The 3 costliest tech problems in advocacy and nonprofit engagement and how to calculate their cost. No. 1 - Big, Bad Data.
This is the first of a three-part series. Here’s Part 2, “Huge CAC, Small LTV.” Part 3, “You’re doing scale wrong,” is forthcoming.
Because studies show that you’re very unlikely to read this whole post, here’s the one thing to take away if you quit reading soon: Do not buy software, ever, unless you’re laser-clear on the problem you’re trying to solve and what it would cost your organization to leave it unsolved.
As Director of Advocacy and Brands at NationBuilder, my core responsibility is to sell our community organizing platform to enterprise-scale advocacy groups, nonprofits and big associations. Often, when these groups come to us for help, they’re in a rush to see a product demo.
This is the wrong approach.
You can’t effectively evaluate a solution before you’re clear on the problem you’re trying to solve. And if it’s my job to show you the solution, I can’t go in blind either.
Here’s the right approach.
- Do an honest exploration of your organization’s challenges. Identify the big problems, and the seemingly little ones. Prioritize them, in order of urgency to solve.
- Calculate the cost of leaving your top problems unsolved.
Calculating the problem cost is fundamental to making the right decision because it’s going to help you confirm that you need to buy a solution, and show you how much you should pay.
For example, say clunky technology is reducing your staff efficiency to the tune of 50 wasted hours per month at $20/hour labor cost, for a monthly organizational cost of $1,000. There’s a clever software tool that promises to boost efficiency and turn those wasted hours into productive ones, but if that tool costs $2,000 per month, it’s still not a good investment, right?
To help you calculate your problem cost, I’m tackling the advocacy world’s three most common and costliest tech troubles, with examples on how to calculate their cost.
The Problem: Big, Bad Data
Big organizations are swimming in data. There’s a donor database; an email list that lives in a separate email tool; other random data sets collected via past campaign experiments and one-off events; and don’t forget about the email inboxes of staff account managers that aren’t syncing with any of the above systems. You’re left with a complicated system that creates messy data (and it’s getting messier over time).
The Consequence: You can’t effectively target your supporters
You make embarrassing mistakes in supporter engagement, like sending membership drive emails to existing members (ouch!), or sending canvassers doing new supporter acquisition to the door of a well-known, big donor. Is it any surprise that the nonprofit industry has a crisis in donor retention?
Because your data is scattered, you can’t target communications in a way that takes advantage of all the information that you collect from different channels, so your conversion rate (the percentage of your supporters who take action when you ask them) is low. You’re also wasting staff time on brutal administrative work.
Calculate the cost
By better targeting, you could increase conversion by up to 60%. Why targeting works is pretty common sensical, but a quick example: Imagine you support Environmental Group A. You join their newsletter, sign an online petition, and occasionally retweet their calls to action. At no seemingly relevant time, you get the following email:
Environmental Action Group ABC is trying to raise $1 million in 2016. Your contribution will help us preserve wildlife. Donate here.
Ignore. Delete. And quite possibly, unsubscribe!
Instead, what if you got the following email:
Thanks so much for signing the petition to protect Mountain Lions in the Santa Monica Mountains. We’re especially grateful that you also shared the petition on Twitter. Three of your followers signed the petition after you shared, bringing our total to 556!
There’s one more crucial way that you can help protect the big cats: Since your $10 donation to EAG-ABC in 2014, we’ve expanded our efforts in your area, accumulating more wins than ever. To help cover the cost of new advocacy staff, we’re asking our past donors like you for a renewed commitment of $20.
Your $20 donation will go to Mountain Lion preservation advocacy in the Santa Monica Mountains. If you donate, we’ll invite you to a donor-only special morning hike on April 10.
EAG-ABC Advocacy Coordinator
This second email would obviously get a better conversion rate, right? But in order to send this well-targeted fundraising ask, EAG-ABC would need to have, in one place, my geographic information, my donor history, my online advocacy participation and my social media engagement.
Before you figure out how to piece those systems together, let’s first understand what it’s costing to leave them silo’d.
To calculate your current donor conversion rate, take your total email list and divide it by the number of individuals who donated last year. An organization with 250,000 emails and 30,000 donors has a donor conversion rate of 12%. We’ll assume an average donation of $10, making annual individual fundraising $300,000. With better targeting in place, assume a 40% increase in donor conversion (remember the difference between our Environmental group’s untargeted and targeted fundraising asks) and multiply the current donor conversion rate by 1.4. Our donor conversion rate jumps from 12% to 16.8%. Now, apply the new rate to the same list size of 250,000, and we have 42,000 total donors — 12,000 more than current. Finally, multiply the new donors by the same average donation: 12,000 x $10 = $120,000. This is your opportunity cost, or how much you’re losing by not solving the messy data problem.
Now let’s take into consideration the cost of duplicative software. It’s commonplace to use one system for, say, donor management and another database to engage advocacy supporters because the donor system wasn’t designed to track advocacy activities, and vice versa. But the two systems inevitably overlap. Let’s assume a 30% functionality overlap in two primary database systems that cost $30,000 annually. That’s a $10,000 cost in duplicative software cost.
Finally, in every organization with fragmented data ecosystems, there is significant staff time allocated for data systems management. Because these systems aren’t built to integrate, this is usually frustrating work.
Many organizations have to pay a full-time staffer just to oversee the manual flow among various systems. Those without such a staffer invariably waste the time of development, marketing and advocacy staffers. In the latter example, organizations tell me that they’re wasting, on average, 10 hours per week doing manual imports and exports, creating pivot tables in Excel, and plenty of manual data entry. At a labor cost of $20/hour (which translates to a $42,000 salary), that’s a $10,400 labor cost.
Total cost: $120,000 + $10,000 + $10,400 = $141,500
Should you solve the problem?
In this case, you probably should — but that assumes there’s a technology that can integrate your systems, and cost you less than the current problem cost (hint, check out NationBuilder). But the point of the exercise is really to help you walk into the buying process with extreme clarity on your solution criteria, which in this example is systems integration.
If you’ve done an honest examination of your problems, and calculated their costs, you can better qualify the potential solutions. For example, if your core problem is systems integration, you know you need to gain a solid understanding on how a technology tool combines systems that today are separate. When the salesperson tries to show you social media bells and whistles that aren’t relevant, you can re-focus the conversation on your real needs — fix the data mess so you can effectively target, increase conversions, and raise more money. When it comes time to talk pricing, it won’t be in a vacuum. Even if you love a certain tool, if it costs more than your current problems are costing, it’s probably not worth it. If it’s going to save you money, you can feel really good about your investment.
I am the Director of Advocacy & Brands at NationBuilder, where I help large organizations implement technology, strategy and process to achieve their goals in community engagement. Ping me at firstname.lastname@example.org to talk organizing and technology.