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Why Nonprofits Deserve CRM Innovation
With charitable giving exceeding $298 billion in the U.S. alone, it's time that software companies gave nonprofits the attention they deserve by creating technology that truly serves their needs.
Posted Aug 12, 2015
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If you think about the last five times you donated to charity, chances are that you have a very personal connection to each cause. You've likely even had family member impacted by the cause or a friend who volunteers at the nonprofit. Like it or not, philanthropy is ­­driven by personal connections and passions. As a result, modern nonprofits are under enormous pressure to connect with donors personally in order to build relationships and fund their cause. This is exactly why nonprofit CRM, also called "donor management software," is so valuable for these organizations, yet innovation for this billion-dollar industry is often lacking. CRM innovation in the nonprofit space is essential for the flourishing of charities and represents a massive opportunity for technology companies.

I find that most of my colleagues in the software industry don't fully understand the scope of this problem. A 2014 study by the Urban Institute found that an estimated 1.44 million nonprofit organizations are active in the United States alone. The same study reported that the nonprofit sector made up 5.4 percent of the U.S. GDP in 2010, with an $887.3 billion contribution to the country's economy. Private charitable contributions, including those to religious and public charities, topped $335.17 billion in 2013. To accomplish their mission, modern nonprofits must build millions of highly personal relationships in order to raise hundreds of billions of dollars to accomplish their work.

The needs of the modern charity have changed just as much as the software industry in the last two decades. Unfortunately, charities are often asked to shoehorn their needs into archaic donor management systems or traditional CRMs built for sales instead of generosity. The good news is that nonprofits are also willing to spend their money on innovative software to find donors and impact their cause. Charities and social enterprises face growing pressure to cut through marketing clutter and connect personally with younger Millennial donors. Their software can no longer afford to see donors as "leads" or "transactions"; instead, they must focus on the personal passions of each giver. The Case Foundation explains this issue well in their Millennial Impact Report: "Millennials first support causes they are passionate about (rather than institutions), so it's up to organizations to inspire them and show them that their support can make a tangible difference on the wider issue."

Most of today's donor management systems are built on a 40-year-old paradigm. At their core they are designed to keep track of addresses and log donations. Nonprofits deserve a whole new breed of technology with the kind of leading-edge features available in business-centric CRM tools. The type of holistic relationship management required for philanthropy engages donors at the very core of their beliefs and identity—and then builds a highly personal relationship that often stretches over years. CRM traditionally stands for "customer relationship management," but donors aren't customers. They're co-conspirators in solving the world toughest problems. And the work of charities would not be possible without their help. They are people who give their hard-earned money, time, and relational capital for no benefit of their own—and want to see and feel that they are making a difference.

So with that in mind, let me close with five distinctively philanthropic features and areas that will create value for CRM companies in the nonprofit space:

Generosity-specific predictive data analytics. Nonprofit CRMs must predict and customize each donor's experience. Successful systems will combine tried-and-true fund-raising data analytics with social media signals and even current events to create a holistic, personalized relationship with each giver.

Giver-managed relationships. Nonprofit CRMs must enable two-way communication and create open conversations with givers about the success of individual projects. Nonprofits can no longer report on cold institutional metrics. 

Completely removing the "sales" paradigm. Nonprofit CRMs shouldn't be modeled on sales/transactions. Instead, they should focus on long-term relationships around generosity, social engagement, advocacy, etc.

Open APIs and integrations. The days of monolithic donor management systems are over. Nonprofits want to use best-in-breed tools for email marketing, donation processing, etc. The new CRMs should embrace these choices and provide easy integration.

Increase efficiency and decrease overhead. Nonprofit CRMs must help reduce the unnecessary costs common to charities. Back-office tasks like donation importing, gift receipting, and foundation giving management can suck up hours of staff time and create massive overhead. The new CRM needs to understand the very specific needs of nonprofits and provide efficiency tools that allow charities to go about the work of accomplishing their mission.

If software vendors and analysts can shift their focus to the unique relational needs of charities, then there is real potential for CRM technology to help amplify the good created by some amazing nonprofits.

Gabe Cooper is the CEO of Virtuous Software, a nonprofit CRM designed to simplify donor management. Gabe has spent over 14 years helping nonprofits build software to accelerate fundraising. Connect with Gabe at http://www.virtuoussoftware.com/.

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