Using Analytics for Fundraising

Using Analytics for FundraisingMichael Milton

July 22, 2010

Presented for the Nonprofit Roundtable of Greater Washington

A great nonprofit:Youth Haven

Let’s define “analytics”

using them to make decisions

Analytics is...

studying key metrics, and

My favorite metric:

% of CEO time in front of prospects

Another favorite metric:

Churned dollars

How much money did you receive from this year’s LYBUNTs last year?

Yet another cool metric:

Client emergency contact conversion rate

A more specific version of that last one:

Conversion rate for parents of current

students

A dubious metric: Fundraising efficiency

From charitynavigator.com

It's easy to calculate!

Analytics is harder for fundraisers

For-profits have a structure and reason for being that make it easier

to select metrics

Shareholders want

dividends...

Shareholders

The corporation

...so they bring on a board to ensure

that they get dividends...

Shareholders

The corporation

Board

controls

...and the board hires a CEO to manage to company to create

dividends...

Shareholders

The corporation

Board

CEO

controls

controls

...and the CEO hires salespeople, who create the revenue that leads to

dividends.

Shareholders

The corporation

Salespeople

Board

CEO

controls

controls

controls

The sales folks select the metrics

that describe revenue creation.

Shareholders

The corporation

Salespeople

Board

CEO

controls

controls

controls

Now let's look at nonprofits

At the top, we have

beneficiaries rather than

shareholders

Beneficiaries

The nonprofit

They don't actually control

the nonprofit

Beneficiaries

The nonprofit

Their payoffs are more vague than

dividends

Beneficiaries

The nonprofit

(generally speaking)

The board wants to help

the beneficiaries

Beneficiaries

The nonprofit

Boardinf uences

But there’s no guarantee that they will,

or that they’ll realize it if they don’t

The board’s ideas about what helps aren’t necessarily the beneficiaries’,

and neither are necessarily right.

Check out givewell.org

Nonprofits can pursue evidence-based management

The board hires the CEO to help the beneficiaries

Beneficiaries

The nonprofit

Board

CEO

controlsinf uences

You want to help, too!

Beneficiaries

The nonprofit

Fundraisers

Board

CEO

controls

controls

inf uences

In theory, the CEO is your boss

Beneficiaries

The nonprofit

Fundraisers

Board

CEO

controls

controls

inf uences

In practice, you’ve got lots of

influences

Beneficiaries

Volunteers

Members

DonorsThe nonprofit

Fundraisers

Board

CEO

controls

controls

inf uences inf ue

nces

inf uences

inf uences

inf uences

inf uences

Revenue is your goal, which by itself is

unambiguous

But a lot of times it’s not clear how

the revenue that you create translates into

social benefits

Capital/endowment

And we haven’t even started to list the revenue streams

Mail

Membership EmailGov grants Major

Planned

Phone

Special events

Big grants

Small grants

Web

“Revenue” won’t be of much help tactically...

you need illuminating metrics

But it’s hard to pick the right metrics in such a complex environment

Of course, there are exceptions.

So a lot of development directors play to this complexity

rather than develop analytics

Capital/endowment

Mail

Membership EmailGov grants Major

Planned

Phone

Special events

Big grants

Small grants

Web

What if managing the complexity is your job?

Maybe then analytics isn’t such a big deal

It is, because if you have the analytics you can

control the conversation

Control means focus and results

A board member thinks she knows what the donor

constituency wants

Focus problem:

A volunteer thinks his pet project is the most important

thing in the world

Focus problem:

The CEO is paying attention to the wrong things

Focus problem:

Getting results right is knowing when you’ve

succeeded.

How do you “do analytics”?

You run tests and then inspect your metrics.

The vascular surgeon who had no controls, from Edward Tufte's Beautiful Evidence

Buy all his books at www.edwardtufte.com

The importance of controlled, randomized experiments

A useful test demands you to

pick the right metrics

Capital One… conducts more than 30,000 experiments a year, with different interest rates, direct-mail packaging, and other variables. Its goal is to maximize the likelihood both that potential customers will sign up for credit cards and that they will pay back Capital One.

— "Competing on Analytics", Harvard Business Review, January 2006

The book

Something easy to test:

Fundraising letters

Web analytics is the cutting edge

You need to learn Google Analytics.

Google Analytics knows where people come from and whether they convert

...so it can show you how social network activity turns into

fundraising dollars.

Monster.com tests button

Customers spent 8.31% more on average when presented with these options.

Here are two of the 128 permutations they tested with Offermatica (now Omniture).

CollectionSocial networksWeb analyticsOperations

Direct MarketingPersonal contact

ConsolidationMunging

Integration

Analysis Selecting the right metrics

Running good testsMaking it actionable

The fundraising data infrastructure