Over the past few months I've had the pleasure of analyzing Network for Good's massive and rich dataset of online giving. The dataset features giving history that goes back over seven years and represents almost 2 million online donors and their nearly $400 million in giving.
This analysis identifies the peak period for online giving in December. This finding -- along with our recommendations for what to do about it -- will be presented by my TrueSense colleague Jeff Brooks and Katya Andresen of Network for Good in a FREE webinar.
The webinar will be hosted by Network for Good at 1PM (Eastern) on Tuesday, November 2. Register here.
Friday, October 29, 2010
Wednesday, October 6, 2010
How Long to Break-Even?
New donor acquisition can be a drag on your cash flow. It seems that most acquisition loses money out of the gate, and this impacts cash flow.
However, the payoff is in the subsequent giving of the acquired donors. Or so we've been told. What does this look like? The following graph shows Long-Term Net Revenue per New Donor for one organization:
This graph shows the average net revenue given by each new donor from one acquisition campaign. We see that the campaign lost money initially. There was a loss of about $7.50 for each donor acquired. If 10,000 new donors were acquired that would be a loss of $75,000. That's a hit to the current year's cash flow.
Fortunately, these donors continued to give (and the organization continued to offer new chances to give). By the sixth month, the subsequent giving of these donors was sufficient to recover the acquisition loss (break-even). This is excellent news.
I've run this graph on many organizations and many acquisition programs (TV, radio, DM, etc.). Some break-even within twelve months and some take as long as four years. How can a program sustain itself if it takes four years to recover an acquisition investment?
My recommendation is to run this analysis on each of your acquisition programs. Know when your campaigns break even. Sure Long-Term Value is important, but you need to count the cost. And you need to understand the impact acquisition has on your current year cash.
However, the payoff is in the subsequent giving of the acquired donors. Or so we've been told. What does this look like? The following graph shows Long-Term Net Revenue per New Donor for one organization:
This graph shows the average net revenue given by each new donor from one acquisition campaign. We see that the campaign lost money initially. There was a loss of about $7.50 for each donor acquired. If 10,000 new donors were acquired that would be a loss of $75,000. That's a hit to the current year's cash flow.
Fortunately, these donors continued to give (and the organization continued to offer new chances to give). By the sixth month, the subsequent giving of these donors was sufficient to recover the acquisition loss (break-even). This is excellent news.
I've run this graph on many organizations and many acquisition programs (TV, radio, DM, etc.). Some break-even within twelve months and some take as long as four years. How can a program sustain itself if it takes four years to recover an acquisition investment?
My recommendation is to run this analysis on each of your acquisition programs. Know when your campaigns break even. Sure Long-Term Value is important, but you need to count the cost. And you need to understand the impact acquisition has on your current year cash.
Sunday, September 26, 2010
Is Choice Always Good?
Strategy+Business is not a publication that focuses on non-profits, but it's still a great resource for fundraisers. Check out a recent article on consumer choice.
My colleague Jeff Brooks (Future Fundraising Now) summarized the article nicely: "choice isn't good; good choice is good."
One good nugget is item #4, which talks about referring to the person's past choices to help them decide.
I've found that to be true in fundraising. In an A/B test the appeal letter that referred to the donor's past gift to the same offer generated more response than the appeal that presented the same offer without the reference.
Test this with your donors, and let me know how it worked.
My colleague Jeff Brooks (Future Fundraising Now) summarized the article nicely: "choice isn't good; good choice is good."
One good nugget is item #4, which talks about referring to the person's past choices to help them decide.
I've found that to be true in fundraising. In an A/B test the appeal letter that referred to the donor's past gift to the same offer generated more response than the appeal that presented the same offer without the reference.
Test this with your donors, and let me know how it worked.
Tuesday, September 21, 2010
What Would Your Mother Say?
Back to the Heart of the Donor study ...
One of this study's findings has puzzled me over the last month. It's this: the speed in thanking and receipting a donor's gift ranked low among the factors encouraging the donor to give a second gift.
I always thought a prompt thank you was important. My mother told me growing up to always say thank you. Always write a thank you note for gifts. And do it right away. Don't these things matter to the recipient?
It seems to go against a fundamental fact of direct response -- the recency curve. The curve tells us that the donor who last gave is the donor most likely to give again. Don't you want to fill the space under the high part of the curve with the good will that results from a thank you?
So, is the Heart of the Donor study is a bunch of hot air? Not at all. I've worked with the researcher behind this work, and I can vouch for him and his work. It merely points to the challenge of self reported data. We sometimes say one thing in a focus group or survey and then do another.
That's why is good to confirm this stuff with testing in the market. If your organization is slow to thank donors, don't use this study to let yourself off the hook. Rather, test a more prompt receipt/thank you package.
One of this study's findings has puzzled me over the last month. It's this: the speed in thanking and receipting a donor's gift ranked low among the factors encouraging the donor to give a second gift.
I always thought a prompt thank you was important. My mother told me growing up to always say thank you. Always write a thank you note for gifts. And do it right away. Don't these things matter to the recipient?
It seems to go against a fundamental fact of direct response -- the recency curve. The curve tells us that the donor who last gave is the donor most likely to give again. Don't you want to fill the space under the high part of the curve with the good will that results from a thank you?
So, is the Heart of the Donor study is a bunch of hot air? Not at all. I've worked with the researcher behind this work, and I can vouch for him and his work. It merely points to the challenge of self reported data. We sometimes say one thing in a focus group or survey and then do another.
That's why is good to confirm this stuff with testing in the market. If your organization is slow to thank donors, don't use this study to let yourself off the hook. Rather, test a more prompt receipt/thank you package.
Monday, September 13, 2010
The All Important Second Gift
I've been going through the Russ Reid / Grey Matter "Heart of the Donor"study. Lots of good material to inspire new thinking on donors and fundraising.
They surveyed over 2,000 donors about many aspects of their giving. They asked donors what encouraged them to give a second gift to an organization. These donors identified three things:
1. Explained the specific mission of the organization to me (76%)
2. Made me feel that my gift really made a difference (72%)
3. Gave me information about exactly what my gift helped accomplish (71%)
These all make intuitive sense. Further, it's an crucial that your donors do go on to give second gifts. The data tell us that donors who give second gifts within their first year are more than twice as likely to give again in their second year.
Two = Three
There's more. These multi-gift donors turn out to have higher long-term values (LTVs). Usually 2.5 to 3.0 times more. The following graph of one organization's direct mail acquired donors shows that multis have an LTV that is 2.8 times that of their single gift counterparts.
Recommendation
Be sure to audit what you say to new donors after their first gift. How well are you doing the three items listed above? If you're missing in any of these areas, then by all means fix it. But do test your new ideas to learn their impact.
They surveyed over 2,000 donors about many aspects of their giving. They asked donors what encouraged them to give a second gift to an organization. These donors identified three things:
1. Explained the specific mission of the organization to me (76%)
2. Made me feel that my gift really made a difference (72%)
3. Gave me information about exactly what my gift helped accomplish (71%)
These all make intuitive sense. Further, it's an crucial that your donors do go on to give second gifts. The data tell us that donors who give second gifts within their first year are more than twice as likely to give again in their second year.
Two = Three
There's more. These multi-gift donors turn out to have higher long-term values (LTVs). Usually 2.5 to 3.0 times more. The following graph of one organization's direct mail acquired donors shows that multis have an LTV that is 2.8 times that of their single gift counterparts.
Recommendation
Be sure to audit what you say to new donors after their first gift. How well are you doing the three items listed above? If you're missing in any of these areas, then by all means fix it. But do test your new ideas to learn their impact.
Sunday, September 5, 2010
Unpacking Long-Term Value
It's important to know the Long-Term Value (LTV) of the donors you acquire. This helps you justify the expense of acquisition. It's also important to understand the donor performance underlying LTV. Here's a basic table that does just that:
The table tracks the 5-year performance of 1,000 donors acquired in Year 1. In Year 1 the average donor gave 1.4 gifts with an average amount of $30.
In Year 2, only 400 donors continued giving. As is usually the case, these donors brought an increase to giving frequency and average gift. And they added $26 on average to their cumulative LTV.
The active donors from Year 2 become the beginning number of donors for Year 3. There are fewer donors than the prior year due to attrition. However, these donors have stronger retention (% Active). Again the performance of the donors continuing is higher than the year before. Less committed donors are leaving the fold. Those who stay have stronger giving performance.
At the end of 5 years, the cumulative LTV is $121. Each metric in the table -- % Active, Gifts per Active and Average Gift -- is instrumental in building to this eventual LTV.
If retention had been lower, the LTV would have dropped. That's why bonding donors through 2nd gift strategies is important. Same for lapse prevention and lapsed donor reactivation.
If giving frequency changes, so does LTV. That's why we need to give the donor ample opportunities to give to multiple offers and multiple channels.
Average gift also has an impact. That's where challenging yet appropriate ask amounts come into play.
The LTV metric helps you understand your organization's growth. At the same time, there's a lot going on underneath that helps us understand we can adjust strategies and tactics to improve it.
The table tracks the 5-year performance of 1,000 donors acquired in Year 1. In Year 1 the average donor gave 1.4 gifts with an average amount of $30.
In Year 2, only 400 donors continued giving. As is usually the case, these donors brought an increase to giving frequency and average gift. And they added $26 on average to their cumulative LTV.
The active donors from Year 2 become the beginning number of donors for Year 3. There are fewer donors than the prior year due to attrition. However, these donors have stronger retention (% Active). Again the performance of the donors continuing is higher than the year before. Less committed donors are leaving the fold. Those who stay have stronger giving performance.
At the end of 5 years, the cumulative LTV is $121. Each metric in the table -- % Active, Gifts per Active and Average Gift -- is instrumental in building to this eventual LTV.
If retention had been lower, the LTV would have dropped. That's why bonding donors through 2nd gift strategies is important. Same for lapse prevention and lapsed donor reactivation.
If giving frequency changes, so does LTV. That's why we need to give the donor ample opportunities to give to multiple offers and multiple channels.
Average gift also has an impact. That's where challenging yet appropriate ask amounts come into play.
The LTV metric helps you understand your organization's growth. At the same time, there's a lot going on underneath that helps us understand we can adjust strategies and tactics to improve it.
Sunday, August 22, 2010
Last week I looked at the Long-Term Value of new donors. I used a 5-year timeframe to quantify LTV, as one possible approach.
An important companion metric to LTV is Long-Term Cost (LTC). LTC is sum of Cost of Acquisition (what it costs to acquire a donor) and the Cost of Cultivation (the cost to cultivate the donor beyond acquisition, using the same timeframe as used in LTV).
LTV and LTC are two building blocks to understand the acquisition program's ability to generate net revenue and to provide a return on investment.
Here's an example:
LTV = $350
LTC = $80 (COA is $40 and COC is $40)
The Long-Term Net is $270 (LTV - LTC) and the Long-Term ROI is 4.38 (LTV / LTC).
Try calculating these metrics on your various acquisition programs. The result will provide insight into where you should be spending your precious acquisition dollars for maximum growth.
An important companion metric to LTV is Long-Term Cost (LTC). LTC is sum of Cost of Acquisition (what it costs to acquire a donor) and the Cost of Cultivation (the cost to cultivate the donor beyond acquisition, using the same timeframe as used in LTV).
LTV and LTC are two building blocks to understand the acquisition program's ability to generate net revenue and to provide a return on investment.
Here's an example:
LTV = $350
LTC = $80 (COA is $40 and COC is $40)
The Long-Term Net is $270 (LTV - LTC) and the Long-Term ROI is 4.38 (LTV / LTC).
Try calculating these metrics on your various acquisition programs. The result will provide insight into where you should be spending your precious acquisition dollars for maximum growth.
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