How much is your database worth Assessing the potential of your fundraising database

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How much is your database worth? Assessing the
potential of your fundraising database

• Joshua M. Birkholz
• July 18, 2007

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The Plan

• Introduction to analytics
• Building in-house analytical capacity
• Assessing database capacity
• Filling your gift pyramid

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Introduction to Analytics
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What Is Meant by Analytics?

• Analytics describes the statistical tools and
  strategies to
• Analyze constituencies.
• Build models to predict constituent behaviors.
• Evaluate program performance using relevant
  metrics.
• Project future program performance.

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Analyzing Constituencies

• Identifying core constituent groups
• Defining their characteristics
• Understanding their motivations

• Applications
• Portfolio optimization
• Segmentation strategies
• Event programming

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Analyzing ConstituenciesFundraising Portfolio
Development

• The right prospects with the right gift officers
• The optimum composition of a portfolio
• Distributions by stage and status
• Distributions by ratings and targets
• Distributions by strategic segments

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Data Mining and Predictive Modeling

• Identifying new prospects for major and planned
  giving
• Stratifying gift levels for annual giving
  segmentation
• Predicting giving among non donors
• Determining lifetime potential

• Using internal information to study known and
  unknown constituents.

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Data Mining and Predictive ModelingWhat Is Data
Mining?

• Using statistics to identify patterns in data.
• Comparing characteristics of people or things
  doing a behavior with people or things not doing
  the behavior.

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Data Mining and Predictive Modeling Predicting
Behaviors from the Patterns

• Common non-fundraising examples
• Credit ratings
• Meteorology
• Airport security

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Data Mining and Predictive Modeling Broad-Based
Communications (Mail/Phone/Email/Etc.)

• Channel preference modeling
• Donor acquisition
• Lifetime value and lifetime potential
• Advanced testing of delivery media
• Who responds to this format or message?
• Why?

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Analyzing Program Performance

• Analysis of the factors and gaps impacting your
  success.
• Review of giving trends and potential in
  comparison to
• Demographics.
• Geography.
• Behaviors.
• Portfolio composition.

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Projecting Future Performance

• Forecasting the future performance of your
  program using current data
• Assessing overall database capacity
• Projecting yields for portfolios and projects
• Informing campaign goals and decisions
• Identifying metrics for investment
• Assessing project feasibility

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Building In-House Capacity
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In-House Capacity

• More and more organizations have in-house data
  mining capacity, from large shops to small shops.
• Large shops generally have dedicated staff.
• Small shops have developed the skill sets in
  research, advancement services, or annual giving.

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Beyond Predictive Modeling

• Often began with tools to identify new prospects
• Used skill sets to conduct more aggregate level
  analysis (like database capacity, performance
  analysis, etc.)
• Increasing number of constituent survey projects
• Constituent analysis projects
• Demographic clusters
• Giving motivations

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Who is doing this? Heres a sampling.

• Childrens Mercy, KC
• Corporation for Public Broadcastingselect
  stations
• Emory University
• Gonzaga University
• Marquette University
• MD Anderson Cancer Center
• Memorial Sloan-Kettering Cancer Center
• MIT
• Princeton University
• Rice University
• St. Olaf College
• The Nature Conservancy
• William Jewell College

• University of California - Berkeley
• University of California - LA
• University of Florida
• University of Hawaii
• University of Illinois
• University of Iowa
• University of Massachusetts Lowell
• University of Minnesota
• University of Texas
• University of Toronto
• University of Utah
• Valparaiso University

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Developing In-House Capacities

• It is not hard to learn.
• Analytics is becoming part of the constituent
  relations and admissions skill set.
• Nobody knows your data like you do.
• Ability to create multiple models and
  analysisnot to be restricted by costs.

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Assessing Database Capacity
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Calculating Capacity in Your Database

• SPSS provides tools to evaluate, expand, and
  aggregate wealth metrics.
• Consolidate screening data.
• Find factors correlated to wealth.
• Model the statistical likelihood to be wealthy.

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Process for Determining Capacity

• Gather financial ratings, targets, giving
  information, and external wealth data.
• Generate a capacity number for each constituent.
• Aggregate capacity for
• Entire database.
• Managed prospects.
• Unmanaged constituents.
• Close constituents.

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Many Types of Ratings

• Non-Financial
• Attachment
• Engagement
• Affinity
• Propensity

• Financial
• Wealth scores
• Lifetime value
• Capacity estimates
• Detailed capacity ratings
• Target ask amounts

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Summary of Non-Financial

• Attachment
• Measures how connected an individual is to an
  organization
• Engagement
• Measures a level of interactiongenerally the
  result of prospect management or broad-based
  communications and events
• Affinity
• Measures the level an individual regards the
  institution or areas of mission
• Propensity
• Generally refers to actual inclination to make a
  gift overall or in a specific manner aka
  likelihood

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Types of Financial Ratings

• Wealth scores and lifetime value
• Capacity estimates
• Target ask amounts
• Detailed capacity ratings

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Capacity Estimates

• Ball park figures produced using prospect
  research
• Broad ranges
• 5-figure, 6-figure, 7-figure, etc.
• Principal, major, leadership, annual, etc.
• Generally, research uses a ratings grid or
  capacity calculator
• Often part of qualificationgenerally a 6090
  minute process
• Sometimes used in peer review or in initial
  portfolio review at start of campaign
• Amount a prospect can give in ideal scenario
  through a 5-year pledge

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Target Ask Amounts

• Responsibility of a prospect manager (gift
  officer)
• Actual solicitation amount with estimated date

• Produced post-discovery during cultivation
  strategy development
• Refined as the target date approaches
• Informed by the capacity estimate but not a
  capacity rating

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Detailed Capacity Rating

• Result of thorough financial research
• Generally, only completed in conjunction with a
  full profile and approaching solicitation
• Helps determine final ask amount
• Often uses capacity calculator or grid in
  addition to qualitative interpretation and
  experience

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Net Worth vs. Identified Assets

• Net Worth
• Very difficult to find unless published in news
  sources about the very rich
• Assets minus liabilities
• Liabilities are not public
• Most assets are not public
• Identified Assets
• Public assets
• Identified via screening or prospect research
• Never the full story

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Sample Qualification GridLarge Market
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Sample Detailed Capacity Formula
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Applying a Capacity Formula
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Sample Formula

• Cumulative giving 100
• Largest outright cash installment 5
• Real Estate gt 2 million 25
• Real Estate between 1 million and 2 million
  10
• Real Estate lt 1 million 5
• Insider stockholdings 33
• Private company value 10
• Private company sales 1

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Capacity FormulaContinued

• Other identified assets 10
• Published Net Worth 10
• Target Ask Amounts 100
• Research Capacity Ratings 100
• Income 10
• Screening capacity 100
• Private foundation assets (technically an income
  characteristic despite name) 10
• Median home price by zip code 5
• Median income by zip code 5
• Calculate a max of sub-capacities less null values

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Using SPSS to Calculate a Formula

• Simple Compute Variable function
• Use multiple steps for each formula item and
  calculate the maximum amount
• Combine into one step

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Multiple Steps Calculate Each Capacity Item
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Multiple Steps Calculate Max of Items
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All in One Step
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Hand Verify Results

• Outcome is a capacity amount for each constituent
  where data is present
• Evaluate missing values to determine cause
• Optionally, replace missing values using SPSS
• Evaluate very large capacities smooth to a top
  level appropriate to your file (10 million )

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Replace Missing Values
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Aggregate Capacity Values

• Calculate Sum of all capacities using
  Descriptive Statistics or Custom Tables
• Calculate Capacities by groups using Tables

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Calculate Overall Capacity using Descriptive
Statistics
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Using Custom Tables
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Filling Your Gift Pyramid
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Filling Your Gift Pyramid

• Recode overall capacity levels and targets into
  ranges from your campaign gift pyramid
• Use tables to calculate suspects and prospects by
  level
• Suspects are evaluated by capacity
• Prospects are evaluated by actual targets

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Recode into Gift Levels
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Produce Custom Tables
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Sample Outputs
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In Summary

• Analytics is a skill set defining the top
  fundraisers
• Tools to look back
• Tools to look forward

• Analytics is based in the understanding that
• Information can and should be a business
  driver for your programs.

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Please join us next week for Part II

• Taking the largest slice of the donor pie
  Maximizing your fundraising databases potential
• July 25, 2007 at 100 p.m. CT
• James Parry, Systems Engineer, SPSS Inc.
• Register now at http//www.spss.com/events/CASE

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Thank You!
Joshua Birkholz Director of DonorCast
7251 Ohms Lane Minneapolis, Minnesota 55439 ph
952-921-0111 fax [phone] email
jbirkholz_at_bwf.com website www.donorcast.com
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