Why Nonprofits Should Learn from Corporate Sector’s Data-Driven Strategy

By Paula Attfield

When it comes to the use of data and brand, the corporate sector remains ahead of the nonprofit sector.

Why? Because the corporate sector has it easy.

In the for-profit world, the consumer pays a fee and gets something in return. Whereas it’s a much more nuanced endeavour to convince a person to open their wallet and part with their money for a charitable cause.

In the for-profit world, the process is a two-step:

1. Consumer makes a payment.
2. The consumer receives a good or service in return.

In the non-profit world, the transaction takes four steps:

1. Donor gives to a charitable cause.
2. The donation then makes it way to helping the beneficiary of that cause.
3. The donor gets nothing tangible (except possibly a tax receipt) in return.
4. Hopefully, the donor is left with a positive feeling.

I’m being perhaps a bit simplistic here, but I hope you get the point, and I’ll explain more in depth a little further on, but it’s first worth noting that the charitable and nonprofit sector is a big one in Canada, employing 2.4 million people at more than 170,000 nonprofits and charities (that’s 1 in 10 workers). The sector contributes more than 8 percent of Canada’s gross domestic product, exceeding the oil and gas or finance industries. (Statistics from Imagine Canada: About the nonprofit sector).

It’s a bigger sector and it is making a difference. One organization may be working to protect the environment, while another may be devoted to finding a cure for a disease, while another may be looking to grant a critically ill child a wish. And on the list goes.

While the need is great, the good news is that Canadians are very generous. In 2020, donors gave close to $10.6 billion (Statistics Canada: Charitable Donors, 2022).

At ST (Stephen Thomas Ltd) our goal is to help connect donors to Canada’s great causes through direct response marketing. This is a trickier proposition than marketing and selling tangible products. In fundraising we “sell” the warm feeling that a donor gets when they donate to a cause. That donation in turn goes to help someone, or something.

It’s worth noting some of the things that set direct response fundraising apart from direct response marketing. Fundraising is an entirely different proposition than a consumer to business transaction.

As a consumer, I buy Apple products. Needless to say, Apple is good at building brand loyalty. I switched to an iPhone to ensure my music library could live on my phone. And I bought an Apple watch because I saw my friends wearing them. And on it goes. Apple has built innovative products, a great brand, and they know how to use their data.

Marketers lean into predictive models and behavioural economics to target their best consumers. There are multiple touchpoints where a brand can find me and entice me to buy their goods or services. And when I do, I get something in return. Something that provides some utility or gratification. A brand will know when I’ve been on their website; they retarget me with similar products.

For non-profits it’s a different equation. Where a consumer brand might target me to purchase a certain car because my neighbour drives one, it’s difficult to predict who will be inclined to give to which cause, at any given time because the fact that I give to a particular cause, will have no bearing on whether my neighbour is inclined to give to that same cause. My neighbour might not care about my chosen cause at all.

This means that data mining is trickier for non-profit organizations. That said, in direct response fundraising we do have metrics that we can consistently rely on.

One of the biggest predictors of whether a donor will give again is recency. How long ago did they give? If we catch them with another ask at just the right time, when they’re still carrying that good feeling, they’re more likely to give again.

Another predictor is frequency, the more frequently the donor gives, the better the chance that they will give again.

We also rely on the monetary aspect of a donor’s giving patterns. How much have they given? Has that amount increased over time? Has it decreased? We can use this information to tailor gift requests to that individual.

There’s also a donor’s connection to the cause. If donors give to a particular cause, they are more likely to give to other causes, including ones that are similar in mission to those they give to. If you’re charitably inclined, donating to one cause makes you more likely to give to another, especially if it’s a related cause. For example, if I give to one environmental cause I’m likely to give to a related cause. Finding donors that might have an affinity to your cause is important.

One thing that is unique to the non-profit sector in Canada is that non-profits work cooperatively to find new donors. They share their lists with one another, on a controlled basis, so that each organization can find new donors. We call this practice list exchange. When managed according to privacy standards, it works well.

A non-profit organization must understand their donor data, both on a campaign-by-campaign basis, but also historically. Analyzing donor history over many years will allow us to use Recency, Frequency, and Monetary (RFM) measures to model predictability of repeat giving. And knowing whether a prospective donor might have a connection to our cause is a big factor in predicting behaviour. All this data can shed light on how much they will be likely to give if asked again and help determine their cadence of giving.

The great thing about direct response is that every hypothesis can be tested and proven.

It’s about measuring what matters, being inspired by data insights, and knowing how to use that data that will help a cause raise more money to do their great work.

Because charities aren’t selling a product but rather the promise of a warm feeling, to raise more money effective fundraising requires that charities differentiate themselves in the marketplace and that they emotionally connect donors to their cause.

Charities must bring their brand to life in all fundraising direct marketing channels – this can make a huge difference to donor acquisition and donor retention efforts.

Are you a donor? If yes, why do you give?

You may give to a cause because you have been personally affected or you may give because a friend asked you to. At the end of the day, a charity must use all the tools available, including relying on what their data is saying and using that information properly. And they must tell their story in a compelling way, one that will convince you to give to a cause that may not be dear to you.

If you’re not a donor, why aren’t you?

Likely if you don’t give, it’s because you haven’t been asked to give, or that you haven’t been asked at the right time, or in the right way, or with the most compelling story. Most donors give because they have been asked and asked well.

Smart, effective and ethical fundraising is what fuels Canada’s non-profit sector. It’s what helps with social justice, environmental, human rights, health and welfare, the arts, and more, in Canadian society. Consider making a gift to your favourite organization today.

Paula Attfield is the CEO of the Stephen Thomas Ltd agency.