Fundraising and Donor Management
Small Business BuyerView | 2014
Every year, Software Advice speaks with thousands of organizations looking for the right nonprofit management software—giving us unparalleled insight into the needs of today’s software buyers. We recently analyzed a random sample of these interactions with small-business buyers (from nonprofit organizations with annual revenues of $100 million or less), to uncover their most common pain points and reasons for purchasing new fundraising and donor management software.
Thirty-eight percent of prospective fundraising software buyers said they were relying on manual methods—such as paper ledgers and spreadsheets—to track fundraising and donor data. This is lower than in the general nonprofit market, where 49 percent of buyers report using manual methods.
Furthermore, a larger number of fundraising and donor management buyers—31 percent, compared to 23 percent of buyers in the greater nonprofit market—were using applications developed specifically to handle fundraising tasks and donor-data management.
An additional 19 percent of buyers sampled were using general commercial software—such as email marketing programs that serve the needs of a broad range of industries, but may not sufficiently handle the unique requirements of a fundraising campaign.
Ben Stroup, senior vice president of fundraising communications for Pursuant, a full-service fundraising consulting company, says this information mirrors the changes he’s seen in the industry as a result of the financial crisis of 2008.
Stroup explains that the financial crisis compelled fundraisers to adjust their strategies, which entailed asking more thoughtful questions about who their funders were and how dollars were being spent. Therefore, it makes sense that more fundraisers are using some sort of software to manage campaigns and donor data—and he expects the trend to continue.
“I think donor management systems are rapidly maturing, and will very soon do for fundraising what the personal computer did for word processing, when specialists were no longer needed to write up documents because the average worker could take care of that task themselves,” says Stroup.
Twenty-five percent of buyers in our sample said their main reason for evaluating fundraising and donor management applications was to automate time-consuming tasks—for instance, emailing receipts to donors, generating form letters and keeping the constituent database clean and free of duplicate records.
One buyer explains that his organization is “outgrowing handwritten [thank you] notes and spreadsheets,” and another says her organization is shopping around to prepare for increased outreach to new donors.
At the same time, 14 percent of buyers reported that their current system was old and glitchy—so transitioning to a more modern, supported solution was necessary to ensure reliable access to donor data.
For a combined 19 percent of prospective buyers, the need to increase funds was paramount—whether through a special campaign requiring a higher level of execution (13 percent) or simply by improving fundraising efforts all around (6 percent).
Other reasons for evaluating new fundraising and donor management software included the lack of a certain function in their current software (12 percent), the need to centralize records in a single database (8 percent) and the need for more robust, in-depth reporting (5 percent).
A majority of small-business buyers—31 percent—were interested in evaluating systems capable of automating the creation and sending of acknowledgement letters and other documents for donors, such as end-of-year statements. This aligns with buyers’ top reason for purchasing new software: the need to automate processes and tasks.
Twenty-three percent of buyers also said that event planning capabilities were a must-have in a new system. This makes sense, given that 19 percent of buyers report that the main reason for purchasing software is to bring in more funds—which often includes hosting special events.
Stroup says this makes sense, because “the smallest nonprofits are strained for resources, with many having only one, two or three staff members to perform all the work. Systems that reduce their workload by automating the most time-consuming tasks can significantly impact a nonprofit’s efficiency.”
Other key functionality buyers were searching for included email marketing (18 percent), online donation and website integration (14 percent), volunteer management (13 percent) and direct-mail marketing (9 percent).
The number of requests for direct-mail marketing support might seem surprising, but as explained in a Direct Marketing Association report, direct-mail fundraising is still a viable strategy—accounting for 60 to 80 percent of total revenue, with response rates 10 to 30 times higher than those for email fundraising campaigns.
Because buyers called for a wide range of features to handle a variety of processes in their new system, it’s therefore no surprise that 55 percent wanted to evaluate integrated software suites—which are built for the purpose of handling multiple processes—rather than “best-of-breed” products, which are developed to support one or two functions very well.
One buyer explains that since his organization lacks a “cohesive system to tie [multiple data sources] together,” a program that centralizes data to be used for multiple purposes could positively impact fundraising performance.
Finally, while 32 percent of small-business buyers didn’t have a software deployment model preference, among those who did, 97 percent said they preferred a Web-based solution. This matches the across-the-board shift we’ve seen in most software verticals in the past six years. In 2008, 88 percent of buyers preferred on-premise deployment models—but by 2014, 87 percent strongly favored Web-based deployment.
A combined 97 percent of buyers in our sample represented organizations that collect less than $5 million in annual revenue, with 76 percent reporting less than $1 million and 21 percent reporting between $1 million and $5 million. Therefore, this sample is highly representative of the small-nonprofit buyer market.
Additionally, the majority of buyers said their organization employs five or fewer staff members, with 23 percent reporting a single employee and 38 percent reporting between two and five employees.
Finally, the bulk of software buyers in our sample—38 percent—represented a human services organization. The next largest segments were comprised of faith-based organizations (13 percent) and arts and cultural nonprofits (12 percent).
As Stroup explains, “following the financial crisis, the conversation turned from single and major gifts to mid-level donor retention—meaning leaders are now asking the questions, ‘Who are our funders? Why did they give?’ and ‘What do they expect from us?’ Since the questions are deeper and require more data to answer, nonprofit leaders are now figuring out how donor acquisition and retention strategies can benefit from the use of technology.”
Our data confirms this. Based on requests for features aimed at automating processes and organizing data, we see that nonprofit staff have an increased understanding of how software contributes to increased productivity. A combined 42 percent of buyers currently use some type of software to support fundraising processes and data tracking—and now, they’re looking to replace what they have with a higher-performance system offering greater functionality.
“Most nonprofit leaders weren’t groomed to view donor databases as powerful customer relationship management tools, so there’s some fear that the technology [could] destroy relationships by reducing people to data points and yielding cold responses,” says Stroup. “This fear is now diminishing, as leaders learn that the data is actually critical to understanding a donor’s engagement with their organization.”
Stroup expects that understanding how software applications fit into fundraising, and how to use them, will increasingly become the default—much in the same way as word processing gradually shifted from being a specialized task to a part of every average worker’s day.
Software Advice regularly speaks with organizations that contact us seeking new nonprofit software. To create this report, we isolated a random sample of 385 interactions with small-business buyers (those from nonprofits with annual revenues of $100 million or less) from 2014 to analyze. It should be noted that these findings exclusively represent those buyers who contacted Software Advice for guidance on software selection; they may not be indicative of the market as a whole.
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