6 Metrics Fundraisers Can Use to Improve Their Growth in Giving

Ask any fundraiser if tracking their donors giving history is important and the answer should undoubtedly be “yes!” Unfortunately, living in today’s world of Big Data can lead anyone to easily get lost in its vast sea of data points (check out this article in Scientific American about just how big our world of Big Data really is).

Therefore, it’s critical to narrow down which metrics matter most to your organization and how to best track them.

In general, the two most important things to consider about any metric you wish to track are:

  1. Will changing this metric improve my ability to achieve my objective?
  2. What strategies and tactics can I undertake to improve the metric?

To illustrate the how and why these two questions are important, let’s use an analogy we can all relate to – keeping a doctors’ appointment. Your objective is to get to the doctor’s office prior to your appointment time. Consider that there are three possible outcomes: arriving early (your goal to get more time with your doctor,) arriving on time, or arriving late.

Let’s start with these two metrics:

  • The time by which you need to leave
  • How fast you need to travel

Just knowing how fast you are going or what time you left, however, does not help you get to your destination early – unless you can change either your speed or your time of departure. So according to this example, there are two strategies one can undertake to achieve the objective: either leave earlier or drive faster. But you really can’t determine if A is the best strategy without also knowing B. Then, factor in costs associated with both. Driving faster costs more money in gas. But leaving earlier costs more in time. Do you want to arrive early because you need more time with the doctor? Or are you okay with the status quo time allotted? And if you’re late, can you really afford to miss the appointment?

The same is true for fundraising metrics. Take Growth in Giving for example. Growth in Giving is defined as the gains minus the losses. If you gain more than you lose, you have a positive growth, versus losing more than you gain, which will equate to a loss. Simple enough right? This growth/loss number is very important, but if you only have that number to examine and are looking at it alone, then you’re not able to do anything except understand whether you did better or worse than the prior year.

If you really want to achieve your desired result, you need to understand how your chosen metric ties into your overall objective and what strategies and tactics you can undertake to improve that number. (Do you need more time at the doctor or are you just trying to keep the appointment?)

There are six primary metrics and multiple ways to improve their growth in giving. I will review a few of the ways these metrics can grow:

The growth number as it relates to new donors is perhaps the most straightforward but it’s also the most expensive. To improve this number, you must acquire more donors. You can do this through purchasing and trading name and address lists to create direct mail and email, fundraising events, face-to-face canvassing, telemarketing, direct TV, and peer-to-peer fundraising to name a few of the most common and tested acquisition methods. New donor acquisition is very costly at the onset because the return rate is generally quite low. Therefore, it’s very important to track the cost to acquire a donor (your CTA) for each of these programs to determine which acquisition strategies work best for your organization.

To retain or recapture a donor you’ve already acquired, the same basic acquisition strategies apply. However, it’s easier to retain a donor that is already engaged with the organization than it is to recapture. At the base of any strategy to retain/recapture a donor are a few fundamentals. First and foremost is to acknowledge how much their donations have helped the organization and thank them for their gift. Be very clear about how much you value them. Then present them with compelling reasons to continue to donate to your organization. Demonstrate that the need still exists and illustrate clearly how your organization is helping to meet that need by sending your donor regular updates. This all seems pretty straightforward, but it can be difficult to balance your need to ask for a donation while being sensitive to the donors’ ability and desire to donate again.

The retained donors that increase their giving have demonstrated their ability and desire whereas the retained donors that decrease their giving may have lost either the ability, or desire, or both. While it is difficult to gauge a donors’ ability and desire, using a donors’ past behavior can help to predict future donations. Whether you use predictive models like we do at DonorTrends, or Recency, Frequency, and Monetary value (RFM) variables, looking at your donors’ past behavior can help to determine not only how much to ask for but when to ask for it. For example, if you have donors that have given at least $100 every year in December for the past 10 years, it would be a good bet that this coming December is a good time to ask and $100 would be a good amount to ask for. If your objective is to increase their donation, further looking at their past behavior can help you determine what the right amount is to request.
The lapsing new and repeat donors are the donors that are not retained on your house file. The lapsing new donors are the ones that only gave one gift and will lapse at a much higher rate than the lapsing repeat donors. In either case, using the same fundraising methods as described above will help to reduce this number, however, you will need to test and finesse which strategies work best for your organization.

For all of these metrics, keeping track of them year over year will allow you to calculate an average for each. You can then assign a life time value (LTV) to each new donor that you acquire. Those averages will help you plan for the future and know what to expect. I recommend using a 5-year average for your LTV and then adjust your growth based on your knowledge of current trends. Using that calculated average will iron out any variances due to outside influences and give you a good place to start.

Hopefully, I’ve illustrated both how and why it’s so important for you to track these critical metrics. Fortunately, the Growth in Giving Initiative has created a free Fundraising Fitness Test that allows any non-profit to track their metrics. So there are no more excuses for missing your doctor’s appointment.

Why Donor Retention Is A Game Of Musical Chairs

During many of the presentations I give around North America, I often share research data from the Panel Philanthropy Study regarding the number of charities supported annually and year after year by households in the United States.

Among the many key points of the research study are two sets of data points that every single fundraiser should know about and utilize in their strategy for donor retention:

  1. Dollar Amounts Given By Household Income Level
  2. Number Of Charities Supported Annually By Household Giving Level

The first set of data points revolves around the amount given in dollars annually by each of three household income levels:

The household income levels shown are under $50,000, $50,000 – $99,999 and over $100,000. The study outlines both the average and median giving. Please bear in mind the average can be buoyed upward by extremely large gifts. During our presentations we focus in on the median levels to show just how few dollars there are up for grabs by the over 1.4 million registered charities in the United States.

Notice that the median total amount gifted is $540, $1,000 and $1,850 for the three respective groupings. When any charity analyzes their database to see just how many donors are being retained year after year and multiply that number times some portion of the household giving level can you realize the potential “Lifetime Value” of each household.

This provides a vivid introduction into just how important it is to have a strategy to retain those donors from one year until the next. Only by improving your organization’s donor retention strategy can you obtain your fair share and higher of the household dollars being granted to charitable giving as well as being in position to garner larger gifts and legacy gifts. (Those larger gifts and legacy gifts are most often made after consecutive years of giving to your charity…)

The second set of data points hones in on the number of charities supported annually:

  • Income $50K – 2-3 organizations supported
  • Income $100K – 3-4 organizations supported
  • Income >$100K – 4-5 organizations supported

However, in each income bracket, one of the supported orgs is usually a church (that they attend), and another is most likely a school (that they attended, that their children/grandchildren attend).

The actual number of charities supported annually truly surprises most fundraisers. My guess is that it would horrify most nonprofit board members if they were made aware!

Yes, the number of charities supported annually on the average in the United States is not what anyone of us deeply involved in the nonprofit sector would like to see. With the average donor retention rate being below 50%, in fact closer to 40% in our country we can see just how special year after year donors are!

Digging into the caveats mentioned above provides even more alarming insights. Of the charities supported annually by the various household giving levels, one is usually either their church or some other religious organization, and another is often either their school of some nature. The latter would include a member of the household’s high school or college and/or their children or grandchildren’s schools.

Once those caveats are taken into consideration you can easily see the number of annual giving slots decreases dramatically to either 1 or just 2 or maybe 3 slots for the households above $100,000! (There are often actual gasps when professional fundraisers attending our presentations see this information for the first time.)

Summary

Hopefully, the insights and data above provide the impetus for taking a deep dive into your organization’s donor retention strategies. This dive should include evaluating and comparing your donor acknowledgement processes and your donor stewardship processes. As we have outlined in numerous previous blog posts just moving your overall donor retention level up 10% can increase the lifetime value of your donor base by 100% to 150% or more.

Based upon proper strategies for donor stewardship and retention you can win at the game of “musical chairs” being played by all of the charities in our country vying for those extremely valuable year after year annual donors.

Measuring Donor Participation by Giving Levels

Gift reports provide total dollars raised, a valuable summary.  But, how much can we learn about donor participation from total dollar raised?  Important clues can be found in two gift report areas from 2015-1016 research data provided by AFP’s Fundraising Effectiveness Project (FEP).

1. Donor Renewal Levels: 

Donor retention studies include measuring how many new donors acquired in 2015 renewed their first gifts in 2016.  These results were combined with returning donors from prior years for an overall donor retention rate of 45% according to AFP FEP data (see Exhibit 1).  Continued acquisition of new donors will be essential to replace the 55 percent who failed to give in 2016.  Further, a review of 2016 donors by giving levels shows a healthy rate of first-time donors at the three highest giving levels ($250 and above) at 47%, 60% and 56%, which suggests continued investment in acquisition at these levels also will be rewarded with positive gift revenues.

2. Donor Giving Levels: 

Donor participation also measures revenue from donors whose giving levels were the same as last year, gave more, or gave less (see Exhibit 2).  Upgraded donor participation between 2015 and 2016 was 42%, a   62% increase in revenue and a one-year growth rate of 108%.  Donors who gave the same (27%) were 13% of total revenue, while donors who gave less (30%) caused a revenue loss of over $1 billion (-53%) from 2015 giving, resulting in an overall 2016 increase in revenue of only 5% from these three key donor groups.

Source: http://afpfep.org/wp-content/uploads/2017/04/FEP2017Report4212017.pdf

Summary:

Donor attrition harms every nonprofit with the loss of loyal contributors and their valued gift support.  Greater understanding of how often donors give and their giving levels is essential to preserving their generous commitment.  For questions and comments on interpretations of these FEP analysis reports, contact Jim Greenfield at: fundrazer@gmail.com

To improve your donor retention results, increase revenues and receive detailed donor giving trends, submit your data to the Fundraising Fitness Test at: http://afpfep.org/tools/

[INFOGRAPHIC] 2016 National Fundraising Fitness Statistics (NFFS)

The National Fundraising Fitness Statistics (NFFS) provides over 150 metrics across giving levels to allow organizations the ability to compare performance. It is this act of measuring and comparing that allows organizations to identify areas that could be improved.

Understanding how your organization is performing is the first step to identifying strengths and weaknesses.

Take for example the Pareto principle represented in the infographic below, the standard 80/20 rule does not directly relate to non-profit fundraising. As you can see, it is actually 88 percent of the revenue being generated by 13% of the donors.

The Fundraising Effectiveness Project and the Growth In Giving Initiative Data providers have made this type of analysis possible for the first time. It is now available for free on the tools section of this website.

NFFSInfographic

AFP FEP Glossary of Terms

In 2006, the Association of Fundraising Professionals (AFP) and the Center on Nonprofits and Philanthropy at the Urban Institute established the Fundraising Effectiveness Project (FEP) to conduct research on fundraising effectiveness and to help nonprofit organizations increase their fundraising results at a faster pace. The Growth in Giving Initiative (GIG) was formally established in January of 2013 with funding commitments by these three founding sponsors, Association of Fundraising Professionals, DonorPerfect Fundraising Software, and the Center on Nonprofits and Philanthropy at the Urban Institute. GIG is based on a unique, real-time, detailed gift-transaction data collection and analysis process and is designed to track several years of results for multi-year analysis of donor acquisition, retention, upgrading and other fundraising metrics within a variety of giving levels.

The AFP Fundraising Effectiveness Project (FEP) has made significant progress since inception in 2006 to define a comprehensive variety of performance criteria for detailed measurement of nonprofit fundraising performance summarized annually in the Fundraising Effectiveness Survey Report. The Growth in Giving Initiative (GIG) now provides the most comprehensive data set of its kind. This data set is transaction-based allowing unique research into donor behavior not previously available. It is now possible to research specific donor retention activities in multiple categories and terms in various FEP and GIG reports to identify separate donor and donor database responses, such as average gift, donor recapture, donor gain/loss rate, etc. The combined FEP and GIG results are the subject of a variety of studies and reports, including the 2015 FEP Donor Retention Supplement (January 8, 2016) and the special Spotlight report “Benchmarking Giving to Human Services Organizations” by the GIVING USA Institute (Issue 2, 2016).

The FEP Glossary of Terms Appendix has been prepared to help ensure clarity in nomenclature, consistency, and broad usage of terminology used in these reports and other donor giving statistical analysis. This new FEP Glossary has been added as an Appendix to the AFP Fundraising Dictionary 2002 (online) and also can be found here.

Examples of the 68 terms in the Glossary are listed below to illustrate the measurement categories included in AFP FEP and GIG studies and reports. In addition, 21 Donor Retention Rate Formulae are listed on pages 6-8 of the Glossary to aid these calculations.

  • donor attrition rate, the number of donors who gave last year but not this year, divided by total number of donors last year.
  • donor participation rate of growth, the increases or decreases in number of donors from one or more years, divided by the number of donors in the initial year.
  • donor recapture rate, the number of previously lapsed donors who renewed this year, divided by total number of donors last year.
  • donor retention rate, the number of donors last year who gave again this year, divided by total number of donors last year.
  • overall rate of growth in giving, the net of gains and losses in giving from last year to this year, divided by total value of gifts received last year.

The AFP Fundraising Effectiveness Project and Growth in Giving Initiative will continue to provide results analysis and comparative benchmarks to aid nonprofit organizational leadership and their fundraising staff to better understand their own performance and, armed with adequate details on their donors’ performance, to increase their overall fundraising results.

The 3 Step Crash Course in Winning Back-Lapsed Donors

Nonprofits are constantly facing the problem of annual or recurring donors lapsing into inactivity.

Unfortunately, far too many organizations make the mistake of not distinguishing their lapsed donors from other donor groups.

They’ll send these lapsed donors the same correspondence as their active donors or, even worse, prematurely mark them as inactive and ignore them altogether.

But giving up on your lapsed donors is a huge mistake. Considering the high value of donor retention to nonprofits, why wouldn’t you focus on donors who have consistently given to your organization in the past?

First of all, these donors have already shown their affinity for your organization and that they’re willing to give to your cause.

Secondly, it’s more cost-effective for your organization to win back-lapsed donors than it is to acquire new ones. Because you’ve already built relationships with these donors, your organization can forgo much of the initial stewardship process, which will cut your costs (both money and time-wise) significantly.

So, in the spirit of Fundrasing Effectiveness Project (FEP) and our focus on increasing fundraising results as quickly as possible, I thought it might be appropriate to give a crash course in winning back-lapsed donors.

Step 1: Choose the right donors.

To launch a lapsed donor program, first you have to define exactly who your lapsed donors are.

While the definition will vary from organization to organization, the general consensus is that a lapsed donor is someone who hasn’t made a gift in over a year and has given to your organization at least twice.

This definition will probably apply to a good chunk of your base, so it can be helpful to narrow the requirements of your program even further.

For example, it’s probably not worth the money to focus on donors who have made gifts under $10.

You only want to focus on the donors whose contributions will bring you a return on the resources you spent winning them back.

Step 2: Choose the right channels.

When it comes to winning back your donors, some communication channels will be more appropriate and effective than others.

Lapsed major donor prospects definitely warrant an in-person visit or a phone call, but it’s likely your organization won’t have the resources to approach all of your lapsed donors through these channels.

While email appeals and typed letters might appeal to some, I can’t recommend handwritten letters enough.

Handwritten letters provide a personal touch and show donors that you really took the time and effort to win them back.

Make sure to include a handwritten return envelope and a first class mail stamp, too, in case your lapsed donors want to give again!

Step 3: Be personal and heartfelt.

The very best way to show lapsed donors that your organization cares about them, however, is by personalizing your outreach and making it as sincere as possible.

Always, always address your lapsed donors by their first name. Use any information you have on hand that will help you individualize your outreach. (Bonus tip! This is done much more easily with the help of a nonprofit donor database.)

For example, if you know exactly when and how much a donor has given in the past, you should reference the time since their last contribution and suggest the same gift size in your correspondence.

This lets your lapsed donors know you care about them personally, instead of thinking of them as merely a dollar sign.

But above all: be transparent and genuine. Tell your lapsed donors that you miss them. Compliment their kind and giving nature! Don’t be shy in letting them know just how much you value them and don’t want to lose their contributions.

What strategies for winning back-lapsed donors have worked for your organization in the past? Let me know in the comments!

What Drives Donor Loyalty? Findings from the Latest Donor Research

We have a tradition of presenting “sneak peeks” of our donor research at AFPFC prior to releasing it to the greater public. We believe it’s important to do this to garner the reactions and questions from fundraising professionals out in the field every day. And, of course, because we can’t wait to share our findings! It is through the feedback from AFP members that we’re able to create research reports that are not just reflective of what’s going on with today’s donors, but that also contain actionable information.

At AFPFC this year, we gave a sneak peek of our latest Donor Loyalty Study. In this year’s study we went beyond donor engagement and dug deep into what drives donor loyalty. We surveyed 1,136 donors in the United States who made at least one donation to a nonprofit organization in the past 12 months.

Here are a few key findings:

  • Donating is personal. While this may seem like a given, it is overwhelmingly true for all types of donors. The three main reasons people donate to nonprofit organizations are very personal in nature – they have a deep passion for the cause, they believe the organization depends on their donation, or they know someone affected by the nonprofit’s mission.

Reasonsfordonating

  • Volunteering and events play a big role in driving loyalty. Seventy-three percent of those who volunteered and 74 percent of those who attended an event say they are more likely to donate. This is especially true for Millennials, 52 percent of whom say they’re more likely to donate after volunteering for an organization. While you might not ask your volunteer coordinator to write a fundraising appeal, he or she may play a major role in a potential donor’s experience and the decision to donate again.
  • Content is NOT just king … it’s money. Nearly 75 percent of respondents say they might stop donating to an organization based on poor content. This is a real wake-up call for the sector. How you communicate with your donors is one area where you have the MOST control (the content you create), and really need to spend time and energy building out a solid content strategy. Are you spending as much time crafting your email content as you are on your direct mail piece, for example?

Content

  • Quality, length, and frequency matter. Adding to the findings above, the quality of content you are sending to donors really does matter. Seventy-two percent of donors say receiving well thought-out, polished content is important to them. A majority of donors would like to hear from the nonprofit they support at least monthly, and prefer short, self-contained content (short emails, letters/articles, or videos under two minutes long). It may be time to rethink that monthly newsletter and consider how you can break up that content into smaller snack-size pieces that are more personalized to your donors’ interests.
  • Donors trust nonprofits to spend money wisely. By and large, donors trust the nonprofits they support to spend their money wisely (93 percent). In this study, we also attack the “Overhead Myth” head-on, asking donors how they feel about their money going towards “overhead.” A majority of donors are fine with their money going to things like setting up for events, publicizing the mission, reaching out to volunteers and other donors, and even staffing or administrative costs.

Reactions

Overall, donors want to hear from you, and they want to hear about the personal impact their donation is making. When in doubt, ask your donors how they want to be engaged, and then follow through with their preferences.

There’s so much more actionable data in the full Donor Loyalty Study. We’d love to hear your thoughts on our findings and specific topics we should dig deeper into with next year’s research.

Confessions of a Fundraiser

Being a fundraiser for over 20 years and living in a community with a professional fundraisers organization not affiliated with AFP International, I thought I was doing a great job keeping up with the trends in the field.  After all, I have an advanced degree, attend professional development workshops and webinars, read books and articles, and, I always make my fundraising goals.

Then about five years ago, a small group of professionals started a local AFP chapter.  Still, I didn’t bite.  I didn’t know much about what AFP had to offer and it seemed expensive compared to the other local non-affiliated organization.

Last year, a colleague asked me to get involved in planning our local AFP National Philanthropy Day conference, which lead me to join the chapter’s board, become a Chamberlain Scholar and attend the International AFP Conference for the first time.
I went early to the AFP conference to attend a workshop on donor retention.

It was at this workshop on donor retention that I learned about AFP’s Fundraising Effectiveness and Growth In Giving Projects and the incredible information gleaned. That proverbial light bulb went off along with a little knot in the pit of my stomach.

While I always make my fundraising targets, have I done everything possible to build a strong, sustainable fundraising program for the organizations I served?  The truth is, I did, based on intuition though and general theories and best practices.  I was lucky.  Still in the back of my mind, could I have done even better had I possessed this new knowledge? I think so.

What I didn’t do as well, however, was educate staff, board members and volunteers based on hard facts and research, on the strategies and resources I was implementing.  Herein lies the problem.  I don’t think I’m so different from a lot of my colleagues.  Particularly when I hear so many colleagues are struggling with getting the right resources to fundraise effectively, or are questioned or even prevented from initiating better fundraising strategies, or unable to get rid of those sacred cow events that don’t produce.

Thanks to the tangible, concrete information gained through the Fundraising Effectiveness and Growth In Giving Projects as well as other research projects, the field of fundraising has evolved and achieved a higher level of sophistication and so have I.  My analytic, strategic planning, and creativity have all sharpened and improved my decision-making.  As a member of AFP, with this research under my belt, I know I am more effective as a fundraiser and as a leader in my nonprofit community.

AFP FEP Glossary of Terms

The AFP Fundraising Effectiveness Project (FEP) has made significant progress since inception in 2006 to define performance criteria for measurement of nonprofit fundraising results.  The Growth in Giving Initiative (GIG) was added in 2012 to track several years of results for multi-year analysis of donor acquisition, retention, upgrading and other fundraising metrics and statistics within a variety of giving levels.

Because a variety of specific categories exist to identify differing donor actions, such as acquisition, retention, upgrades, etc., these categories are used throughout FEP and GIG reports.  The FEP Glossary of Terms has been prepared to ensure clarity in nomenclature, consistency, and broad usage.

This new FEP Glossary of Terms is now being released as a “Exposure Draft” (January 22, 2016) for public comment, after which it will be added as an Appendix to AFP FEP and GIG reports and to The AFP Fundraising Dictionary Online.

If you wish to offer comments and suggestions on the terms and their definitions in the FEP Glossary of Terms, please do so on or before April 12 to Cathlene Williams, AFP Coordinator to the AFP Fundraising Effectiveness Project, at: Cathlenewilliams@cox.net

The FEP Glossary of Terms is divided into four sections in order to correspond directly to the metrics included in FEP and GIG reports that define the analytics used and performance formula described:

  • Group A:  Terms Relating to Donor Retention Strategy
  • Group B-1:  Terms for Donor Retention Rates
  • Group B-2:  Formulas for Donor Retention Rates
  • Group C:  Terms Relating to FEP Gain/Loss Reports

A few examples of FEP Glossary terms illustrate the separate measurement categories and the formulas used:

  • Group A:  donor acquisition, the process of identifying and acquiring new donors.  AFP Fundraising Dictionary (2002); and
  • Group A:  donor upgrade, the activity by which a donor increases his or her level of giving.  AFP Fundraising Dictionary (2002)
  • Group B-1: includes a variety of comparative analysis terms, such as new donor acquisition rate, new donor retention rate, repeat donor retention rate, etc., along with the mathematic formula for each in Group B-2.
  • Group C: captures a variety of terms for gain/loss measurement, including: lapsed donors, recaptured donors, repeat donors, same donors, downgraded donors, and more.

The AFP Fundraising Effectiveness Project and its related reporting units (see “Reports” section of this FEP  website), Fundraising Fitness Test (in the “Tools” section) and the overall Growth in Giving Initiative are designed to aid nonprofit organizations and their fundraising staff to better understand their own performance and, armed with adequate details on donor retention performance, to increase their results.

Why Donor Retention Matters and How Stewardship Plays An Important Role

This post originally appeared on ADRP and was republished with permission.

In my role as a Regional Collaboration Manager for YMCA of the USA, I travel throughout my assigned region helping local YMCAs to maximize the effectiveness of their fundraising efforts. Recently my teammates and I were working with a YMCA to analyze their fundraising metrics and identify opportunities to improve their development work. We were using the Fundraising Fitness Test, a free tool that was introduced by the Growth in Giving Initiative through AFP and the Urban Institute. Using the Fitness Test, we were able to start to see some of the inner workings of their campaign strategies. One portion of the test examines donor retention numbers, and this portion revealed some very interesting things. Continue reading