The Importance of Donor Data and How to Use It Effectively

Fundraising professionals don't need to be told that donors are more likely to support an organization if they feel they understand the work the organization does and that you, the fundraiser, value their investment in that work.

The key question, then, is: How can I effectively communicate with and develop relationships with donors that improve the odds of my organization retaining and even growing their support? And it follows that one of the biggest challenges nonprofits face in strengthening their donor relationships is not being able to seeand understand their donor data.

Given everything you do as a fundraising professional for your organization, the prospect of adding more data gathering and analytics to your tasks surely is concerning. Unfortunately, it isn't a task you can afford to ignore. Indeed, the success of your nonprofit depends on your ability to engage with donor data.

The good news? There's no reason to feel overwhelmed by yet another item on your to-do list. Donor data can be managed and used efficiently — you just have to have a little knowledge and the right tools.

Donor data encompasses several different areas and, when used effectively, can accomplish a lot. But first, you need to ask yourself some basic questions:

1. Why should I bother to collect donor data?
2. What kind of data should I track and collect?
3. How do I keep the data organized?
4. What can I do with the data?

Why should I collect donor data? 

A big part of your job as a nonprofit development professional is cultivate prospective donors and maintain relationships with existing donors. You organize fundraising campaigns and look for opportunities for your nonprofit to engage with the community to raise awareness of your cause.

Every donor interaction or community engagement results in new data. Collecting and analyzing that data allows you to:

• Better understand your donors. Successful engagements are predicated on knowing who donates to your nonprofit and why. In turn, this enables you to target the right audience, at the right time, and increases your organization's efficiency.
• Take advantage of corporate philanthropy. Corporations are an extremely underutilized source of revenue for nonprofits. The best way to capitalize on corporate philanthropy is through a matching-gifts program in which a corporation agrees to match donations to your organization on a 1:1, 2:1, or even 3:1 basis.
• Reach new markets. As you learn more about your donor community and how they respond to your fundraising campaigns, you'll be able to see which marketing strategies are effective and which should be tweaked or even abandoned. The more data you have on your donors, the easier it is to optimize your strategies to target a desired audience segment and achieve a positive outcome.

Don't underestimate the importance of gathering data about your donors. Good data analyzed in a timely fashion is the key to opening doors as you pursue leads in a fundraising campaign.

What kind of data should I track?

Donor data encompasses so much that it can quickly become a tidal wave that overwhelms any organization not equipped to handle it. To avoid that, you want to make sure that everything you track can be used to make your nonprofit more successful.

Here's another way to look at it: the data you track should be linked to one of two concepts — donor capacity and donor affinity. Donor capacity is determined by an evaluation of individual wealth indicators that can give you an idea of a donor's ability to give in general, while donor affinity uses individual philanthropic indicators to help you understand a donor's willingness to give to your organization.

The individual wealth indicators you should be on the lookout for include:

• Real estate ownership. There's a definite correlation between people who own real estate and people who give to charity. In fact, individuals with at least $2 million invested in real estate are seventeen times more likely to donate to a nonprofit organization.
• Business title/affiliation. This can give you a general idea of an individual's net worth and earning potential and suggest potential connections you might be able to leverage into major gifts down the road.
• Stock ownership. Keep an eye out for individuals who are corporate officers or directors and/or who own more than 5 percent of a company's public shares. They're more likely to be a candidate for a major gift, and it will help you estimate their net worth.

Of course, a billionaire with virtually unlimited donor capacity may have little desire to give to your organization — or any charity, for that matter. This is why it's important to gauge a prospective donor's potential for engagement with your organization by looking at the donor's:

• Giving history. Assess the donor's "RFM" — the Recency of their last gift, the Frequency of their giving, and the typical amount of their Monetary contributions. RFM can help you know who to target, when to make your ask, and how much you should ask for.
• Relationship to your cause. Look at what kind organizations prospective donors have supported in the past and target those whose interests are aligned with your nonprofit's mission.
• Political giving. People who give to political campaigns are more likely to give to charity — and are more likely to be a major gift donor.

Remember to collect basic information that will make the process of cultivation easier down the road, including:

• address/contact information
• profession/employer
• gender
• age
• date and amount of last donation/gift

Having this kind of information in a database will enable you to sort your donor community into different segments and design a targeted fundraising strategy for each segment. Equipped with this information, you'll be in a position to follow up with donors with a higher donor capacity score and encourage them to maximize the impact of their gift — for example, by offering them access to Double the Donation's matching gift database.

How do I keep my data organized? 

If you want to develop deep, meaningful relationships with your donors, you need to invest in  a CRM (constituent relationship manager) solution that enables you to organize, sort, and understand your data.

CRM software makes it easy to store all your donor data in a centralized location where it can be easily accessed by multiple members of your team. It also makes it easy to create in-depth profiles comprising the essential information for anyone who interacts with your organization, whether it's a donor, a prospective donor, or a volunteer.

One researching CRM solutions, make sure the software supports:

• List segmentation. The software should be able to segment and sort profiles based on any attribute you have decided to track (e.g., gender, age, location).
• Engagement measurement. The software should allow you to analyze data that tracks an individual's history with your organization (i.e., how often they have engaged, when they engage, whether they are more likely to give or to volunteer, etc.).
• Reporting and analyzing data. The software should be able to keep tabs on the effectiveness of different methods of engagement with donors.
• Seamless communication with donors. The best CRM will enable you to communicate directly with your donors to discuss fundraising ideas that apply to them.

To learn more about the essential features of a quality CRM, check out Bloomerang's guide to the best nonprofit CRM.

What can I do with the data?

While there are several things you can do with your donor data, the question we hear most often from fundraising professionals is: How can I use my existing data to find new donors and grow my donor base?

First, you can identify prospective donors by analyzing the wealth and philanthropic indicators (see above) of selected individuals in the broader donor community. Maximizing the benefits of wealth screening can help you:

• Gauge likely major-gift prospects.
• Identify important and potentially “leverageable” connections.
• Prioritize engagements to reach your fundraising goals.

While prospect research is essential to any nonprofit's success, it can also be a massive undertaking, so we recommend the following best practices:

• Use the most current data you can get your hands on.
• Screen the data in smaller batches.
• Prioritize philanthropic indicators.

Efficiently using donor data is the key to your nonprofit's future growth and sustainability. Doing so will not only help you  better understand your existing donor community, but will enable you to more easily and efficiently identify new prospects with whom to engage.

The importance of collecting and using donor data cannot be overstated; in fact, donor data  should influence every fundraising decision your organization makes. To do it effectively, you need to be organized, proactive, and creative. The good news? Equipped with a deep understanding of your donor data, you'll be able to secure more and larger gifts and donations, take full advantage of corporate philanthropy, and grow your donor community.

Adam Weinger is president of Double the Donation, a provider of tools that help nonprofits raise more money from corporate matching gift and volunteer grant programs.