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The Power Of Data Analytics For Nonprofits

by DataFlareUp
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Nonprofit organizations are undergoing substantive growth across service and support. Recent surveys found that 53% of nonprofits experienced increased service demand during the pandemic and expect this trend to continue, while 74% of nonprofit agencies are now seeing increased support from community members.

While this is good news for the nonprofit market at large, it also presents a unique challenge: In a world defined by hybrid work and driven by digital solutions, how do nonprofits ensure they are making best use of data related to grant funding, pledges, fundraising and outreach?

Data analytics makes this possible. Here’s a look at how this process works and the power it offers nonprofits to drive better decision-making.

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Infographic created by Sylogist, an ERP for nonprofits

What Is Data Analytics?

Put simply, data analytics is the process of turning raw data into meaningful insight.

Collection is the first step. Many organizations already have data collection tools in place, thanks to existing customer relationship management (CRM) and enterprise resource planning (ERP) tools. Next is curation — the process of assessing data sources to remove irrelevant or duplicate information. Analysis follows. Data is examined in depth to discover potential connections and suggest key trends.

Consider the example of a nonprofit conducting regular fundraising efforts. After collecting data about donation amounts and frequency, analysis reveals that the total amount raised is falling slightly each month. While this trend doesn’t pinpoint the cause, it offers a starting point for further evaluation.

The Four Types of Data Analytics

There are four broad types of data analytics that can help nonprofits:

  1. Predictive: Predictive analytics uses historical data to predict future trends. For example, if budgetary needs have increased by 8% to 10% each year for the past five years based on available data, it is reasonable to assume this trend will continue and budget accordingly.
  • Diagnostic: Diagnostic analytics is all about “why.” Why did something happen? Why did it not happen, or why did it happen differently than expected? By assessing the impact of multiple variables on outcomes, nonprofits can discover why certain actions — such as changes to fundraising processes or campaign outreaches — have affected total donations.
  • Descriptive: Descriptive analytics does just that: It describes what’s happened over a specific period using data. This allows nonprofits to quickly compare time periods to develop operational roadmaps.
  • Prescriptive: Prescriptive analytics help provide suggestions for future action based on the outcomes of predictive analytics. Using machine learning to run potential scenarios, nonprofits can better assess the risks and benefits of fundraising, accounting or recruitment strategies.

Benefits of Data Analytics for Nonprofits

Effective data analytics offer benefits for nonprofits, including:

  • Improved outreach: By leveraging collected data about the impact and efficacy of previous outreach campaigns, nonprofits can pinpoint where their campaigns were successful and how they could be improved. For example, if diagnostic analysis reveals that campaign emails had a lower-than-average open rate but a high conversion rate for those supporters who did open them, it’s worth investing the time to create more effective messaging.
  • Increased membership: As noted above, community support is on the rise for nonprofits. It’s one thing to generate encouragement — it’s another to drive action. Here, prescriptive analytics make it possible for nonprofits to simulate potential recruitment scenarios based on historical data to determine which approach is the most effective.
  • Enhanced fundraising: Effective fundraising is the foundation of nonprofit success. Descriptive analytics allows organizations to assess the impact of current and previous campaigns to identify areas of change and suggest strategies to help improve the next round of fundraising.
  • Streamlined budgeting and forecasting: Predictive analytics makes it possible for nonprofits to improve budget forecasting and allocation. By using historical spend, grant and fundraising data to produce likely future trends, organizations can identify most likely outcomes and align budget expectations to match.

Worth noting, the efficacy of analytics for nonprofits is predicated on their ability to collect, curate and analyze this data at scale. While collection happens naturally, curation and analysis require analytics frameworks capable of handling the increasing volume, variety and velocity of nonprofits’ data. This includes everything from supporters’ personal and financial data to budgetary reporting to compliance with data handling and security regulations.

Survey data backs these benefits — 78% of nonprofits using advanced analysis solutions said they achieved much greater efficiency in mission performance.

Making Good Choices

The good work done by nonprofits is in high demand — but making best use of contributions and community support means making good choices to help ensure effective allocation of funding and resources.

Robust data analytics makes this possible. Equipped with effective data analytics solutions and strategies, nonprofits are better positioned to uncover key connections that streamline current operations and set the stage for continued growth. For further information on how nonprofits can leverage data analytics, read the accompanying resource.

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