client services at LW Robbins, described three ways fundraisers can do that using analytics in their session, “Analytics in Plain English: 3 Top Techniques Every Fundraiser Should Know.”

The missing link — the search for mid-level giving prospects
Henze kicked things off by shooting down the historical donor pyramid myth. Whereas the old model showed a pyramid like the ones the Egyptians built in ancient times, in reality, most organizations’ donor bases have a really strong foundation of lower-level donors, but then the “pyramid” dramatically thins out the higher you go on the giving levels, looking more like a skyscraper than a pyramid.

The key, Henze said, is to encourage transitional gifts — a technique of moving donors through one level of giving toward the top. But first, you must start by building the middle of the pyramid. To do that:

• Focus on individuals “transitioning” from lower annual giving amounts to mid-level giving clubs.
• Use data mining or predictive modeling to identify individuals on a transitional trajectory.
• Implement high-touch cultivation and solicitation strategies to interact with these prospects.

“If we don’t identify transitional prospects — most people don’t rise to their potential without a push,” Henze said. “If you do analysis, it will point you in different directions. Let the data drive your fundraising.”

Henze gave these examples of how to identify mid-level donors and the next stage through data mining:

• Mid-level donors make an average of nine annual gifts prior to reaching major-donor status (also check mode or median).
• Establish a threshold, such as six annual gifts, to identify potential mid-level prospects.
• Change stewardship efforts to cultivate better relationships with these prospects at an earlier stage (i.e., personal thank-you program).

“Data-driven analysis cancels out the, ‘We’ve always done it this way,’ mentality. Use analysis to lead to a change in strategy to speed up the lifetime value of donors,” Henze said.

Once you mine all your data and carefully record and study it, you can perform donor profiling and predictive modeling to identify how you should communicate and cultivate donors. The assumption is that certain donors have some characteristics in common. Discover those characteristics (demographic, financial, behavior, transactional), screen the entire database against them, and predict giving or membership, Henze said.

You must look at internal and transactional data such as gender, length of time on file, number of years giving, response vehicle (direct mail, e-mail, etc.) and relationship to organization (donor, member, volunteer, special-event attendee) to give you donor/nondonor characteristics. You should also look at external data such as U.S. Census Bureau information, cluster data (Equifax Niches data, Acxiom’s PersonicX and Nielsen’s PRIZM), wealth and summarized credit data to append to your file.

Henze also suggested running a communications audit, knowing how many times you solicit, thank, inform and invite donors across print, voice and electronic channels. Then you can adjust your strategies for success as follows:

• Apply mid-level donor profile to database.
• Segment best prospects.
• Create different solicitation strategies.
• Couple best solicitation techniques with fewer solicitations, more cultivation and information sharing.
• Thank and steward.

With that information and the past giving behaviors, predictive modeling and segmentation can be invaluable. It’s an incredibly accurate way to unearth the donors who might move to the next giving level, widening the pyramid. And that’s the goal, to widen the giving pyramid, making it look less like a skyscraper and more like the marvels of ancient Egypt.

Check back next week for part 2.