Key Findings:

1. Buyers’ top software purchase drivers include a need for more functionality (27 percent) and changes to, or the expiration of, an existing contract (22 percent).
 
2. Built-in email marketing and outreach tools are a “must-have” for 42 percent of buyers: a 133 percent increase from 18 percent last year.
 
3. In a sub-sample of buyers who seek fundraising software that integrates with another application, 57 percent want accounting integration.

Introduction

Building long-term relationships with donors is crucial to sustain funds, and constituent data can boost the impact of relationship-building activities. Without good data management, donor records can become disorganized or lost, which means fundraisers must make decisions based on assumptions.

Since data is so useful, one could argue that fundraising and donor management software—which organizes and helps analyze constituent data—is the most important component of a nonprofit’s technology portfolio.

Marina Glogovac, CEO of CanadaHelps.org, a nonprofit that helps people find and donate to charities, predicts disruption in the nonprofit sector “[will] be through the increasing volume, visibility, accessibility and affordability of data” that will “build an accurate picture about what is going on in the charitable sector.”

Indeed, we find that what the fundraising pros we studied want most in new software aligns with the needs for better data management and accessibility:

• Tools to organize and analyze donor data, and;
• Functionality to personalize donor interactions based on insights.

27 Percent of Buyers Replacing Existing Systems Want More Functionality

The most common reason for replacing existing software is the need for more functionality: 27 percent of buyers in our sample say their current system falls short and does not support all the functionality they need.

Top Reasons for Replacing Software

A mandatory upgrade or change to a service contract leads 22 percent of our buyers to research new software. Since service changes will occur whether or not buyers choose to stay with their current vendor, some take the opportunity to review alternatives before renewing their contract.

One buyer, an executive director for a small human services nonprofit, explains how his current software vendor was acquired by another company that planned to change the service license agreement and pricing. The contract change inspired him to shop around for a better deal.

“We will have to upgrade the software and agree to pay a monthly fee in a few months. I want to see what else is out there before agreeing to it,” he explains.

The need to consolidate data from multiple systems is a driver for another 12 percent of our sample.

For example, a production assistant for an arts and cultural nonprofit wants to combine several systems into one, saying: “Right now we have an email marketing program for newsletters and email blasts, [and] all of our donor records in spreadsheets, but [there is] not a single database, so it is really hard to manage.”

Other factors driving buyers to replace their fundraising systems include:

• The need to increase efficiency (11 percent);
• Business growth (10 percent);
• Wanting a system that’s easier to use (10 percent);
• The need to reduce costs (9 percent); and,
• The desire to automate administrative processes (4 percent).

More Than One-Quarter Want to Automate Constituent Communication

This year, more buyers want fundraising software with built-in communication tools than last year: Requests for email marketing functionality alone increased 133 percent between 2014 and 2015.

Top-Requested Communication Functionality: 2014 to 2015

Our data aligns with findings in research group Nonprofit Research Collaborative’s report on 2014 charitable donations:

• Of nonprofits that used direct mail, 58 percent increased receipts;
• Of those that used email, 70 percent increased receipts; and
• Of those that used other online solicitation methods, 71 percent increased receipts.

One of our buyers, who is an executive director for a single-employee arts and cultural nonprofit, says she does not “have time during the day to contact every donor.” Thus, she needs a way to communicate with over 1,000 donors without demanding more of her time.

With fundraising and donor management software, one person can maintain data records, personalize and deliver messages and track interactions with hundreds or even thousands of donors. When done manually, many staff members are needed to complete the same tasks.

For example, using fundraising software, the executive director above would be able to:

• Send emails to all constituents or custom groups of constituents at one time using built-in email marketing tools;
• Deliver thank-you letters and receipts to donors when their contribution is processed by email or direct mail; and,
• Generate a mailing list and labels to send newsletters, annual reports or other printed materials.

Data Management Functionality Also Highly Desired Among Buyers

In addition to communication tools, buyers want functionality to handle data management and analysis. Twenty-three percent say reporting is a “must-have,” 22 percent want campaign management and 18 percent seek donor interaction tracking.

Top-Requested Fundraising/Donor Management Functionality

Campaign management functionality helps users track campaign progress and costs across channels. Interaction tracking provides a way to keep detailed notes on  “touches”—including phone calls, events, in-person visits, digital and print mailings or other custom interaction types.

A fundraising coordinator for a midsize animal-welfare nonprofit sums up a pain point that often prompts the need for communication and data management functionality: tracking donors and contributions.

“We have people coming in here dropping off checks and gifts. We don’t do any following up. [We want them] to know their efforts are not unnoticed,” he says.

By using the campaign management, interaction tracking and comprehensive reporting tools that are usually included in fundraising applications, fundraisers in similar situations can:



• Gain a more complete view of how donors interact with an organization;
• Stay on top of donor follow-ups;
• Improve existing constituent relationships by personalizing interactions; and
• Analyze donor trends and preferences for future campaigns.

Over Half of Buyers Request Integration With Accounting Software

Buyers are often interested in software suites that “do it all,” from fundraising and event planning to volunteer tracking and fund accounting. It might be that small nonprofits have limited resources and simply want easy-to-deploy products to increase operational efficiency as quickly as possible.

That said, it is also common for nonprofits, regardless of size, to link together two or more separate, best-of-breed systems to function as one. Of the buyers in our sample who want their fundraising and donor management software to do just that, 57 percent say integration with an accounting application is most critical.

Top-Requested Fundraising/Donor Management Integrations

Other buyers mention the need to integrate their software with:

• The nonprofit’s website (22 percent);
• An email marketing program (17 percent);
• The nonprofit’s social media accounts (17 percent); and
• A constituent relationship management system (CRM; 4 percent).

The reduction or elimination of duplicate data entry requirements is the main benefit of integrating fundraising software with other applications. For example, by integrating with accounting software, users can enter contribution details in the fundraising and donor management system once, then sync that data with the accounting system to generate financial statements and reports.

Alternatively, by integrating with donation forms embedded on a nonprofit’s website, the data collected through the forms is automatically stored in the fundraising system. This way, users don’t have to manually export the donation form data, then enter or import it into the fundraising system.

When done correctly, integration with other applications increases a nonprofit’s overall efficiency.

Conclusions

As a nonprofit’s donor base grows, tracking data using manual methods (such as whiteboards, pen and paper and Rolodexes) becomes unwieldy, so nonprofit professionals turn to software for help.

Once nonprofits have organized constituent data, a new pain point arises—figuring out how to interpret and use it. That issue is reflected in the most common fundraising and donor management software requests among buyers in our sample:

Email marketing and other communication tools. These support list segmentation, personalization and mass delivery of messages to constituents.

Reporting functionality. Reporting tools simplify data analysis, allowing users to drill down and uncover donor trends and preferences that lead to more successful fundraising campaigns.

A single, consolidated database. Many nonprofits currently have data stored in several disconnected systems, and want to collect it all in a single database. This, too, improves analysis of constituent data.

Demographics

Comprising 30 percent of the sample, administrative staff members are the primary evaluators of new fundraising and donor management software. Executive directors account for 26 percent; somewhat surprisingly, only 15 percent hold fundraising and development roles.

Other buyers are board members (12 percent), consultants (4 percent), founders (3 percent) and other roles, such as finance and IT (10 percent).

By Role: Prospective Buyers

Furthermore, our sample is primarily made up of small nonprofit organizations: 67 percent report an annual operating budget of $1 million or less; 24 percent, between $1 million and $5 million; and 9 percent, between $6 million and $25 million.

By Annual Operating Budget: Prospective Buyer Size

Methodology
Our advisors regularly speak with buyers who contact Software Advice seeking new fundraising and donor management software. The data used to create this report was collected by our advisors during those interactions for business purposes rather than for market research. We randomly selected 200 interactions from the U.S. during August 2014 to July 2015 to analyze for this report.

These findings exclusively represent those buyers who contacted Software Advice for guidance on software selection, and may not be indicative of the market as a whole. Expert commentary solely represents the views of the individual. Chart values are rounded to the nearest whole number.

If you have comments or would like to obtain access to any of the charts above, please contact janna@softwareadvice.com.