Data is Gold

Data is gold. But only if you can get to its real value.
part 1

[Chuck Longfield’s passion is data and what it can do to make nonprofits more effective. Here, 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.]

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.

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.

‘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 realize 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 organizations 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 organization. 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 organization 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 organizations 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 favorite 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 tire 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 modeling 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 maximize 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 organizations 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 organizations 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.

Here’s part 2, Making More of Your Data.

Chuck Longfield is chief scientist for Blackbaud, Inc. and founder of Target Software, Inc. and Target Analysis Group, Inc., Blackbaud companies.

Ken Burnett is author of several books on donor development and communication, including Relationship Fundraising and The Zen of Fundraising. Chairman of Trustees at ActionAid from 1998 to 2003, Ken began his fundraising career with that charity back in 1977. He is founder and managing trustee of SOFII.

Copyright, The SOFII Foundation 2010; reprinted with permission.