Nonprofits that engage in fundraising are familiar with the concept of a ‘virtuous cycle’ (or some call it a ‘virtuous circle’) — for example, it’s the basis for Moves Management, in which fundraisers follow a cycle of cultivation, solicitation, and stewardship, which leads to a relationship that supports further, ongoing cultivation, solicitation, stewardship, etc. Rinse and repeat.
For those unfamiliar with this construct, however, it’s easily described. A virtuous cycle is a chain of activities in which each activity reinforces the subsequent activity for a positive result or outcome. This ultimately supports a loop back to the initial activity in the cycle, and so the cycle continues with further positive momentum and outcomes, until, perhaps, some external force disrupts it.
(The opposite of a virtuous cycle is known as a vicious cycle. A vicious cycle’s components engender and reinforce ongoing and increased negative results and negative outcomes, but still can have the same momentum as a virtuous cycle until disrupted.)
The Virtuous Nonprofit Technology Landscape: 5 Levels
In the world of nonprofit data technology, there’s a naturally occurring virtuous cycle as well, or it could be a vicious cycle, depending on how it’s approached, led, and addressed. This cycle has to do with how the technology tools that a nonprofit uses (or doesn’t use) impact how effectively the organization delivers its mission (or doesn’t) and makes its intended impact (or doesn’t).
The cycle looks like this – and develops into a virtuous one for organizations that endeavor to be more technology and data-driven – and a vicious cycle for those that do not.
1. Think of tools and technology at the beginning of a cycle or the bottom of a pyramid. If you are a data-driven organization – and what organization doesn’t strive to be – the quality and integrity of your data are directly dependent on your nonprofit’s data management tools and technology – or lack thereof. And if tools and technology can improve the quality of your data, they’re likely worth the investment. If the tools and technology are rudimentary, or if there is no data management technology, the data which are used in business processes, and upon which decisions are made, could be flawed, inaccurate, or outdated.
2. When the quality of your data is reliable and dependable, the business processes that employ that data will be more effective. Conversely, if your data is stale or erroneous or incomplete, the processes that rely on that data will suffer. Studies have shown that consumer data decays at the rate of 2% per month1, which means that up to one-quarter of nonprofit data could become outdated each year. So, the importance of data quality (and of technology that ensures data quality) cannot be overstated.
3. Moving through the cycle or up the pyramid, when data quality is high and business processes are more effective, supporter, donor, and member engagement will be commensurately more effective. For nonprofits, key engagement activities that leverage and employ data include thank you letters, email newsletter subscriptions, fundraising appeals, and communications to donors about the impact of their giving. If data are of high quality and processes are effective, these engagement activities will be more successful. But if data quality suffers, donor engagement will likely suffer as well.
4. We’re almost at the top of the pyramid or rounding the bend in the cycle. If supporter or donor or member engagement is high, there’s a much better chance that existing donors will be retained, that new donors will be acquired from prospect pools, and that average gift size will increase. That means that the organization’s revenue from fundraising overall will increase. Conversely, if the donor experience is a poor one and if donors are not effectively engaged (again, due to data quality) then fundraising revenue will likely dip – it will decrease and perhaps even be irrecoverable.
5. At the top of the pyramid or the end of the cycle is the nonprofit organization’s mission. Logic dictates that if more revenues are raised from fundraising sources, then mission delivery and organizational – and donor – impact would be exceeded. But if fundraising revenues decrease, then mission delivery goals would likely not be achieved.
And, to make it a truly virtuous cycle, it’s not a stretch to assume that if more funds are raised, and if that results in improved mission impact, and if that can be tied back down the pyramid or around the cycle to the better use of tools and technology, then there would be additional budget for tools and technology forthcoming to further support additional and more effective mission impact.
Data Integration and the Virtuous Cycle
In today’s environment in which nonprofits use not only a main CRM database but also an assortment of ‘satellite’ platforms to manage a variety of supporter engagement and donor interactions, data integration technology could be considered the ‘textbook case’ for the virtuous cycle described above.
Think of it – in addition to a main CRM database such as Salesforce or Raiser’s Edge NXT, it’s not uncommon for organizations to use separate platforms for online giving, event management, email marketing, eCommerce, membership, ticketing, volunteer management, etc. So – there are literally loads of data captured in all of those satellite systems that need to be integrated into your main system of record, so that end-users have the complete picture of supporter involvement (donative and otherwise).
That’s where tools and technology come in and that’s where the virtuous cycle begins. Proper data integration tools and technology will ensure that information from your satellite solutions come into your main CRM system quickly, accurately, preventing duplicate records, and cleaning up data along the way where necessary. That will ensure that processes leveraging that data operate as intended and that supporter communications – segmentation, cultivation, acknowledgment, stewardship – are timely, personalized, and appropriate.
The rest of the cycle falls into place: prospects are acquired as new donors, existing donors are retained at rates that beat the averages, average gift size increases. Fundraising goals are exceeded, and that – combined with probable cost-savings from efficiencies brought about by better tools and technology – means more funding for mission delivery and mission impact.
Embrace the Cycle!
We frequently think of tools and technology as the solution to a specific, albeit tactical, problem – save time, prevent duplicates, remediate inaccurate data, and reduce stress. While tools and technology can address those specific tactical challenges, we don’t often think of them strategically, as a means to an end – or as the starting point in an ongoing cycle that can have tremendous effects ‘downstream’ (positive or negative; virtuously or viciously).
If, for example, fundraising or donor retention targets are being missed, it could be advisable to work backward around the cycle and see if data or process problems are at play, and if so, if the root cause is associated with tools and technology (or lack thereof). Similarly, even if goals are being achieved, it may be worthwhile to examine your tools, technology, data quality, and processes to see if any adjustments might make your downstream outcomes even stronger.
Embrace the cycle! With a little analysis, self-examination, and the right technology, a vicious one can be disrupted and turned virtuous. And a virtuous cycle can run continuously, monitored but not interrupted, to ensure a nonprofit’s Mission Impact is maximized.
1 Guidestar, from Dun & Bradstreet’s NetProspex State of Marketing Data
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