US Red Cross Collaboration To Find Long Term Donors

Supplied: Knowledge Wharton

The American Red Cross and researchers at the University of Pennsylvania’s Wharton Business School are undertaking a major study of 500,000 people in an effort to turn one-time donors into long term supporters.

Through a partnership with the Wharton Customer Analytics Initiative (WCAI), the Red Cross has linked up with six teams of researchers from around the country, including analytics experts from Baylor University, the University of Pittsburgh and the IBM Watson Research Center who will analyse data from the Red Cross database to develop tools for improving the organisation's outreach efforts.

When an epic disaster occurs somewhere in the world, images of devastation are conveyed instantly around the world through newspapers, television and the Internet.

The result is an outpouring of aid, often in the form of donations to Not for Profits like the American Red Cross. But once the dramatic images and headlines begin to fade, donors often disappear as well.

The question for groups like the Red Cross is how to identify and reach out to those one-time givers who are most likely to become regular donors.

"The single biggest channel through which we can acquire new donors is in response to a disaster," says Tony DiPasquale, senior director of market intelligence for the Red Cross.

"What we have long had difficulty doing is moving these donors from being disaster-response donors to ones who support [our organisation's] core mission."

Solving that puzzle could be a boon for the Red Cross and NFPs that need to find cost efficient ways to improve their fundraising. The answer may lie in the world of customer analytics, the collection and mining of data on individual consumer behavior that is already revolutionising how for-profit businesses operate.

Wharton says the payoff for Not for Profits like the Red Cross may be as valuable as it has been for businesses that have mastered the analytics field.

"This could have a huge impact, because efficiency in [the NFP] industry really matters," notes Eric Bradlow, a Wharton marketing professor and co-director of WCAI.

"Converting disaster donors to lifetime donors is crucially important."

But Not for Profits looking to harness this sort of data will face the same challenges seen in the for-profit world, Bradlow and other experts say, including effectively translating analytical insight into new outreach efforts and finding the right balance between tracking customers and respecting their privacy.

The Red Cross says it has good reason to be concerned in the current economy.

According to the 2011 Fundraising Effectiveness Survey Report by the Association of Fundraising Professionals and the Center on Nonprofits and Philanthropy at the Urban Institute, net giving has not recovered to pre-recession levels.

The survey found that for every $5.35 in gift dollars that organisations received from donors in 2010, $5.54 was lost through reduced gifts or lapsed donors.

"Giving rates still have a long way to go before we reach pre-recession levels, and it all begins with reducing the number of lapsed donors," Andrew Watt, chief executive of the Association of Fundraising Professionals, said when the report was released in the fall of 2011.

"This is one of the biggest challenges charities face – losing nearly 60% of donors every year and relying too heavily on new donors. It's much less expensive to retain and inspire existing donors than it is to find new donors, so charities should focus on stewarding their current donors and reducing losses there."

According to DiPasquale of the Red Cross, in a year following a major disaster, less than 10% of those who give become repeat donors. "Those folks are less likely to return unless we see another event of that caliber," he said.

The Red Cross's project with WCAI is aimed at changing that equation. The six teams selected for the project will be studying a data pool of more than 500,000 donors to the organisation who made a contribution between 2006 and 2011.

The goal is to come up with new tools to improve fundraising efficiency.

In terms of privacy issues in the the Red Cross/ WCAI collaboration, the database that is being studied contains no demographic information.

"We want to avoid anything that would lead to personal identification — any opportunity where you can, through reverse engineering, figure out who's who," says Peter Fader, a Wharton marketing professor and co-director of WCAI.

Moreover, Fader argues that having personal information about donors would not add much, anyway. "Demographics like race, income and gender tend to be very poor in terms of predictive power," he says.

“Instead, more straightforward data – including the frequency of someone's donations and the average size of their past transactions – are better indicators of their future behaviour.”

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