No matter how worthy your nonprofit cause, the biggest struggle among NPOs is always maintaining a robust cash flow. The fight for funding is fierce — and retaining loyal donors even more difficult. Over the past six years, nonprofit donor retention has hovered at around 45%. For 2021? Just 41.9%. Ouch.
The problem behind most ineffective nonprofit donor outreach is lack of information. You can’t successfully communicate and connect with your potential donors if you don’t understand them. If you’re making decisions based on assumptions about your donor base, you could be unintentionally ignoring their preferences and values, thereby reducing engagement and contributions.
So what’s a nonprofit to do? Market research.
What is NPO market research?
Let’s say you’re looking to better engage your nonprofit donors with your next fundraising campaign. How effective are mailers, texting, and email for funding solicitations from your donor base? How can you make sure to get the highest amount of engagement and donations? That will start with market research.
Market research is the collection and interpretation of relevant information. In this case, the research would center around your donors’ contact channel and messaging preferences. But keep in mind that NPO market research isn’t limited to learning about your donor base. The techniques we’ll go over here can be used to better understand the communities you serve, evaluate your ROI, compare your organization to competing charities…the limits are endless!
Though you can hire an expensive expert to do your market research for you, the gathering of relevant data doesn’t have to be costly or complicated to be effective. So how, precisely, can a NPO successfully conduct DIY market research to increase revenue?
Step 1: Do the prep work.
So far, you know two things to be true:
- Market research is necessary for a successful nonprofit and
- You can do it yourself.
But wait! Before you go along on your merry way, market research-ing all over the place, you need to do your homework. Take some time to determine your goals as an organization, the primary objectives for your research, and any assumptions with which you’ve already been making decisions.
Step 1a) What do you want to know?
Your first job is to clearly define for yourself the questions you need answered. This is where specificity will serve you well. Laying out exactly what you want to know and determining which metrics will answer those questions will allow you to conduct research that is focused and useful for future decision making.
If you’re unsure where to begin, you can start by asking yourself a few questions about your nonprofit:
- What’s going well?
- Where would we like to see improvement?
- What do we know for sure about our donor base? Where are the gaps in our understanding of these donors?
In our above example, the specific market research question might be: Through which channel do we get the highest donor ROI: mailers, texting, or email?
Step 1b) Form your hypothesis.
It may have been a while since you’ve followed the scientific method, but this step is more useful than ever when it comes to market research! Consider what assumptions your organization may be operating under.
- Which of your projects are most important to your donor base?
- How does your audience prefer to be contacted?
- What are the most common charitable obstacles faced by your donor base or volunteers?
For the example research question around the efficacy of donation solicitation channels, the assumption might be that mailers bring in the most donations because they’re the most traditional form of donor contact. But is that true?
Step 2: Get to it! Conduct your research.
- Qualitative Research
The first phase of your research should be spent gathering qualitative data. This type of research is all about discovery, and will be less measurable and structured than the next phase of your research.
You’ll gain a better understanding of your audience’s “why.” Why do they support your charity? What will encourage them to continue giving? Why might they like email contact better than snail mail? The answers to these questions are typically gathered through one of the following three methods:
- Focus Groups
- Quantitative Research
Phase Two is all about the numbers! Quantitative data is measurable and specific, and is used to generate statistics with which you can make more informed decisions. Generally, you’ll be looking at larger populations to understand patterns and trends.
Depending on your objective, you may be looking at market research papers, industry reports, case studies…the list goes on! No matter which sources you choose to include in your research, the numbers will come from information that’s already been published.
Here are some of our favorite sources for quantitative research:
- NCCS: National Center for Charitable Statistics
- IRS SOI Tax Stats: Charitable and Exempt Organizations Statistics
- Propublica Nonprofit Explorer: Research Tax-Exempt Organizations
- The Chronicle of Philanthropy: Data & Research
For our example study, you may check the general statistics on outreach channel efficacy. But you may also compile internal records and data. As you track the ROI on various outreach methods, you may be shocked to learn that SMS messaging has nearly 7x the click rate of emails, and over double the ROI of mailers. But does your donor base feel text messages are intrusive? Will they stop donating more quickly with SMS campaigns?
Guess it’s time to conduct more market research.
Step 3: Apply what you’ve learned.
All of this hard work is meant to be used, so don’t wait to take action! Put your findings into practice, and commit to evaluating the success of your changes at regular intervals. Continue to connect with your audience to ensure that you’re keeping their needs, preferences, and values in mind.
Thorough market research is one of the best ways to set your organization up for success. Another great way to make sure you’ve got a solid foundation? Consult with an accountant you trust to make sure you’re starting on the right (financial) foot. Contact KYN Accounting today to get started!