How Artificial Intelligence and Machine Learning Can Transform Alumni Giving
Leverage predictive modeling to maximize fundraising and uncover your next group of key donors
By Adam Thies, Emma Lowther, Nick Lewis, and Ankit Phaterpekar
Philanthropic giving from individuals has reached an all-time low. In 2022, 63.9% of all US giving was from individual donors. This rate represents a decline of $17.3 billion by individuals from the previous year. Percentage-wise, the share of individual giving has decreased 20% from a height of 83% in the mid-1980s. The rate of individual giving is even lower for higher education, which in 2021 raised only 39.8% of total dollars from individual alumni and non-alumni donors. Despite philanthropy experiencing back-to-back record-setting years in 2020 and 2021 in terms of total dollars raised, this decrease in number of individual donors translates to a smaller pool of donors who have the potential to become the next generation of transformational givers, thus posing a threat to the major gifts pipeline and long-term fundraising goals.
Now more than ever, it is crucial that institutions become more efficient in how they identify and prioritize donors who have strong capacity and are inclined to give due to their alignment with the university’s mission, vision, and values. One way in which advancement offices can accomplish this goal is to leverage artificial intelligence (AI) and machine learning (ML) technology. These new tools make it possible for fundraisers to receive real-time and dynamic information on their potential donor pool, which has the potential to identify a higher volume of new major gift prospects with greater accuracy than traditional prospect research methods. This will better set up advancement offices to contribute to the future success of their institution by strengthening the organization’s pyramid of mid-level and major gift donors in a cost-effective manner.
The Financial Landscape of Higher Education Today
Both private and public higher education institutions are increasingly dependent on new revenue sources as tuition dollars and government funds have been in a steady state of decline. State government funding for higher education has been depressed since the financial crisis of 2008. Institutions experienced a slight increase in funding as a result of the COVID-19 pandemic. Nevertheless, the $80 billion dollars of federal COVID relief effectively disappeared quickly as it was either passed on directly to students or used to cover lost revenue from room-and-board vacancies.
Tuition revenue is harder to come by as undergraduate enrollment fell by roughly 4% between 2020 and 2022. This trend is likely to continue as we move closer to the demographic cliff. Additionally, public pressures from students and state governments will make it increasingly difficult for universities to raise tuition rates any substantial amount soon.
The Growing Importance of Advancement
As a result of the current financial climate there is more pressure on university advancement departments to cover the gaps in campus budgets. Philanthropic giving is vital to the health of a university. Private gifts make up between 5% and 12% of total institutional revenue depending on private/public school status. Donor contributions help fund scholarships, academic research, professorships, student experiences, athletics, capital projects, and more. They also can help universities grow endowments, which allow schools to create additional scholarship and research opportunities in the long term.
Challenges Facing Advancement Offices
At first glance it appears that fundraising is currently strong within institutions. Total giving increased 12% in FY22 to a total of $59 billion, the largest increase in over two decades. Many institutions set individual fundraising records as well. Nevertheless, much of the boost in giving was driven by organizational giving, while the same period saw the total number of individuals who gave decrease.
Additionally, this boost in dollar amount is expected to be short-lived as much of the record giving of FY22 came at a time when stock markets were still bullish. Growing economic uncertainty fueled by the possibilities of a feared recession has greatly affected projections for FY23 giving. For instance, the level of confidence that advancement leaders have in achieving their FY23 goals has declined nearly 20%.
Advancement offices are also facing significant internal challenges that will make meeting their fundraising goals difficult. These challenges include difficulty in attracting, retaining, and fully staffing their departments. Seventy-one percent of chief advancement officers cited staff shortages and resignations as a major challenge moving forward. Staffing issues are the result of high levels of burnout and low levels of staff morale, energy, and motivation. These issues have a significant impact on the ability of those in advancement offices to hit their fundraising goals, which, at many institutions, are more ambitious than ever. Considering these challenges, increasing work efficiencies is paramount to making sure they are able to hit their goals.
How Artificial Intelligence and Machine Learning Can Help
So, how can advancement offices drive more value in the face of current challenges?
The emergence of AI and ML offers a promising solution by addressing the often-complex task of donor prospecting. This technology allows organizations to create an automated index to identify and analyze a donor’s giving potential. How is this done? The dynamic machine learning model, built on both internal and external data sources, applies supervised learning to classify and compare donor and non-donor constituents, thus identifying the attributes and/or behaviors that indicate propensity to give. With these attributes and behaviors identified, it is then possible to use predictive modeling to improve the efficiency of prospect development efforts.
To meet ever-increasing fundraising goals, major gift departments are always looking for new prospects to build their pipeline. Typically, this work has largely been manual — initiating bulk wealth screenings, combing through data, and identifying indicators of ability and propensity to give. Research practices can be time-consuming and often result in static data that loses value over time, requiring additional manual update. And since major gifts can take years to cultivate, it’s crucial to focus on the right opportunities, which can be best informed by dynamic donor data. This dynamic prospect qualification tool allows fundraisers to identify a pool of major gift prospects with accurate real-time-capacity data, allowing for quicker turnaround from research to gift officers.
Such a solution was recently implemented by Slalom at a major arts-and-culture institution. The real-time-responsive scoring system puts the organization far ahead of its peers in maximizing fundraising efforts and allows them to diversify their outreach beyond already-known major gift donors.
Machine learning provides a huge opportunity to gift officers with pre-vetted information to target their outreach and uncover the next group of key university donors. This would improve the quality of the prospects that are identified and allow fundraisers to focus their efforts on the individuals most likely to give, thus improving and maximizing their existing donor conversation rate. By strengthening their major gift pipeline, fundraisers will be able to significantly increase the chances of securing the next generation of major donors.
Conclusion
Artificial intelligence and machine learning unveil a universe of untapped potential for higher education advancement offices, and Slalom can support you in embracing this cutting-edge technology. Leveraging the power of machine learning, our experts can efficiently identify individuals with a strong inclination to donate and actively contribute to your institution, streamlining prospecting efforts and freeing up valuable time and resources.
Imagine a world where every donor feels intimately connected to your institution’s mission and personalized interactions spark a flame of philanthropy across a new audience. Reach out today to learn more about how our experts can help you embark on this journey.
Slalom is a global consulting firm that helps people and organizations dream bigger, move faster, and build better tomorrows for all. Learn more about Slalom’s human-centered AI approach and reach out today.
