Do the terms “predictive donor modeling,” “data mining,” or “fundraising performance metrics” make your eyes glaze over and inspire you to hide under your desk?
Intimidating consultant-speak about data analysis can make small nonprofits tune out and turn off. These phrases give the impression that 
data analysis is for organizations with multi-million dollar campaigns and 20-person development teams.
But donor data analysis isn’t just for giant hospitals and universities. The truth is, it’s not necessarily a complicated endeavor at all.
By starting small and establishing some simple systems, you can become a “data-informed” nonprofit!
Let’s start by putting “donor data analysis” into more palatable terms. Donor data: what’s in it for you?
In a nutshell, there’s more to measuring your annual fundraising than revenue. You need to measure performance in terms of donors as well.
A close look at your donor data tells you which donors are responding to your outreach and illuminates how well your strategies and tactics are working.
Data analysis reveals your most loyal and valuable donors. Most importantly, it allows you to make the most of the giving potential within your database.
Here are examples to illustrate the usefulness of data analysis:
In 2010, a community arts organization began tracking a segment of loyal donors who gave for 5 years or more. Over the next two years, they implemented new cultivation tactics for this group.
When they calculated retention of these loyal donors in 2012, it increased from 32% in 2010 to 67%. Additionally, presumably because of the extra attention they received, the average gift amount of this group increased by 25%.
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After two years of tracking their data, a women’s shelter recognized that donors with no gift in the past 3 years were no longer giving enough as a group to cover their communication and solicitation costs.
The shelter used the money they saved on those lapsed donor mailings to produce a welcome pack for new donors. New donor conversion went up 30% over the next two years as a result of the welcome package. Collecting, measuring, and interpreting your data helps you answer important questions like these:
- Who is in your database? How many current donors do you actually have? How many are prospects or lapsed donors?
- Did your new cultivation program for lapsed donors/ new donors/ event attendees, etc… actually make a difference?
- Who are your best major donor or monthly giving prospects?
- Which donors aren’t worth the cost and effort to pursue? When do we stop mailing to lapsed donors?
But where do you start?
Individual fundraising can be segmented and measured in countless ways. This is where things can become overwhelming. You need to start small, determine your most important questions, and figure out how to answer them.
Break it down into these five steps to start:
1. Identify and collect your most important information
Begin by making a list of donor segments that are important to your organization. These may include current, new, lapsed, multi-year, and prospective donors. Your organization may have special segments such as alumni, families of patients, former clients, etc… that are important to track.
Count and record the number of donors in each segment.
2. Calculate and Measure
Based on numbers from previous years, you’ll calculate the percentage of donors who renewed their giving this year. Calculate your overall retention rate as well as retention rates of your important segments listed in Step 1 (Here’s a step-by-step guide to help you calculate retention rates). Calculate the percentage of each segment within your database. What percentage of your total database are current donors? Of those current donors, what percentage are first-time donors and what percentage are multi-year givers?
3. Analyze
In this step, you’ll answer important questions about your donors and determine your strengths and weaknesses in terms of your annual fundraising.
For example, how does your overall donor retention compare to last year? What about retention of first-time donors compared to last year? (If you don’t have numbers from last year, don’t worry. You’ll be ready for next year!)
What do your current donor counts tell you? Do you have a ton of first-time donors in your database? Do you have substantially more recently lapsed donors than current or new donors? If so, you’ll need to work hard to keep them.
4. Strategize
Based on the strengths and weaknesses you uncovered, create a plan for improvement. If you need to focus on lapsed donor renewal, you may want to plan a telephone campaign and a special mailing to those donors.
Perhaps you discovered 150 non-donor records in your database of parents whose children you served. A personal, meaningful appeal to this group might be a good idea.
5. Document
Create a spreadsheet and record all your numbers, calculations, and your plan of action. Next year, you’ll have easy access at donor analysis time. I recommend keeping both a hard copy notebooks and an electronic folder.
Next year… repeat!
True there’s some up-front work to get your system off the ground, like creating spreadsheets to record your data and building a documentation notebook.
But once you’ve gone through this initial set-up, you’ll have a simple data analysis system to follow each year. With this is under your belt, it will be much easier to add other data points and become a data-analysis devotee!
Your data analysis system will help you design a fundraising strategy that will not only raise more money, but improve your relationship with your donors over the long-term.
Donna Mehr is the editor of smartannualgiving.com where she helps small nonprofits build strong annual fundraising programs. She is the author of The Smart Guide to a Smarter Annual Appeal.
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