How nonprofit organizations can prioritize data for long-term stability and sustainable growth

The current state of nonprofit data

In 2019, only 31% of organizations identified themselves as data driven, according to a NewVantage Partners survey. Two years later, the same survey found that number dropped to 24%.

And 76% have yet to forge a data culture. Because of this, nonprofit data quality has fallen into a collective decline. Three factors play into this:

1. Managing data can be overwhelming for an organization.
2. If you choose to bring data management in-house, you run into siloed CRM and warehousing tools.
3. The companies that sell those tools don’t provide the internal support to actually manage them.

This creates the perfect storm for bad data management habits.

The cost of poor data for nonprofits

There’s an expensive price tag on bad data. IBM estimates that it costs the U.S. economy $3.1 trillion a year; that’s an astonishing 15-25% of revenue for most companies.

Why so high? Even if most of your data records are perfect, the flawed records cost you much more. Let’s look at the rule of 10 to give a little perspective:

890 records are perfect

110 records are flawed

For every good record that may cost $1, every bad record cost $10.

Perfect record - $1 x 890 = $890

Flawed record - $10 x 110 = $1,110

Total = $1,990

As you can see, a few bad records can end up costing your organization big time in the long run.

And lost revenue isn’t the only thing we’re facing here. Poor data management can lead to lost customers, bad strategy decisions, and even reputational damage.

With this much on the line, you can’t afford not to change your approach to data.

How to invest in data as your leading asset

For organizations looking to sprint into a data-driven future, you must begin by making data strategy the hero. To do this, you must start by reviewing and revising your data management processes.

Here are five steps any organization can implement to plan their data strategy:

1. Identify your data management practices

If you don’t have any data management practices, sit down and start putting them together.

Evaluate your current data governance construct. While many people believe this just revolves around business rules, it actually encompasses a much larger scope of your data management practices.

2. Create a road map for optimization of data management

To be successful, you must understand where all of your data is coming from, where it’s going, who gets to use it, where they’re using it and, at some point, when you need to destroy it.

This means being strategic and understanding how to manage it. Create a roadmap that outlines your plans for optimization and the steps it will take you to get there. This process can include:

• Combining strategies
  • Look at your donors holistically across every channel.
• Merging data silos
  • This is one of the hardest things to do, but it’s necessary. Match capabilities from system to system.
• Understanding campaign selection and execution across all channels
  • What are you doing inside your organization across the board? Create a vision for a data strategy that’s not just about fundraising but about your organization as a whole.
• Reporting and Business Intelligence
  • What reporting and outcomes are needed for your organization to be successful? It’s much easier to work backwards than it is to force your already built data to fit into reports.
• Plan for the future
  • Things change quickly. Make sure as you map out your data strategy it’s a rinse and repeat practice. Be open to change.

3. Assess your data quality

Finding the errors within your data will help you understand the overall quality without combing through your entire database.

Do you know how many duplicates you have on file? Do you know if your addresses are correct? A simple way to start assessing the quality of your data is to take 100 of the most recent donations to examine what’s missing.

By doing this, you will reveal where improvements and new processes need to be implemented.

If you have high quality data, you should be able to confidently run reports without fear of errors or second-guessing work.

4. Integrate data strategy into your strategic planning

Data is a critical component for any campaign’s strategic plan. As you’re planning your campaigns, make sure you’re thinking about the data you have available. Do you have everything you need for deep personalization or optimized donor journeys?

If this isn’t available in your data, you may need to add additional elements to your environment in order to get you what you need to succeed.

By planning and investigating first, it’s a lot easier to operate later.

Once you have an effective data strategy, you can unlock a clear pathway for the optimization of programs like direct mail acquisition. (More on this later.) 

5. Share data strategy with your teams

For data integration to be successful, it has to be a cultural shift. If everyone at your organization isn’t committed to a data-driven future, this process will fail.

Start with leadership buy-in at the highest level, then share the roadmap with the rest of your teams. Make sure everyone understands how, where and when you’re expecting to use your data.

Accept that this shift will be fluid – steps forward and backward are normal. What’s important is that everyone is committed to changing and improving your data practices for the long run.

You’re committed to a data-driven future. Now what?

Using your data to drive strategy and make decisions

As Abraham Lincoln once said, “The best way to predict the future is to create it.” You’ve spent all this time cleaning up your data and tightening your best practices – data is your new secret weapon.

And you can use it to reveal donor stories and hidden trends allowing you to predict the future and make strategic decisions to set you up for sustainable growth.

There are many stops on this road to your new normal, but here are the four main pitstops to be aware of along the way.

Long-Term Net (LTN)

• Initial Gift Amount
• Age
• Seasonality
• Geographic Location
• Multichannel Readiness
• Control Package
• Lists, Media

When you acquire a donor in direct mail, over the next few years how much net revenue will they generate? Your ask array alone can make the difference between generating viable levels of long-term net revenue or causing your organization to regress.

Primary Metrics

• Performance Floor or Ceiling
• Financial Impact

Forget how all the other organizations are performing. While it’s nice to know, it’s much more important to understand your file’s capabilities.

What is your performance ceiling or floor for things like retention, average gift and frequency? What strategies can be executed to break the performance ceiling?

Core Balance Index (CBI)

• Are you acquiring, reactivating and retaining enough donors to protect your future?

Who are your core donors? These are people who give for two or more consecutive years and have the potential to upgrade to mid-level, major and planned giving.

In direct mail, these donors can drive 40% of gross revenue and 60% of net. They’re also the donors who protect you during economic hardship.

Prime Leads

• Are you prepared to experience accelerated financials?

We mentioned mid-level, major and planned giving; they’re all connected. Once you understand your long-term net, primary metrics and core balance index you’ll be able to identify which donors have the potential for higher giving down the road.

Conclusion

With this valuable information in your toolkit, you can use it to drive your multichannel strategy for lists, offers, packages, creative and channel investment.

You may be asking, “Is this all really possible?” We’re here to assure you that this is in reach.

Nonprofit organizations that are committing to data-driven futures now are seeing higher volumes of sustainable growth and will have a big leg up on the competition in the coming years.