Getting started with AI-driven fundraising: crash course

If efficiency, technology, and smarter fundraising have been on your nonprofit’s radar, you’ve almost certainly encountered artificial intelligence (AI). It’s been a big buzzword for years now, but AI has moved beyond buzzword status—it’s an accessible and increasingly common tool for nonprofits. AI can completely change how nonprofits engage donors and prepare for fundraising appeals. The end results are more efficient AI-driven fundraising, more revenue, and more time for what matters.

But there’s still a lot of confusion around exactly what AI is and what it does for nonprofits. This quick guide will review the essentials.

How AI for Nonprofits Works

Artificial intelligence works through machine learning, which involves the discovery and analysis of deep patterns in datasets. Machine learning technology uses these patterns to train predictive algorithms that will measure specific propensities and make predictions. These algorithms are continually refined over time as more data is generated for analysis.

On your team’s end, the process is simple—the technology runs analyses and delivers predictions. The most user-friendly AI tools will provide these insights in the form of predictive scores and rank metrics. For instance, AI can quickly rank individual donors by their likelihood to give to a direct mail appeal right now.  

When incorporated into your nonprofit’s strategies, AI has a number of important benefits. Its most immediate benefit is that it gives you real-time lists of the individuals who are most likely to take action on your next appeal or stewardship message. But when looking at the bigger picture, even more valuable benefits become clear for AI-driven fundraising:

• Higher conversion rates through better-targeted donor lists
• Reduced overhead costs of broad fundraising outreach
• Reduced (and in many cases completely eliminated) need for time-consuming and inaccurate manual data analysis or donor segmentation

Altogether, these benefits mean healthier fundraising ROIs, efficient campaign planning, and more time for building donor relationships. 

How Nonprofits Use AI

Nonprofits are already using artificial intelligence tools for a variety of fundraising and stewardship purposes. AI-driven fundraising can generate predictions that help you:

• Create highly targeted mailing lists for appeals, reducing upfront costs and increasing conversion rates.
• Identify lapse risks and upgrade opportunities for your monthly giving programs, making it easy to proactively boost retention rather than simply react to churn. 
• Flag opportunities for mid-level, major, and planned gifts to help guide your stewardship strategies and better allocate your development team’s resources.

The bottom line is that AI makes data-driven predictions for you, taking the guesswork out of developing lists for campaigns and outreach. This makes it a valuable tool in all kinds of contexts, from day-to-day fundraising to the quiet phases of capital campaigns to ongoing donor engagement programs. 

How Nonprofits Don’t Use AI

Artificial intelligence is not used to flatly automate your outreach and fundraising. This hands-off approach often isn’t the best choice for nonprofits. 

While your historical fundraising data tells a complex story about your donors and how they’re likely to behave in the future, you still need a human touch to engage with them successfully. But this doesn’t mean nonprofits need to waste time, money, and attention on outdated backend processes. 

Data analysis for planning campaigns is the perfect example. It’s essential for modern, efficient fundraising, but there’s no reason why it should be a gargantuan task on its own. Rather than automating how you reach out to donors, AI instead automates the analysis process itself to give nonprofits a solid foundation on which to build their campaigns.

AI for Nonprofits in Action

Dataro recently worked with Parkinson’s UK to test a few questions:

• Can AI find new donations that would otherwise be missed through traditional mailing list development?
• Can an organization raise more by contacting a smaller, more targeted group of donors?
• Does an AI-driven approach result in more or less revenue than a more manual approach?

To answer these questions, Parkinson’s UK tested its own donor selections for a direct mail appeal against those predicted by artificial intelligence, which actually recommended a reduction in campaign size. Once the campaign played out, the results indicated that AI could generate more revenue and increase the number of individual gifts made despite the smaller mailing list:

• The traditional mailing list had a response rate of just under 9 percent, while the AI-generated list had a response rate of 14 percent.
• The traditional approach secured less than 2,500 individual gifts, while the smaller, AI-driven mailing list secured roughly 2,800 gifts.
• AI also identified 411 gifts that were missed by the traditional mailing list.
• Donors flagged by AI as the most likely to give ultimately did contribute the majority of revenue for the campaign.

In this case, using AI to guide the fundraising appeal resulted in more revenue, a higher ROI, and minimized mailing waste.

Nonprofits (and their funders) will continue to adapt through 2021 and beyond, but the need for increased efficiency will always remain. The precision achieved through AI predictions can completely change how nonprofits fundraise and engage their donors. It can unlock new levels of efficiency and focus for their campaigns and stewardship outreach, but there’s still a long way to go in terms of adoption across the sector. 

For organizations considering investing in AI technology, the first step is understanding exactly what AI-driven fundraising is and how it is and isn’t used. From there, research more success stories from other nonprofits and consider exactly how artificial intelligence might fit into your own strategies.