As organizations go through digital transformation – the topics of data, data analytics, Artificial Intelligence, machine learning, and more continue to be brought up. The non-profit sector is no different. In fact, 90% of nonprofits say they are actively collecting data. Although this is a good start, only 40% of respondents said they use this data often to help make decisions, and only 5% say they use data to help with every decision. This lags behind other industries, where 55% of organizations say they have adopted big data analytics into their every day operations.
Why does this matter?
The lack of analytics adoption is putting the non-profit industry at a major disadvantage. The utilization of analytics can help you make better decisions, save you time, and increase your bottom line by 2-7%.
At Advanced Analytics & Research Lab, one of our main focuses is non-profits, and helping them close the gap on other industries in terms of analytics adoption. One solution we have recently, and successfully piloted is our fundraising optimization model. This blog will highlight how this model works and how it can help your organization.
Fundraising Optimization
For many non-profits, fundraising operations is their bloodline. In fundraising, there is a number of significant opportunities when it comes to utilizing analytics in order to increase the efficiency of your initiatives. One way to do this is through the use of predictive and optimization models, which can help an organization save up to 10~50% of their advertising/mailing costs. These predictive models can help pinpoint which donors are “low value and low probability” and re-allocate funds to those that are “high value and high probability”, thus significantly increasing ROI on fundraising activities. As well, by segmenting customers using their features like geography, age, professions, and their transactional behaviors, we can help further identify opportunities and fine-tune outreach.
To help non-profits implement predictive and optimization models into their fundraising activities, we recently created a proprietary fundraising optimization model. This prebuilt algorithm will take as much information as possible from your existing data framework to build a profile at any given time for every donor in your database. As typical fundraising campaigns only receive about 2-4% donation rate, we will use this information to predict the probability and amount of each donor. This means that you won’t have to put resources into the 96-98% of people that don’t donate, helping you achieve large cost savings.
Example Scenario
Let’s do an example to illustrate how the fundraising optimization model works for a mail-out campaign, and how it can help your nonprofit.
Let’s say your non-profit is doing a Christmas Mail-out Campaign. You have 10,000 potential donors in your database, and the mailing cost is $3.50 per mail. Historically, your donation rate is 3% (or 300 people donate out of the 10,000 people contacted). With our model, you can predict who will or will not donate and how much each person will donate or not, allowing you to focus on the high value and high probability donors. Therefore, we can narrow down the 10,000 list of prospective donors to a list of optimized donors to send mail-outs to (for ex, 4,000), thus saving you thousands in outreach cost without losing on the actual revenue.
Accuracy
The key to this is the accuracy of the model. After a few pilot projects, we have found that we have been able to achieve results of greater than 90% accuracy.
Bottom Line
If we assume that the average donation is $200, we can see that the results of a normal mail-out campaign vs. one using the AAARL fundraising optimization model:
Therefore, even though your revenue is a bit lower, you saved much more than the loss in revenue, and with that extra money, you can invest into higher ROI marketing campaigns.
Conclusion
The fundraising optimization model is one of the many ways we can help non-profits use their data to boost their organizations performance. If you are interested, read more about how it works, try our demo, or book a call to discuss! Stay tuned for more blogs on how your non-profit can use analytics to help your organization thrive.