Customer Analytics: A New Lifeline for the Red Cross and Other Nonprofits?

... The question for groups like the Red Cross is how to identify and reach out to those one-time givers who are most likely to become regular donors. "The single biggest channel through which we can acquire new donors is in response to a disaster," says Tony DiPasquale, senior director of market intelligence for the Red Cross. "What we have long had difficulty doing is moving these donors from being disaster-response donors to ones who support [our organization's] core mission."

Solving that puzzle could be a boon for the Red Cross and nonprofits like it that need to find cost efficient ways to improve their fundraising. The answer may lie in the world of customer analytics, the collection and mining of data on individual consumer behavior that is already revolutionizing how for-profit businesses operate. Through a partnership with the Wharton Customer Analytics Initiative (WCAI), the Red Cross has linked up with six teams of researchers from around the country, including analytics experts from Baylor University, the University of Pittsburgh and the IBM Watson Research Center who will analyze data from the Red Cross database to develop tools for improving the organization's outreach efforts.

The Red Cross's project with WCAI is aimed at changing that equation. The six teams selected for the project will be studying a data pool of more than 500,000 donors to the organization who made a contribution between 2006 and 2011. The goal is to come up with new tools to improve fundraising efficiency. The IBM Watson team, for example, will be creating software tools that give the Red Cross new ways to visualize and work with the data. "Data visualization is a hot topic," notes Kurt Kendall, a leader in the Consumer Marketing Analytics Center at McKinsey. "There is a whole body of research that shows human beings are very bad at looking at a table of numbers and drawing conclusions from it. But the human brain does very well on visual pattern recognition."

Another group, this one from Baylor, will be studying how communication directed to donors from the organization affects response rates. "They are going to look at [donor] letters to see what kinds of messages they include, and what is the psychology [behind] the message that makes a person engage," says Elea Feit, a Wharton marketing lecturer and research director of WCAI.

(To learn more about WCAI's collaboration with the Red Cross, see the video above: "Using Data to Help Convert Red Cross 'Disaster Donors.'")

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