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:
- Will changing this metric improve my ability to achieve my objective?
- 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.