A Balancing Act: The Art and Science of Fundraising Through Analytics
In the age of “Big Data,” countless companies and organizations are turning their wealth of data into an extremely valuable asset. In the commercial world, Big Data, machine learning and artificial intelligence are turning data into actionable insights. Big Data really has moved from being a buzzword to being mission-critical.
And the good news for nonprofits is that data is the most abundant element in our sector. Data traces our paths and measures our efforts to drive meaningful change in the world. Data informs us about supporters, members and funders. Data provides insights into the success of our engagement, campaigns and programs. Data makes it possible to understand the impact of our actions and the reach of our outcomes.
Unfortunately, far too many nonprofit and social good organizations struggle to transform their data into measurable value. In my bestselling book, “Data Driven Nonprofits,” I call this the Nonprofit Data Paradox: The more you have of something, the less valuable it becomes.
If we know powerful insights are possible, then why aren’t data and analytics used more in the nonprofit sector? The short answer is that fundraising has long been considered an “art” at the expense of the opportunities that “science” can provide. Data should be an asset that enriches nonprofits and helps them grow. Instead, many struggle with maximizing the value in their data, because they get overwhelmed by the flood of data, fail to maintain it or choose to ignore it all together.
And the impact of this dynamic is obvious when we consider some of the challenges facing our sector. First-year donor retention rates hover around 30 percent. Giving has remained at 2 percent of disposable personal income for 40 years. Programs struggle to show quantitative evidence of their outcomes to funders. As a sector, we are quite literally stuck in the past and are jeopardizing the future.
Yes, many nonprofits are using technology for both fundraising and mission delivery. But the use of data to drive decision-making is not as prevalent as it needs to be. We need more data science in the mix to help drive better results.
Some people fear that too much reliance on data and technology will de-humanize the art of fundraising. Nothing could be further from the truth. The art and science of any nonprofit activity is enhanced, not inhibited, by the use of data. We need to give nonprofit professionals the modern skills, capabilities and tools to create more value. A fundraising artist who is prepared with the right information about their donors will outperform one who relies simply on gut instinct.
In fact, I’d even suggest that it is not possible to be donor-centric without the use of data and analytics. Information helps ensure that fundraisers are talking to the right people, at the right time, with the right resources. Metrics also help tell us if something is working or has room for improvement. Every fundraiser can benefit from knowing three simple KPIs about their donors: First-year retention, multi-year retention and lifetime value. There are many things that can be measured, but these three are simple metrics are very powerful tools in the hands of a professional fundraiser.
The “modern alchemy” of analytics can turn raw data into treasure. In fact, our research at Blackbaud across thousands of organizations reveals that a lot of money is being left on the table. The average nonprofit is missing out on $3,781,461 in untapped giving potential, because they are under-asking with both annual and major gifts. The analysis revealed that an average upgrade capacity of $52 was possible for annual donors and a potential lift of $1,197 existed for major donors.
Embracing both the art and science of fundraising will require champions across the organization. We often hear about the importance of top-down leadership to make change happen. While the support of leadership is important, it simply is not enough. The most successful data-driven nonprofits have champions at all levels of the organization working to drive change. They may not have the fancy title or the corner office, but they make things happen each and every day.
Nonprofit organizations need to balance the art and science of their efforts to accelerate performance and change. The appropriate coordinating conjunction is “and” not “or” in this case. It is no longer up for debate—it is an art and a science.
Steve MacLaughlin is the vice president of data and analytics at Blackbaud and best-selling author of “Data Driven Nonprofits.” Steve has spent 20-plus years driving innovation with a broad range of companies, government institutions and nonprofit organizations. He serves on the board of the Nonprofit Technology Network and is a frequent speaker at conferences and events. Steve earned both his undergraduate degree and a Master of Science degree in interactive media from Indiana University.