Optimize Year-End Fundraising with Predictive Analytics

This giving season try something new to optimize your fundraising campaign: predictive analytics. Rather than relying on evaluating the effectiveness of past fundraising efforts and basing decisions on opinions and experience, predictive analytics provides additional guidance on what will likely be the most effective campaigns, whom to target and how to allocate resources to maximize fundraising results.
 
WHAT IS PREDICTIVE ANALYTICS AND HOW DOES IT FIT WITHIN NONPROFITS?

Predictive analytics is a set of techniques and technologies that extract information from data to identify patterns and predict future outcomes. Based on a variety of statistical techniques and software technology, predictive analytics helps to understand the relationships between data points and identify patterns within the data, as well as which factors contribute to the prediction. This whole analysis can be configured to show prediction based on various factors and can be refined further over time as more information is included in the analysis.

Nonprofits are uniquely positioned to benefit from predictive analytics. Most nonprofits house the kind of data that can fuel detailed analysis, which results in actionable insights. They have donor information that often includes a wide array of demographic information, historical behavior information and information about how donors responded to past fundraising campaigns. This type and breadth of information can quickly be converted into predictions and more effective fundraising campaigns. Even if the nonprofit only has hundreds or thousands of donor records—as opposed to hundreds of thousands or more—that is sufficient for creating effective predictive analyses.
 
WHAT CAN NONPROFITS PREDICT?

Predictive analytics can help nonprofits identify the people who are most likely to donate and those unlikely to give. To identify potential donors, nonprofits can examine past donor information to identify the characteristics that most accurately determine whether someone donates. Unlike traditional analysis methods that only examine past donation information, predictive analytics leverages information—such as age, income, lifestyle, past donation information and associations to nonprofits with similar missions—to pinpoint donors. With this information, nonprofits can more precisely target a pool of potential donors to maximize fundraising results.

For example, a nonprofit with a list of 3,000 past donors and 2,500 potential donors may only be able to directly contact 2,000 donors through in-person meetings, phone calls and/or direct/digital mailing due to budget constraints. How can the nonprofit determine which of the 5,500 potential donors to contact? The nonprofit can utilize predictive analytics to assign a donation probability to each potential donor based on historical donation information and each potential donor’s characteristics to then target only the donors with a high probability. This helps reduce the overhead of devoting resources to individuals or groups who are unlikely to donate and maximizes the donor conversion rate.

Going one step beyond identifying donors, predictive analytics can actually be used to predict donation amounts. Instead, predictive analytics can be performed that assigns both a donation probability and an expected donation amount if they donate. This is an expected value for donors, and this information can be calculated to optimize the fundraising campaign. If a nonprofit identifies five high-value donors who only have a 40 percent donation probability, targeting those may still be more valuable than pursuing five low-value donors who have a greater than 90 percent probability of donating.

Predictive analytics can be applied to almost any area of nonprofit operations. While improving fundraising is often the first goal, predictive analytics can be used to improve other areas of the organization. Several examples of these are:
  • Mission-specific goals
  • Operational performance
  • Cost forecasting
  • Community and government outreach
 
WHEN SHOULD NONPROFITS CONSIDER PREDICTIVE ANALYTICS?
 
Nonprofits most commonly turn to predictive analytics when they are:
  • Seeking to improve fundraising results
  • Facing competition for donors
  • Not meeting fundraising goals and objectives with current campaigns
  • Exploring opportunities for new or enhanced fundraising campaigns
  • Experiencing a shrinking donor base or difficulty reaching donors
 
HOW DOES PREDICTIVE ANALYTICS FIT WITHIN THE BIGGER PICTURE?

Predictive analytics is an important method for improving your fundraising process. Just as major retailers, financial institutions and healthcare companies are utilizing predictive analytics to maximize revenue and reduce costs, nonprofits have an opportunity to make use of this technology within their own organizations.

Regardless of the volume of fundraising you are doing or the makeup of your donors, you can benefit from applying predictive analytics to your year-end fundraising campaigns.

Ready to get started? Stay tuned for part two of this series to get tips on the mechanics of implementing predictive analytics.
 
For more information, contact Joe Sremack, director, Data Analytics & Automation, at jsremack@bdo.com or Gurjeet Singh, senior manager, Data Analytics & Automation, at gsingh@bdo.com.

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