Expanding the Scope of Prospect Research: Data Mining and Data Modeling

1. Expanding the Scope of Prospect Research:Data Mining and Data Modeling Chad Mitchell Blackbaud Analytics November 19, 2014

2. Game Plan • Definitions, Overview and Why? • Data Mining vs. Data Modeling • In-house Solutions • Outsourcing Options • Examples and Cast Studies • Benefits and Risks • Q and A

3. Background – Chad Mitchell • Iowa State University • Annual Phone-A-Thon • Alumni Association Ambassador • Major Gifts and Special Event Ambassador • Experian • Data Modeling and Demographic Data • Blackbaud – Develop Prospect Screening Service • Blackbaud Analytics • 250 Clients

4. Definitions • Data Mining: Investigating and discovering trends within a constituent database using computer or manual search methods • Data Modeling (Advanced Statistical Analysis) : Discovery of underlying meaningful relationships and patterns from historical and current information within a database; using these findings to predict individual behavior

5. Specific Applications of Data Modeling • Determine subsets of similar individuals from a larger universe • Segment by characteristics • Interests, finances, location, etc. • Target marketing • Predicting future behavior

6. Why Use It? • Classify donors & prospects by factors other than wealth (or major gift potential): • Lifestyle/life-stage • Affinity • Interests/behaviors • Cultural • Demographics • Psychographics

7. LIKELIHOOD Wealth Screening Results CAPACITY Go Beyond Capacity Annual Giving Major Giving Minimal Investment Cultivate

8. Benefits of Data Modeling • Reduce solicitation costs • Increase Response Rates • Understand donor/non-donors characteristics • Create cost-effective appeals • Increase gift revenues • Staffing and resource allocation • Turn knowledge into results

9. Why Me? … New Roles for Researchers! • Prospect research is more than prospect identification • Leadership role of research • Introduce new analytical/evaluation tools • Results oriented change • Giving is more than major gifts

10. What Are My Options? • Do It Yourself • Simple statistics – Data Mining • In-house Data Modeling • Outsourcing • Advanced Data Modeling • Regression Analysis • Consulting

11. Simple Statistics • What is simple? • Frequency distributions • Trend analysis • Segmentation analysis • Tools • Existing Donor Management Application • Microsoft Excel or Access

12. Simple Data Mining - Examples • Time of year giving • Application: anniversary date solicitation • Giving by solicitation type • Application: segmented solicitations • Geographic Analysis • Application: special event and trip planning

13. Anniversary Date Solicitations • Objective: reduce solicitations to loyal donors • Methodology: identify loyal donors with time consistent giving patterns • Contact donors at appropriate renewal time • Mail or call these donors less frequently • Increase value of their gifts

14. Segmented Solicitations • Objective: Increase solicitation effectiveness by using ‘asking’ method appropriate to donor • Methodology: Factor analysis • Identify common characteristics of those who give by phone, by mail, etc. • Target groups sharing those characteristics • Eliminate ineffective solicitations

15. Special Event Planning

16. Analyze Every Area of Giving • Annual Giving • Frequency at lower levels, highest propensity • Most important donor segment • Major Giving • Determine an appropriate ask amount • Maximize potential of each donor • Planned Giving • Frequency of giving – 10+ years • No Major Gift giving history

17. Case Study – Higher Education Two similar organizations with vastly different profiles University A University B

18. Data Modeling – How Do You Do It? • Challenge yourself • Identify the behavior to be predicted • for example, annual giving likelihood • Identify variables to be used • Create a file (random sample) • validate fields to be used • Utilize statistical software package • SPSS • SAS

19. Types of Data Modeling • Clustering • Decision Trees (CHAID) • Neural Networks • Logistical Regression • Probit Regression

20. How To (continued) • Split the file in half at random • modeling sample • holdout sample • Build model • Apply algorithm to holdout sample • Test the model • Score the database • Implement the model

21. Yes, There Are Risks • Bad or misleading data • Off the shelf modeling programs • Time intensive • Test, test, test • Applying Generic models • PRIZM, P$CYLE and MOSAIC

22. Acceptable Risk • Potentially rich data in your file • Understanding the big picture • Bringing focus to your development efforts

23. Levels of Information • Individual • Household • ZIP + 4 • Block • ZIP Tip: start at smallest level possible - individual

24. Types of Data • Types of Client Data • Demographic • Giving History • Activities/Relationships • Transactional • Attitudinal • Interests

25. Sources of External Data Demographic/Census Single source databases - credit Consumer transactional Aggregated (avoid aggregated age) Cluster Vendors Experian Acxiom InfoUSA D&B KnowledgeBase Marketing List Brokers Types of Data

26. Creating Variables • Additive • Dichotomous (yes/no) • Continuous/quadratic • Composite variables • State/city • Missing data

27. Maximizing Your Data

28. Appended Data Client Data Determine best candidate variables for modeling process; create new Composite and dummy variables Identify attributes with the greatest explanatory value; select and weigh data in unique algorithm Blending Data into Models Final Unique Algorithm(s) Identify best models and test results

29. Challenge Decrease direct mail expense while increasing annual contributions Before BBA Pieces mailed = 1,200,000 Total No. of Gifts = 3,000 Contributions = $300,000 After BBA Pieces mailed = 200,000 Total No. of Gifts = 10,000 Contributions = $1,200,000 ROI Contributions = 398% Case Study – Family / Human Services

30. Outsourcing – Why? • Models specific to your donors and prospects • Speed • Cost • Accuracy • Consulting

31. Vendor Qualification • Methodology and Philosophy • Experience • Number of clients • Personnel – Ph.D. Level Statisticians • References • Case Studies • Integration with Existing Software • Broad Range • Deliverables, Follow-up and Consulting

32. Annual Giving Propensity 478 Major Giving Propensity 849 Planned Giving Propensity 250 Cash Capacity for Org in 12-mo. Period $5,000-10,000 1000 0 1000 0 1000 0 Outsourcing Examples Every donor…

33. Annual Giving Model

34. Visualize Your Database

35. Chart Your Ask Amounts

36. Summary • Data Mining vs. Data Modeling • In-house vs. Outsourced Solutions • Risks and Benefits

37. Contact Information • Chad Mitchell • Account Executive • Blackbaud Analytics • (800) 468-8996 x.5854 Toll-free • (404) 888-9353 Direct • (843) 216-6100 Fax • chad.mitchell@blackbaud.com • www.blackbaud.com