CHAPTER THIRTY
DONOR DATABASE MANAGEMENT AND SEGMENTATION
By Jeffrey A. Lindauer
When the first edition of this book was written, few could foresee the impact of electronic data on the fundraising profession. What was once a need for simple mail-merge technology for the annual year-end letter has become a desire to maintain a cornucopia of knowledge on which competent fundraisers can base their work. As costs to acquire and save data decrease and the capability to analyze data expands, the question of what data should be captured? has changed to what shouldn’t I capture?
In its most basic form, the fundraising database is composed of the information necessary to facilitate the fundraising process. For some organizations, the need may be as simple as recording the name, contact information, and gift history of a small number of donors. This will facilitate a prompt gift receipt and personalized thank-you letter, and the information can be used to produce the annual honor roll of donors. In subsequent years the same data can be used to renew their generous support.
For others, the need for data has expanded to a comprehensive collection of data elements including an almost limitless number of attributes such as event attendance, volunteer activity, linkage indicators, wealth and asset information, predictive modeling data, marketing segments acquired from external vendors, contacts with the organization, online behavior, and more. If the information is available, it can be stored in a database, analyzed, and used to increase the effectiveness and efficiency of the organization.
Although it has become easier to store, analyze and use vast amounts of data, it is important to remember that fundraising is, at the end of the day, about people. The process of asking for money will ultimately determine the overall success of any fundraising program. Those who are most successful are able to leverage the data they have at their fingertips to more effectively manage both resource allocation and their personal relationships with others. Simply collecting data for the sake of doing so is a certain path to “analysis paralysis” for many fundraising professionals.
Sample Data Elements
The data elements that an organization could acquire and store are limited only by the imagination of those responsible for capturing them. For the purposes of this discussion, data are considered to be more fundamental in nature, captured for individual donors and prospective donors, and used for the purpose of increasing the effectiveness of the solicitation process. To fully list any and all possible data elements would be a herculean task.
The Basics
While nonprofit organizations may differ greatly in their ability to collect, maintain, and use data, certain core data elements are essential for all. Few would disagree that simple contact information such as name, address, phone number, e-mail, employment information, and historical giving transactions are a requirement for any organization to capture and maintain.
These core data elements allow fundraisers to perform the main functions necessary to maintain a fundraising operation. Direct mail solicitations, telemarketing, e-mail, personal solicitations, gift receipts, thank-you letters, honor rolls, invitations to special events, and more can be generated with this minimal amount of data. Employment information not only helps with matching gift procurement but also provides helpful information when determining a prospective donor’s ability to give.
Core data elements are often acquired at the time of the first gift to an organization. Data are captured from gift cards, information provided on a check, or online giving forms. RSVPs to organizational events and volunteer opportunities also provide opportunities to capture data on new prospective donors and update data on those already in the database. Information may also be acquired through list brokerage firms who specialize in renting or selling lists of potential donors based on criteria the nonprofit would work to determine.
Solicitation History
In addition to the basic giving history of each donor, the database should contain a solicitation history. This information is valuable on both a micro and a macro level. For the individual, it is helpful to know which solicitations (both personal and mass) have been made, when they were made, and the outcome. This information may be tracked by coding each appeal (and segment within each appeal) with a unique code. That tracking code is applied to the individual’s record at the time of solicitation and again on the gift transaction, should the donor make a contribution.
On a macro level, this data enables the nonprofit to analyze the success of each individual solicitation, watch for over- and undersolicitation and generally monitor donor response to appeals at every level. As a management tool, this information is extremely valuable to determine future solicitation activity and to allocate resources most effectively.
Event and Activity Data
As the organization begins to expand its data catalog beyond the basic data elements just outlined, a logical next step is the recording of interactions with the organization and members of its staff. Keeping a comprehensive record of these interactions begins with the recording of attendance at any functions held throughout the year. This may include fundraising-specific events, such as an annual fundraising auction, or attendance at board meetings. Any such activity should be recorded, as these data are critical as the organization works to build a historical account of each donor’s and each prospective donor’s relationship with the nonprofit entity.
To further enhance future use of the data, event activity should record not only those who attended but also who was invited to each event and the RSVP status of each invited guest. Those who respond in the affirmative but never show up should be distinguished from those who attend every event. This data can provide important insight into individual donor behavior as well as assist in the analysis of the effectiveness of each individual event.
In addition to event attendance, many volunteer and other types of activities may be available to those interested in the organization. Each volunteer activity, its duration, and related information should be recorded. This will provide information to the organization when volunteers are needed in the future and also indicate which individuals have the greatest linkage and interest.
Personal Interaction
In addition to events and activities involving many players, a historical account of personal interactions with each individual should be recorded. The relationship between donors and organizations often outlasts the tenure of staff. As members of the organization’s team come and go, it is helpful to have detailed accounts of prior interactions, from phone calls to personal notes to face-to-face visits. The reports filed on each contact should ideally include information that employees should know as they pursue the relationship in the future.
After each contact with donors or prospective donors, staff should be encouraged to document pertinent details of the discussion. This may include specific interests of the donor, funding opportunities, and particular concerns. As others currently on staff or those who join the staff into the future begin to work with that same donor, the historical record will help them understand what has happened in the past and plan appropriately to continue the relationship.
Ideally, data on the nature of each contact will include not only the substance of the discussion, but also the type of interaction (phone, e-mail, personal contact), circumstances, and next steps required to move the relationship forward.
Wealth and Ability
As the nonprofit becomes more sophisticated, it may look to enhance its database with additional data elements beyond those most readily available. Additional research to determine the ability of each individual can uncover prospective donors who would not otherwise be considered for a more substantial gift.
Internally, members of the staff can conduct research using many common tools. These may range from simple and inexpensive Internet search engines to robust data repositories available for a significant subscription fee. Publicly available information will allow the organization to gather considerable data related to an individual’s wealth. Home ownership and values, publicly held stocks, and other financial information are available on many individuals in the database.
For large organizations and those with little time to invest in internal research, there are many vendors who can conduct this type of screening. Outsourcing may be limited to a select few individuals or the entire database of names, depending on the need and budget available.
In addition to specific wealth information that may be acquired, others involved with the organization often can provide information on their peers. Engaging loyal donors and volunteers to help identify others who may be able and willing to support the organization can provide valuable wealth data. In addition to the data received on others, this volunteer activity can strengthen the relationship with the individual.
Regardless of the source of this valuable information, wealth and ability information should be stored in the database. This data may be used to further segment prospective donor pools for various methods of solicitation and to determine ask amounts. As a prospective donor’s wealth increases, so too can the time and energy invested in the prospective donor. Over the long term that investment may yield significant rewards.
Unique Data Elements
Beyond those fundamental elements already mentioned, a nonprofit may have valuable data that is unique to their organization. Institutions of higher education, for example, have degree data, lists of classes taken by each individual, favorite professors, Greek affiliations, and more. Organizations in the medical field may have extremely private medical information such as an individual or their family member’s experience with a particular disease and information about the doctors and specific specialty areas that may have been influential in the treatment process.
Each organization must determine for itself which data it wishes to maintain and how these may be used in the future. An evaluation of the value of the data compared to the costs necessary to acquire and maintain them should determine the willingness to add each specific element to the database. When in doubt, it may be wise to do so, as a future application may warrant the data, and once it is gone it may be difficult to retrieve.
Leveraging the Power of Data
As a database and the number of elements captured grow, so do the possibilities for its use. From basic segmentation of membership lists and annual fund appeals to identifying major gift prospective donors, data play an important role in the fundraising process.
At the most basic level, the use of data should lead to increased efficiency and effectiveness. It allows the organization to best allocate its finite resources to solicit the right people for the right gift at the right time.
Linkage, ability, and interest are fundamental concepts on which every fundraising program is based. Data can play a key role in determining an individual’s level of each. Data can be leveraged to identify the best approach for each prospective donor. In some cases, data may even determine that the best approach is no approach at all.
Linkage is usually very easy to determine if data are available in the system. Board members, donors, friends, and volunteers all have varying levels of linkage. So do those in others’ networks of friends and acquaintances. If the data are in the system, the relationship can be determined. In many ways linkage, like interest, relates to a donor’s propensity to give. Those who are most closely associated with the organization today (or who can be brought into the fold in the future by others) are better prospective donors than those without linkage.
Ability may be determined by giving history, wealth data, or even by comparing zip codes to historic U.S. Census Bureau data. Knowing what a prospective donor may or may not be capable of giving is an important factor when determining how an organization should approach them.
Interest is simply the interest an individual has in the nonprofit and its work. Those with great interest in an organization are more likely to give, and as this interest increases, often the size of the gifts (within the individual’s ability level) does too. Interest is often determined much as linkage is. Active attendance at events and meetings, volunteering, interactions with staff, and other data points may point to greater interest. For others, the determination of interest is more difficult. Data may show that they refuse to attend events and don’t volunteer, but they do write three checks annually. They may be as interested as anyone but aren’t the type of person to attend events or volunteer. Determining the proper formula to identify true interest will help answer the question.
One could combine linkage and interest into one metric: “propensity to give.” Ability stands on its own as “ability to give.” It is true that ability may drive propensity in some cases, but often the two are considered distinct.
Figure 30.1 presents a chart depicting the possible combinations of these traits.
When determining the best allocation of resources on individual prospective donors, it would be ideal to plot every prospective donor on such a chart. Knowing where each prospective donor falls on the chart allows the nonprofit to make the best possible connection with them. Gone are the days of “one size fits all” fundraising approaches; the allocation of resources and strategy can and should vary widely by prospective donor type.
High Propensity, High Ability
Prospective donors with the greatest propensity and ability to give are the most valuable prospective donors available to the organization. They are truly the best of both worlds, having a keen interest in your success and the means to make a substantial gift. Ample resources should be allocated to this segment. These prospective donors warrant considerable investment of the organization’s time and efforts. These are, or likely will be, the most significant donors to the cause.
High Propensity, Low Ability
Many prospective donors have a great desire for the organization to be successful, but lack the financial means to make major gifts. These individuals are often consistent annual fund donors, albeit with less significant gifts. They are your best friends, your greatest advocates, your key volunteers. The organization may wish to work with this segment to upgrade their giving to appropriate levels but cannot expect a major gift in the near future. These loyal individuals may be prime candidates for exploring planned giving opportunities. Prospective donors may be surprised that they can make a gift much larger than they ever thought possible through their estate, real estate, or life income arrangements. By marketing to them appropriately about these opportunities, you may generate significant income from the resulting planned gifts.
Low Propensity, High Ability
Every organization has individuals with great wealth who either have never given or give dramatically less than they are able to. They have financial ability, but their linkage and interest are lower than other donors’. The nonprofit may choose to invest in this segment as an attempt to generate further interest. The marketing team may send high-end newsletters, and the individual could be invited to take a closer look at the organizational mission without a fundraising goal in mind. Resources are allocated to these “projects” with the knowledge that not all will be converted, but those who do become involved will be well worth the effort.
Low Propensity, Low Ability
Some prospective donors simply aren’t interested and don’t have the ability to support the organization. In some cases, the costs to maintain contact with these individuals outweighs the current or future return on the investment. The allocation of resources to those who fit this category may be significantly reduced and, in some cases, even eliminated. Those resources may then be allocated more effectively with the remaining prospective donors in the database.
Putting It All Together
It is easy to determine where some prospective donors should fall on the ability and propensity chart. One who has obvious wealth and a consistent history may be an automatic candidate for the high propensity, high ability segment. One who has no giving history or involvement and little wealth may score just the opposite.
For most, however, data can provide a “best guess” solution. An organization may use the data to “score” each variable on a scale to best identify each prospective donor’s true position on the chart. Gift frequency, gift size, activities, and volunteerism may result in a higher propensity score, whereas home value, salary, location, stock holdings, and, again, gift size may be used to compute the ability score. With the two sets of data, you can determine the best allocation of resources for each individual.
This type of activity can be taken to a more scientific level by using a predictive model to programmatically score each prospective donor in the database, using a combination of weighted measures on each piece of data in the system. A predictive model is best created by looking at past activity to identify those factors that determine donor behavior. Some characteristics are universal, others unique to the organization creating the model. Once you identify those factors that influence giving behavior, that information is used to find individuals who closely fit those criteria and score them appropriately. This takes the guesswork out of the process and helps avoid making false assumptions. No model is perfect—there will always be outliers who defy explanation—but a good predictive model will help the organization execute the proper strategy for a variety of populations within the database.
Predictive models can be created in-house using off-the-shelf software or by outsourcing with professional service bureaus who specialize in predictive modeling for nonprofits.
Conclusion
Data are the lifeblood of any organization. As such, they should be treated like any other important asset. Investments must be made to acquire, maintain, and use data on an ongoing basis. As data become stale, inaccurate, and incomplete, they become useless. Every attempt must be made to maintain and grow a robust database to ensure success.
This discussion represents only a brief overview of a few representative ways data can be used to enhance a fundraising program. To become more knowledgeable and truly begin to explore the ways data can be used to facilitate success, the reader should turn to peers and professional organizations for further information. As technologies improve and fundraisers continue to create new and imaginative ways to use them, this field will continue to reap great rewards for those who can leverage the power of data.
