Tuesday, April 7, 2009

Maximizing Your Donor Database

How to Transform Your Database From a Money Pit Into a Profit Center

The development database…just the term stirs fear in the minds of good Development Professionals.

So many things can go wrong with development databases…are donor recognitions and salutations perfect? Did this week's donors receive acknowledgment letters? How many duplicates?

With these in mind, development departments work very hard to ensure that, as a result of their database, "nothing goes wrong."

And, yet at the end of the day, most of us are exasperated with our databases. Even when we have a good, "clean" database, we can't help but feel like it's a money pit. Partly because we don't really want to acknowledge that the expensive database we just bought can't do everything we think it should be able to do.

But, in fact, any good donor database has limitations. Databases have three main functions:

1. Storing Information
Databases store volumes of data about donors and giving histories; almost any data point about a donor can be stored in your database.

2. Organizing Information
For the most part, donor information is well-organized. Fundraising software developers (Donor Perfect, Blackbaud) do a good job making the user's interaction with data fairly straight-forward. Users can easily look up a constituent, enter gift and can find necessary information (Mrs. Smith gave five gifts totaling $500).

3. Answering User Questions
This is the most important and under-utilized purpose of a database. Databases are designed to answer simple questions, such as "which donors gave last year" or "how many donors lapsed two years ago."

At best, these answers provide interesting information, but they don't add financial value to your nonprofit.

However, the database gives you the most important tool a Development Officer can use to increase its top line and meet or exceed fundraising goals: a dataset.

Understanding a dataset's potential is important. The dataset is key to Silverizing your fundraising.

Moving Beyond Database Constraints

Once Development Officers understand that the development database gives them a dataset, they are ready to ask revenue-generating questions:

  • Who is giving $100 who should be giving $1,000?
  • Which prospects should be major donors to our organization?
  • How do we convert prospect to a donor (phone call, newsletter, etc)?
  • Who should we be cultivating for a Planned Gift?
  • Which event attendees should be giving more?
  • Which major donors are about to stop giving?

To answer these questions, start by taking the dataset and use a little knowledge of Excel and some fairly basic advanced statistics (we get the pun).

By mixing your datasets with Excel, you can model your donors' behavior. Your models will start answering these questions – for example, here are 10 donors who gave $100 last year who should be giving $1,000.

And, now, you can begin maximizing revenue.

So, please remember: your database isn't designed to – and thus, never will – spit out a list of which of your $100 donors should give you $1,000 (and frankly, your Development Committee probably won't be able to predict this with better certainty than if you picked donor names out of a hat at random).

But, if you want to identify these unique $100 donors, you can do this only if you acknowledge database constraints, use the database to create datasets and beef up your Excel skills so you can Silverize your fundraising activities.

Shameless Arrowhead Management plug:

Most nonprofits do a fairly good job keeping their donors' names and addresses current. But, few can undertake complex prediction and forecasting activities to answer questions that will make you more efficient, raise more money for your organization and transform your database from an "index card catalog on steroids" to a revenue-generating "can't live without" part of your development team.

Organizations looking for answers to these questions often find it more efficient to outsource their database management to people who can do this modeling.

Developing models of your databases is exactly what Arrowhead Management does - we'd love to help you create the models that answer these questions!

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