Fundraising Software: Your Money-Making Machinery

By Tim Mills-Groninger
You could say that fundraising software prints money. Fundraising is one of the few nonprofit activities where return on investment (ROI) is measured in real dollars. It is also an arena where marketing is purest; a compelling message inspires the donor to make a gift without receiving anything tangible in return.

In a perfect world, donors would seek out the organizations with missions that match their own values and thus make spontaneous gifts. In the less- than-perfect world we live in, it is a more cumbersome process. Prospects have to be identified, asked, and their gifts have to be processed and acknowledged. While it would be nice to be able to ask everyone, there are costs associated with asking -- both in the monetary expenditure and, especially with email spam, credibility.

Fundraising software was invented to automate the labor-intensive part of identifying prospects, getting a solicitation to them as efficiently and cheaply as possible, and recording the results. Skilled users could segment donors and prospects on a limited number of factors and craft appeals designed to elicit the largest possible gift. It was far from a one-size-fits-all world, but it was certainly a few sizes fits many. Securing major gifts was largely independent of whatever software was in place.

Solicitors, often volunteers, were matched with prospects and the cultivation and moves management process progressed in private until the gift was secured and entered into the database.

The life and death question, for some development programs at least, is: should it? What changes to the back office of fundraising --- the software, people, and processes -- can help make sure that the right people are being asked for the right amount at the right time?

Donor acquisition and retention are the key components to a successful fundraising program. They provide the return in ROI. Fundraising software and the people using it are the investment side of the equation. Failing to spend wisely can diminish the effectiveness of the development effort. Donors are also more sophisticated, and are more likely to consider themselves as stakeholders in an organization and expect the same kind of performance data that they receive from their commercial investments.

Unfortunately, as donors want more assurance that their money makes a difference, they are simultaneously being inundated by direct mail, email, and other media that they often ignore without thinking.

Getting the most out of a software and personnel investment requires a close look at your development strategy and an assessment of what's working and where there is a need for change. Understanding options and trends can help focus efforts and spending on areas with the greatest potential for return.

Organizing data about current and prospective donors, maintaining high quality, and accurately acknowledging and reporting gifts has become a job in its own right. In higher education, the Council for Advancement and Support of Education (CASE) refers to the "back office" of fundraising support as Advancement Services.

Originally, Advancement Services was all about getting the data right but is now also concerned with more complex issues of compliance and privacy.

While Advancement Services is an important part of raising money, it doesn't mean that every development office is going to have a full-time Advancement Services professional on staff. After all, many fundraising efforts are managed by one person, or even a single part-timer.

John Taylor is one of the pioneers in professionalizing the back office side of fundraising with positions at Duke University, CASE, and currently with Advancement Solutions, a consulting firm headquartered in Atlanta.

According to Taylor, the question of when to hire a database administrator, usually one of the first Advancement Services positions, is a difficult one. "If I've got a fundraising staff of five or more, I have to have at least one person dedicated to managing the development system. You have to decide if you're managing the system or managing the data. At some point volume is going to dictate, if you're receiving more than 50 gifts a day, you'll need a full-time person just for receipting and acknowledgement," said Taylor.

Back office development functions are less formalized in non-academic institutions. "We also see it being called donor relations or development operations," said John Joslin, senior consultant at fundraising software publisher Donor2, a division of Boca Raton, Fla., Campus Management.

"When development staff reaches about 10 people, they need a full-time person to manage data. By then they're doing more events, more planned giving, prospect research, and the like. When you add all of the elements of a sophisticated development initiative, you need someone to manage it, to make sure that gifts are entered correctly and that overall the information is correct, reports are generated, and things happen in a timely fashion."

Charlie Cumbaa, vice president, products and services at Charleston, S.C.-based Blackbaud, sees more nonprofits adopting corporate approaches to data management. "I think it's a phenomenon that's more pronounced among larger nonprofits -- they're more likely to adopt best practices from the for-profit side, and Advancement Services is a good example of that.

For David Hassan at Northbrook, Ill.-based SNAP Auctions Solutions, development offices should create a half-time data manager when the database grows to about 50,000 constituent names, and full time when it grows to 100,000. But Hassan also cautioned that the size of the list doesn't necessarily dictate the software selection. For Hassan, "If you're using just 10 percent of the package you've wasted 90 percent on what you don't need -- 90 percent that could have gone to mission."

Austin, Texas-based Sage Software Nonprofit Solutions Vice President Dan Germain's similar caution on fundraising software is "people buying the wrong package for their size today and not getting the value out of their investment." He explained, "If you don't look at the total cost of ownership, you're shortchanging yourself. You have to do due diligence on both ends -- what you can afford and what fits your infrastructure and skill set, and on the back end you have to ask, are you getting the most out of it from a best practices standpoint and utilization of all of the features."

Centralizing information about constituents enables you to connect with them as whole people. Having separate systems -- one to track registrations, another for gifts, another for interests, and so on -- limits you to disconnected snap shots. Two trends have emerged to deal with the need for centralization: fully integrated, usually Web-based, applications and the database of record approach that collects data from multiple data sources.

The nonprofit community has not shown a preference for either approach, and there is still some confusion about the options. On one side of the problem is the distinction between best-of-breed and fully integrated solutions. Best-of-breed solutions do one set of tasks very well. Sometimes the tasks are very narrowly defined -- bulk mail, event registration, email subscriptions, planned gifts, and other specific activities. Best-of-breed can also extend into larger areas of managing all of the major aspects of a development office.

Integrated software combines multiple functions into a central data repository and user interface with the benefit that training needs are simplified and data are more consistent. The biggest distinction between the most sophisticated best-of-breed application and integrated applications tends to be in handling online data. With more donor contact occurring online, more providers are offering software tools that exist only online.

At one time called Application Service Providers (ASPs), the more common term today is Software as a Service (SaaS). With SaaS you purchase a subscription for the software and receive an account that you log into to use the software. Authorized users can log in from any computer with Internet access, making the solution particularly attractive to organizations with multiple sites and staff that travel. While the start up costs for many SaaS applications can be low, the monthly fees mean that the total cost of ownership is similar to traditional software for functionally comparable packages.

However, many traditional fundraising packages offer integrated solutions, and many SaaS vendors are providing best-of-breed solutions, such as email subscription management, event registration, and even accepting online donations. Another obvious issue is the limits on integration. Very few vendors write their own word processing or spreadsheet applications as an integrated component of their fundraising software, but several have created accounting software modules for their packages.

One solution that has emerged from this plethora of options is the database of record. With this approach the traditional fundraising software is kept as the official repository of all donor and prospect information, and transactions from other applications are imported or otherwise synchronized with it. Gifts received by mail are entered by hand, online donations are entered electronically from whatever system processed them. Depending on the different systems used, the synchronization can be almost simultaneous or it can take up to several days.

For Jay Malik, president and chief executive officer of Serenic Corporation, a software firm in Lakewood, Colo., the question is "whether the best-of-breed application is really delivering what you need. Do you want to deal with five different user interfaces or do you want a single interface for all of your data?," he asked rhetorically. "The real central issue is whatever you choose has to meet your core requirements. With best-of-breed you have to look at the ongoing costs of supporting those applications, such as synchronizing between systems, audit worthiness, and the like. Nonprofits have to be wary of what is really integrated and what I call Frankenstein's monsters -- a bunch of body parts just bolted together and trying to work together."

One significant function of fundraising software is to be the central repository for research about donors. Unfortunately, many development offices evolved their prospect research functions from an incidental activity to a core resource.

Centralizing research in fundraising software makes it more likely to be used because it's attached to the prospect's record. It also makes it easier to perform quantitative analysis against different factors such as age, wealth indicators and others.

According to Donor2's Joslin, access to research data is more important today because "our clients are doing more major gift initiatives and that more of those are staff driven. The software is helping the staff manage more contacts; they can do a better job of screening, targeting, and cultivation. We don't have the volunteer leadership that we once had."

Without the personal connection that many volunteers have with prospects, the quality and accessibility of research becomes a critical part of the cultivation process, he said.

Data quality issues are equally important to even smaller development offices trying to balance time spent organizing asks against administrative time that is not always considered as productive. Charlie Crystle, chief executive officer of fundraising software developer Mission:Research in Lancaster, Pa., observed "we have a lot of customers who just need to get it done. They have to do a lot of different things; and if they planned and learned a little more they could work more efficiently, raise more money, and expand their capacity to execute their mission."

Organizing donors has become more complex, according to Advancement Solutions's Taylor. "What I've seen is a significantly more dispersed segmentation. In the old days it was young alumni, old alumni, LYBUNTs, SYBUNTs and anyone else you missed. Now with e-philanthropy I'm seeing organizations segment 20 or 30 times," he said.

This adds a lot of internal work, and you have to ask at what point you have too much. "And, frequently they fail to analyze the results of all of these different scripts. Phone and direct mail are also increasing their segmentation -- the number of branches on the tree has increased," said Taylor. "We're not seeing organizations always weighing the costs of these segmentations. A lot of institutions are paying more attention to only soliciting donors how they want to be asked; donors have gotten very particular, and you have to be wary and aware of how they want to be asked -- if they say don't call, don't."

According to San Diego-based Kintera's David Lawson, vice president for market strategy, "The number one thing is that they want to know what happened to the money. We haven't been in the relationship business, we've been in the dating business - a thank you note and we move on. The donor expectation is stewardship - what do we do from the moment someone says yes until the next moment they say yes - that's the relationship business."

A quality relationship, according to Lawson, is two-way communications with each side respecting the needs of the other. "We saw a lot of that with Katrina and the tsunami - people seeing pictures of people getting packages. Another example is a hospital that set up a simulated operating room in their parking lot so that donors could see and even use (with simulated patients) the equipment they had paid for," he said.

Matching software to development operations is not easy. According to Taylor, "Years ago it used to be based on number of records. At lot of that had to do with the limitations of hardware and storage of capacity, but those days are gone. Today you can run some of the state of the art packages on your laptop."

Sage's Germain said, "We look at it from the perspective of the scope of their fundraising campaign -- how much are you trying to raise. That will drive what kinds of gifts you're trying to get. A small organization trying to raise $1 million or $1.5 million may only have one, two, or three people. The more sophisticated they get the more sophisticated the tool needs to be. It's important to match the resources of the staff."

For John Biedermann, vice president, DonorPerfect Online at SofterWare, a Fort Washington, Pa., software developer of nonprofit solutions, the answer is "it's been based on the size of your office and how much 'stuff' you need to manage. You might have an organization that is raising money from a limited number of foundations, and their challenge is depth of information. On the flip side, you might have a religious organization with four staff and thousands and thousands of donors with most of their fundraising coming from direct mail."

Taylor's final caution on evaluating software options is, "Purchasing a development system is no different than buying a car -- you'll have a price in mind, but you have to test drive. A lot of shops only send one person to do the test drive and don't take into account the other people using the system."

The best way to learn about donor preferences is to ask, and a great place to ask is on your Web page. Web visitors already have an interest in your organization and mission and while a few might click through to the donate now button on their first visit, most need more assurance that your organization is a good investment.

First and foremost, asking a Web visitor for their email address means that they'll be expecting a message later and will be less likely to consider it as spam. Asking for interest information means that you'll be able to send information about things they care about, and avoid extraneous content.

According to Cumbaa, "I think a lot of the rules of respecting the individual are still true -- understanding what their interests are and how they want to maintain the relationship. It requires having unique knowledge of the individual and using it in a unique way. The Internet has an impact that many organizations don't really understand. In addition to being an effective fundraising tool, it is an important medium for friend raising. Many donors are becoming accustomed to having more convenient information about the organizations they're giving to."

Looking at ROI improvements requires formalizing back office processes and making software choices that improve stewardship while controlling costs. Creating Advancement Services procedures without the right software tools will frustrate staff; purchasing fundraising software without an eye to how it will be used and who will be using it will lead to under-utilization.
***
Tim Mills-Groninger is associate executive director of the IT Resource Center in Chicago. He is also a contributing editor of The NonProfit Times.