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Using Analytics for Fundraising Michael Milton July 22, 2010 Presented for the Nonprofit Roundtable of Greater Washington

Using Analytics for Fundraising

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Page 1: Using Analytics for Fundraising

Using Analytics for FundraisingMichael Milton

July 22, 2010

Presented for the Nonprofit Roundtable of Greater Washington

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A great nonprofit:Youth Haven

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Let’s define “analytics”

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using them to make decisions

Analytics is...

studying key metrics, and

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My favorite metric:

% of CEO time in front of prospects

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Another favorite metric:

Churned dollars

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

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Yet another cool metric:

Client emergency contact conversion rate

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A more specific version of that last one:

Conversion rate for parents of current

students

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A dubious metric: Fundraising efficiency

From charitynavigator.com

It's easy to calculate!

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Analytics is harder for fundraisers

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

to select metrics

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Shareholders want

dividends...

Shareholders

The corporation

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...so they bring on a board to ensure

that they get dividends...

Shareholders

The corporation

Board

controls

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

dividends...

Shareholders

The corporation

Board

CEO

controls

controls

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

dividends.

Shareholders

The corporation

Salespeople

Board

CEO

controls

controls

controls

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The sales folks select the metrics

that describe revenue creation.

Shareholders

The corporation

Salespeople

Board

CEO

controls

controls

controls

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Now let's look at nonprofits

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At the top, we have

beneficiaries rather than

shareholders

Beneficiaries

The nonprofit

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They don't actually control

the nonprofit

Beneficiaries

The nonprofit

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Their payoffs are more vague than

dividends

Beneficiaries

The nonprofit

(generally speaking)

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The board wants to help

the beneficiaries

Beneficiaries

The nonprofit

Boardinf uences

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But there’s no guarantee that they will,

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

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

and neither are necessarily right.

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Check out givewell.org

Nonprofits can pursue evidence-based management

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The board hires the CEO to help the beneficiaries

Beneficiaries

The nonprofit

Board

CEO

controlsinf uences

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You want to help, too!

Beneficiaries

The nonprofit

Fundraisers

Board

CEO

controls

controls

inf uences

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In theory, the CEO is your boss

Beneficiaries

The nonprofit

Fundraisers

Board

CEO

controls

controls

inf uences

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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

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Revenue is your goal, which by itself is

unambiguous

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But a lot of times it’s not clear how

the revenue that you create translates into

social benefits

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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

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

you need illuminating metrics

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

Of course, there are exceptions.

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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

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What if managing the complexity is your job?

Maybe then analytics isn’t such a big deal

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It is, because if you have the analytics you can

control the conversation

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Control means focus and results

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A board member thinks she knows what the donor

constituency wants

Focus problem:

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A volunteer thinks his pet project is the most important

thing in the world

Focus problem:

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The CEO is paying attention to the wrong things

Focus problem:

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Getting results right is knowing when you’ve

succeeded.

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How do you “do analytics”?

You run tests and then inspect your metrics.

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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

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A useful test demands you to

pick the right metrics

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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

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Something easy to test:

Fundraising letters

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Web analytics is the cutting edge

You need to learn Google Analytics.

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Google Analytics knows where people come from and whether they convert

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

fundraising dollars.

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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).

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CollectionSocial networksWeb analyticsOperations

Direct MarketingPersonal contact

ConsolidationMunging

Integration

Analysis Selecting the right metrics

Running good testsMaking it actionable

The fundraising data infrastructure