Data is gold. But only if you can get to its real value

All fundrais­ers know that their data is valu­able. All fundrais­ers know that devel­op­ing an exist­ing donor is many times less cost­ly than recruit­ing a new one. All fundrais­ers know that fundrais­ing should be inte­grat­ed, that focus­ing on the donor is more appro­pri­ate than on the medi­um of com­mu­ni­ca­tion, that…well, that there are a lot of things we all know full well but we still don’t do the right thing by them. Data is one of these, per­haps one of the most obvi­ous and important.

Written by
Chuck Longfield
June 02, 2011

Correctly applied, data can be literally priceless. But unless you know how to make it work for you and then actually make it work for you, it’s worth no more than, well, its weight in gold. As data weighs next to nothing, that makes it pretty worthless, however much you have.

Chuck Longfield’s passion is data and what it can do to make nonprofits more effective. Here, exclusively for SOFII, he talks with Ken Burnett about the real asset value of data and how fundraisers can make much more of it and from it, by looking after it better and using it differently.

‘There is no value in sitting on a pile of gold or a reservoir of oil that you don’t have any means to access,’ says Chuck Longfield.

But the first thing is to realise the value that is there.

‘Fundraisers are very creative, they run amazing campaigns to inspire and recruit new donors, yet still the majority of these expensively recruited people fail to give a second gift. A one per cent improvement in retention could be far more valuable than a large investment in acquisition. But it’s human nature to focus on finding the ‘killer’ idea, the next big acquisition method. Maybe though, the real killer idea for most organisations would be to make better use of their data so that they can develop more meaningful relationships with their donors.’

Chuck Longfield thinks that at least part of the problem is that, in the art and science of fundraising, data seems to fit mostly in the science bit whereas most fundraisers tend towards the arty side. Fundraisers are creative, imaginative, even intuitive. Data, by contrast, seems solid, complicated, unfashionable, perhaps even a bit unfriendly.

Not so, says Chuck.

‘A donor just phoned to tell you her change of address and commented on how much she loves the work of your organisation. The data input clerk thanks her and puts in the change. Wait a minute! Something really rather wonderful just happened there.’

‘What... a routine change of address? ‘

‘ No. Wrong. This donor just put her hand up and said, “I love you”. Think about it. She took the trouble to call to let you know her address has changed. She cares enough to tell you personally. She would never do that, unless she loved you. So the last thing she wants is for you to lose track of her.’

Chuck is right. Her action is a clear signal. Yet we treat it as just a routine administrative change. We have the data, but we aren’t handling or recording it correctly. The point is to understand and appreciate the action, not merely to focus on the transaction.

‘She is self-identifying,’ Chuck explains. ‘It’s something many donors will never do, though a surprising number will. However, very few nonprofits take steps to record this kind of data. Donors are telling us things, yet we ignore the information.’

‘What about the donor who turns up at an event? What does his attendance say? Most likely that he loves you too. What if he turns up at more than one event? Where do we record that information and what do we do with it? Or a donor who names your nonprofit in his employer’s gift-matching scheme – how important to a donor do you have to be before they do that? Yet I know of only a few nonprofits anywhere in the world who record or use the information they have on gift matching or event attendance.’

Chuck thinks that mostly the problem is under-resourcing.

‘They just don’t have the people. Nonprofits – and therefore the general public – still think it’s a virtue to underspend on ‘administration’, which means they’re happy to underspend on running their organisation properly. You can put your finger in the dyke and stop one leak, but what’s the point if another springs up somewhere else, and you haven’t enough fingers?’

‘To tackle issues like this properly nonprofits need to gear up to a new level of capacity, which some will do and some simply can’t. So they will need to scale up, either by partnering with other organisations to create new models for working or to outsource these things entirely. Not just the database expertise, but the follow-up actions such as telephoning, or even the mailing components too.’

Not surprisingly, Chuck believes that the people who build computer systems have to factor into their products the technology that will deal with these issues. As he puts it, ‘Software developers need to provide the tools so nonprofits can take advantage of a richer data set.’

Our world changes very quickly. A favourite analogy Chuck employs is the simple act of applying the brakes in a car. ‘Twenty years ago you hit the brake, pressure was applied directly to the brake pads and the wheels – safely or otherwise – eventually stopped going round. Now, technology has come up with a range of answers to a lot of other variables that were always there – the slippery road, your tyre conditions, outside temperature, speed of the car and so on. Now there’s a computer chip inside your car’s entirely transformed braking system. It still just stops the car, but does so very much more effectively, usefully taking into account a whole range of other variables.’

So it should be with nonprofits. Chuck cites one example from a small number who are pioneering in the area of introducing more variables to their donor interactions, with great effect.

‘Most fundraisers segment by just three variables – recency, frequency and value.’ (Some fundraisers are not yet even using RFV, but that’s another story.) ‘Tammy Ruda of Brown University has moved her institution’s donor communication from a simple increase assumption – last year you gave $100, this year please give $150 – to more ambitious asking based on a more sophisticated modelling system that takes account of a range of other important variables – wealth, if the donor has a child at Brown, if they had financial aid, if they were eminent at a sport and so on. The results speak for themselves in higher than average response rates and gift levels. Brown’s fundraisers can manually adjust the model if they feel that appropriate, but the purpose is to maximise the value of a donor’s contribution based on the optimum amount to ask for, informed by all the important things that the data tells us.’

Makes sense, doesn’t it?

Chuck is often disappointed to learn how little fundraisers know about the state or content of their data. ‘I ask people how many duplicates they have on their file and most don’t know. It’ll be somewhere between one and five per cent, which on today’s fundraising databases indicates a significant waste. Fundraisers should at least know that figure and many others too. They can simply go and check. And over time they should also check that things are actually getting better.’

Recently Chuck ‘adopted’ a public television station in Houston, Texas. ‘My offer was simple. I said to Michael, my contact there, that if we form a partnership and he gives me full access to his data I will call him once a week to tell him something that will either make or save money for his station. The deal is that he then has to act on it.’

Apparently this unusual pact is working well for both parties.

‘I recently called Michael to say, yesterday a wealthy individual went to your website and made an unsolicited first-time gift of $500. Michael didn’t know that, but agreed he should personally call the donor and quickly. Timeliness is important. With two or three high potential donors a week at this level, he could do that. If there were 500, he personally couldn’t handle it, so probably once again it wouldn’t get done.

‘Recently I rang Michael to tell him about a donor who has given substantially over several years, $500 each quarter, via credit card. Abby, Michael’s colleague had called to say the card has expired but could only leave a message. The donor has not returned the call. The station’s policy is not to call a second time. But that donor has no intention not to renew.’

Chuck knows from experience that in many organisations donors are slipping through the cracks. This kind of data is worth thousands of dollars, if fundraisers can act on it. Chuck acknowledges this is often easier said than done.

‘I have the tools to do this and fundraisers such as Michael do not. But, he should have, or at least he and his colleagues should be able to access those tools. If their organisations are too small fundraisers need to get together to share the cost and make sure they do have the tools.’

Chuck recently introduced a member transfer service for the 140 public television stations that form the US’s PBS network. Statistically, one per cent of people move to an entirely different location each year. For the whole of PBS that’s 40,000 people, worth annually $5 million, until recently mostly lost. Now when a donor moves from, say, San Francisco to Washington she’s automatically greeted at her new home by her new PBS station. The potential for stewardship in this approach is huge.

In fact the potential for better use of data is huge. If we aspire genuinely to build mutually beneficial relationships with our donors, we simply have to find better ways to use our data.

© 2010.

Chuck Longfield’s six recommendations for making more of your data.

Room for one more? If data is your driver, you need to know where it is and how to get to it.

1. Monitor your data quality regularly

Every fundraiser should satisfy himself or herself that their data is spot on. So choose 100 donors at random and review their data. Call donors and check that the data you hold is correct. Check duplicates, status, spellings and so forth. Make sure all the important information is there and add new stuff you’ll collect in the process. Capture your donors’ ‘rich interactions’ and then write a short report on it. Act on what you learn, and use this to set targets for the future.

2. Use this richer data in your selections.

Create and test single passion variables, such as event attenders, matching gift donors, address changers, even complainers. Consider adding new selections to your traditional RFV. Practice seeing things through your donors’ eyes. This will help you to get your incentives right.

3. Call all new donors with a carefully constructed relationship-building message.

Or at least, invest in the donors with the greatest potential. Kay Sprinkel Grace says that calling new donors carefully can increase gift values by 40 per cent. Yet few do it. Whatever the financial incentive, anyone who does is sure to learn a lot.

4. Look at donor return on investment (ROI).

Analyse your donors rather than your campaigns. This is an opportunity to increase stewardship and to practice seeing things from your donors’ viewpoint. Look not just at what your latest mailing will bring in, but consider its effect on the majority who didn’t respond.

5. Create hurdles for donors, to justify further investment.

You don’t have limitless resources, so create hurdles for donors so you can find which ones might be best for you to focus your time and budget on. Don’t make their lives difficult, of course, just give them every opportunity to wave their hands saying, in one way or another, ‘I love you’.

6. Follow up all non-renewing donors (above say $100) personally.

Find out why they’re not renewing and change what you do accordingly.

Lord Leverhulme, head of Britain’s biggest advertiser Unilever, famously said,‘Only half of what Unilever spends on advertising actually works. The trouble is, I don’t know which half.’ So fundraisers are not alone. But what difference might it make, in money saved and raised, if he could answer that question in detail?

About the author: Chuck Longfield

Chuck Longfield, chief scientist at database vendor Blackbaud, is a plain-talking sage, an unassuming expert who understands what’s important in the technology that surrounds and so often bamboozles us, and how to get to it and make the most of it. Chuck not only spots what fundraisers get wrong and why, he also chips in practical tips and ideas that might take you in surprising and productive directions.

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