How to Identify Donors With the Greatest Potential to Give

University of Waterloo

Many nonprofits track donor engagement and analyze wealth, but few look at these variables together. That could leave large sums of money on the table, says Jason Coolman, associate vice president for development and alumni relations at the University of Waterloo in Canada.

As part of his master’s degree coursework a decade ago, Coolman created a formula for measuring how connected Waterloo alumni felt to the university and how much they could give. This information allows the college’s fundraisers to identify supporters with the greatest willingness and capacity to give — and cultivate them rather than taking a scattershot approach.

Prioritizing Certain Relationships

Around 80 percent of Waterloo’s giving comes from less than 1 percent of its donors, Coolman says. But traditionally the college spent more time soliciting the other 99 percent — via direct mail, email, social media, and other fundraising channels — than working to strengthen ties with alumni who could give the most.

Coolman’s research suggested that was a costly mistake. Using data, he created a two-by-two grid to group alumni into quadrants. The horizontal axis represents their involvement with the university, and the vertical axis represents their wealth. (See illustration.) Both of the top groups had above-average wealth; what set them apart was how connected they felt to the institution. Alumni in the top-right quadrant, labeled “leaders,” were highly engaged and had above-average wealth, which often led to greater giving. Coolman describes “leaders” as having “high engagement and high impact.”

A second group of wealthy individuals who are less engaged are labeled “potential leaders.” Coolman and his team conducted interviews with alumni in each group to figure out how to maximize giving among them. It turns out that both groups of wealthy supporters wanted things such as highly personalized treatment and to understand how their giving made a difference. However, the “potential leaders” had not yet received this attention and therefore weren’t giving as much as they could.

“On average, the leaders are giving almost $100,000, and the potential leaders are giving under $800,” Coolman says. “They’re giving, but we’re leaving $99,000 on the table for each one of those people because we haven’t made it highly personal and highly engaging.”

You can’t control people’s ability to give, Coolman adds, “but we do control how we move relationships forward.” And that’s the value of this model, he says. Based on the research, Waterloo revamped its strategy to focus on moving as many people as possible from the left side of the chart to the right — toward a stronger connection with the institution — especially those at the top, who represent the biggest opportunities.

It’s still important to pay attention to smaller donors, Coolman says, because those who aren’t wealthy today may become big contributors in the future. But the college now invests more resources in building personal relationships with those making “mega gifts,” he says, and those who have the money to become major supporters but have not yet received priority treatment from Waterloo.

“There’s a huge risk and reward on that top-end group,” Coolman says, since much of your success depends on a small number of donors. “But the reward is so great that it’s worth focusing on it.”

Although Waterloo hasn’t been immune to the larger trend of declining donors, he adds, this shift has helped the college increase the number of high-dollar donors and raise more money overall.

Creating a Model Using Your Own Data

You don’t need an expensive database or huge staff to adapt this approach to your organization, Coolman says.

Start by asking yourself who are your most connected donors and how have you engaged them. Waterloo quantified engagement by sending alumni a survey that asked whether each person would recommend the college to others or if they wanted to get more involved.

Roughly 10,000 people responded; the fundraisers scored each individual’s interest in giving on a scale from zero to 100 based on their answers. The team then compared the respondents’ behavior with the actions of alumni who didn’t participate in the survey. Nonrespondents whose behaviors matched respondents received comparable scores.

If you can’t do a survey, Coolman says, use the data you have. For instance, if certain donors have shared lots of personal information with you, such as their physical mailing address, number of children, and job title, that shows they’re more engaged than those who have only provided an email. Develop a scoring system based on the value of supporters’ actions to your organization. Group supporters according to their scores, and label them based on their level of engagement.

You’ll next need to gauge your donors’ giving capacity, which Waterloo did by analyzing alumni data and external sources, such as tax filings, home values, and other assets, to assign wealth scores. You also could hire an outside expert to help you screen and assess your supporters’ affluence.

Once you’ve assembled data or scores on wealth and involvement, “Then, basically, when you look at those two points plotted together, it tells you which of these four quadrants that person is in,” Coolman says.

Maximizing Results

When you know where your supporters fall in the model, Coolman says, you can prioritize your fundraising efforts. Here are a few more tips Coolman recommends to help you raise more money.

• Assign staff members to work on your top and bottom groups separately. Ideally, you should allocate 50 percent of staff time to efforts geared toward smaller donors. The other half should be spent building personal relationships with those whose wealth places them in the top 1 to 5 percent of supporters. Small nonprofits can do this, too, Coolman says.

“If you added one person [to your staff] who did the very personalized stuff, if they were to convert one gift at $50,000, that is like a thousand $50 gifts,” he says. “It would be very hard to get a thousand $50 gifts.” Therefore, this targeted approach is likely to boost revenue overall.

• Start small. Don’t overhaul your strategy from one day to the next, Coolman says. “I think you want to make it a slow and incremental change over time.” Set your fundraising goal, and work toward it over five to 10 years.
• Give wealthy donors personalized treatment, such as one-on-one meetings or phone calls instead of letters or emails.
• Connect wealthy donors to your leaders or to an influential peer. For example, enlist major donors with a high profile to help with outreach to your potential big contributors. This shows your top supporters that they matter to your organization.
• Demonstrate the impact of big gifts above and beyond the information you share with smaller donors. For example, send photos and statements from those who have benefitted directly from these supporters’ gift, and find a customized way to say thanks.
• Track the results of your strategy so you can assess whether it’s working and prove the return on your investment in this approach.