Analytics. Not Just for Prospecting Anymore.

Transcription

1 July 2016 Analytics. Not Just for Prospecting Anymore. By Joshua M. Birkholz As a 15-year fundraising analytics professional, I ve seen a great evolution of the application of data science to development. Analytics may be a task to many, but it is a catalyst of a broader transformation in the core business model of fundraising. Business success is largely attributed to macroeconomics (market conditions), leadership effect (vision and character of executive team), and business model (how business is conducted, staffed, and organized). Philanthropy, which has averaged a share of 2.1% of the GDP, is most certainly connected to macroeconomics. The ability to attract and secure transformational gifts Copyright 2016 Bentz Whaley Flessner and provide campaign visioning shows the obvious leadership effect. The greatest change in recent generations is the evolving way we do our work. This is arguably the first generation fundraising has been organized as a business. Certainly, fundraising has a long history. However, it used to be sufficient to know the handful of wealthy constituents, integrate into the communities of wealth, develop a strong board, and build incremental revenue to earned income. Now, the demands for funds have moved way past the incremental, campaign size is a status symbol of elite

2 nonprofits, and for-profit-like competition exists in the nonprofit sector. The need for a sustainable business of fundraising with diverse sources of revenue has ushered a change that cannot be undone. Alexis P. Barber Joshua M. Birkholz Jason E. Boley Kate H. Butler Janet B. Cady Christopher A. Clark James P. Daniel Bruce W. Flessner Allison J. Gannon Annie M. Harm Emma L. Hinke Jamie L. Hunte Judith M. Jobbitt Judy Y. Kirk Katrina A. Klaproth Anne L. Kvinge Bond T. Lammey Jenny S. Lappegaard Mark J. Marshall John S. McConnell Jennifer A. McDonough Merrell A. Milano Karl Miller Marisa E. Ontko Dennis A. Prescott Andrew C. Schultz Bruce J. Wenger As we industrialize the fundraising complex, we see the need to assess the whole of our program under an umbrella of continuous process improvement. We need ever-expanding teams, and we need more output from the people we have. Analytics, which originated as a prospecting and segmentation toolset in our industry, provides insight into the operating methodology, practical applications for increasing return on investment, and perspective on the relative benefits of organizational modification. Surely, analytics is not just for prospecting anymore. Applications of Analytics Base Development Direct marketing, annual giving, member conversion, or whatever name you give to base development establishes the first philanthropic behaviors in our constituencies. It is the 101 course on giving, which teaches our members, alumni, patients, and friends how to give and why it matters. The data sciences are critical to creating mass customization so that corporate messaging can be delivered in a personal way. It can identify which constituents are more likely to give in response to different treatements. And, it can enable organizations to manage budgets by identifying which populations require more emphasis and which populations require less of it Ohms Lane Minneapolis, MN (952) South Clark Street Suite 910 Arlington, VA (703) As base development gives way to mid-level giving, we see a light shining on an often neglected pool of potential. An organization with 10,000 prospects with the capacity to give at the major level may have teams of major gift officers. An organization with 10,000 prospects able to give at the mid-range between direct marketing and major giving levels is lucky to have one or two dedicated staff members. The conversion rates of mid-range donors are often much more predictable. The lack of growth in the middle of the pyramid is attributed to talent onboarding gaps at best, organizational ambivalence at worst. The identification and assignment of mid-range donors is among the simplest initial applications of analytics to see a measurable return. 2 BENTZ WHALEY FLESSNER

3 Prospect Development Prospect development describes the underlying infrastructure necessary to operate a best-in-class fundraising program with a major-gift oriented business model. The components of this infrastructure include analytics to identify prospects and evaluate portfolios; prospect research to feed the pipeline, discover emerging constituent sectors, and profile prospects; and relationship management to manage portfolio composition, gift officer activity, and provide contextual, actionable reporting. The prospect identification application of analytics emerged as a way to scale questions of propensity to thousands of constituents, much like wealth screening provides a macro view of capacity. Analytics not only identifies the prospects, but informs likely conversion rates, assignment prioritization, and profile content to reduce the time it takes to verify a potential prospect. Prospect verification, a necessary step in converting pools to assigned prospects, is strengthened by better analytics tools determining if the name should even be researched. These tools include screening match quality algorithms, interest hierarchies, connectedness, and relationships. Portfolio optimization in fundraising is as critical to fundraising as it is to investing. However, rather than determining the right mix of stocks to ensure maximum returns, we are looking for the right mix of prospects. Analytics can help us define the thresholds where the return on in-person interaction is warranted. Often falling into the categories of wealth, propensity, and warmth, we can set thresholds where solicitation yields on capacity are at the highest levels. Next we can equip fundraisers with understanding these thresholds and make decisions such as whether to keep the name in the portfolio, assign it to someone else, unassign it, or wait for institutional relationship deepening. Activity and holding gift officers accountable is often the go-to strategy of the new manager. In reality staffing levels and portfolio mix usually have higher returns when addressed. Nevertheless, growth in giving can be achieved through increased activity. I ve found accountability systems to be lacking when compared to engagement systems. Accountability systems set ceilings. Engagement systems, where I choose to do the right thing, set floors. But the metrics must be thoughtfully chosen and provide contextual aspiration. Most metrics are chosen through either benchmarking similar organizations or adopting the system a new executive used at his or her last organization. BENTZ WHALEY FLESSNER 3

4 Joshua M. Birkholz is a principal at Bentz Whaley Flessner and is widely regarded as a leading innovator in 21st-century development strategies. He consults for leading nonprofits in higher education, healthcare, and human services in comprehensive campaigning, organizational structure, data-driven strategies, and productive business processes. Josh oversees the team of consultants with specialties in the data sciences and prospect development. Using analytics, we can determine which metrics actually provide distinction in more money being raised. One method is to compare baseline activities of high performers to lower performers. The differences will inform noise reduction in the vast broadcast of expectations. Reports should show only the few, highly relevant items with a comparison of individual officer activity to both average activity and best-in-class activity. This clarity of context will provide the self-governance needed to produce an engagement-based system. Forecasting and Simulation Basic economic forecasting looks back to look forward. Rolling averages into the future and hoping our programs follow the trend line may be the approach many nonprofits still follow. But, programs integrating the data sciences are looking at the future in a whole new way. The most notable differences are diversity of methods, macroeconomic context, and outlier management. With the increased accessibility of consumer based statistical platforms, forecasting algorithms have become more complex. This complexity has increased the accuracy. It is less uncommon to see Monte Carlo simulation or ARIMA applied to fundraising projections. These simulations enable organizations to understand the historic relationship between internal and external economic drivers to the fundraising totals. Now, nonprofits can make educated estimates of the impact of stock market declines, staffing levels, and frontline tenures on giving totals. Even with new technologies, the outlier-effect in major giving is substantial. The base can be predicted with increasing precision; but the top of the pyramid requires flexibility. I ve found the very top of the pyramid (the top donors) requires hands-on attention, conversation, and estimation. The major giving population apart from the very top requires an analysis of gift officer behavior. Base level giving is predictable. Major level giving is not predictable; but major gift officer behavior is predictable. Comparing close rates by officers to the prospects by levels in the pipeline will give the best estimate of future major giving. Then the full organizational projection can be an ensemble of base giving by economic forecasts, hand-verified principal gifts, and officer-based major gift projections. 4 BENTZ WHALEY FLESSNER

5 Introducing BWF Insight BWF is pleased to announce a new division providing services in prospect development and analytics. As the leader in consulting for prospect development, BWF Insight uniquely provides The Total Pipeline Solution. Using the latest innovations in data science, BWF Insight meets the critical needs of feeding the pipeline, clearing the pipeline of clogs, and keeping the pipeline moving. Additionally, our experienced team of analysts and consultants will guide the development and excellence of in-house programs. BWF has established several hundred prospect development programs and formed nearly 100 in-house analytics departments through its now integrated prospect development consulting group and the DonorCast practice. This newly integrated BWF Insight meets all of the underlying infrastructure needs of a sustainable modern fundraising program. Analysis Scoring Identification Portfolio Using data to assess database capacity, discover underlying program drivers, and provide campaign projections and simulations. Predictive modeling, engagement, and capacity scoring for identifying prospects and segmenting direct response. High-touch outsourced prospect verification and external prospect identification. Threshold-based portfolio clean-up with hands-on management techniques to be sure the best names are getting attention. Performance Analysis of fundraiser activity to provide refined, actionable metrics systems. Development Training services for developing or enhancing in-house prospect development and analytics programs. Consulting Diagnostic assessments, full-service program management, benchmarking, process and policy design for prospect research, relationship management, and analytics. Whether you need a provider to determine database potential, find you more prospects, develop a cutting-edge program, or outsource your interim analytics and prospect development efforts, BWF Insight is your ideal partner. Contact us today to bring data science to your fundraising business. BENTZ WHALEY FLESSNER 5

6 7251 Ohms Lane Minneapolis, MN (952) INSIDE: Analytics. Not Just for Prospecting Anymore. A great evolution in the application of data science to development is taking place. Analytics is a catalyst of a broader transformation in the core business model of fundraising, providing insight into the operating methodology, practical applications for increasing return on investment, and perspective on the relative benefits of organizational modification. The Total Pipeline Solution (800)