By Andy Tidy
Wouldn’t it be nice if when you recruited a new donor, you knew how much they would be worth in the long term? All donors are not equal, and they don’t behave as if they are, so identifying their differences and adjusting the program they receive accordingly, is the key to maximising net income and achieving the best long term return on investment.
The question that needs to be addressed is ‘what are the metrics that need to be monitored that will allow you to see as early as possible how valuable a donor, or a group of donors, will be and how they should be treated?’ Depending on your recruitment mix, these will vary.
Regular Giving Recruitment
For regular giving recruitment, the key performance indicator that needs to be monitored is attrition. Three month, six month and twelve month attrition will identify any issues there may be in the short and medium term. For a long term view, it needs to be measured over two, three or four or more years. Attrition is usually represented as a percentage of recruited donors but there are other ways of looking at the impact attrition has.
The average number of payments made by donors who stop giving is a useful comparator. For example, if the attrition of your regular giving recruits is heavily skewed to the first few months, then you will get fewer payments per lapsed donor than if the attrition is more evenly spread out over the year. This will have the effect of increasing the amount of “lost income” – defined as the difference between the expected income from a regular giving recruit (12 times the monthly value) and the actual amount received. The lost income amount provides a tangible financial value to the attrition.
Upgrade likelihood is another metric that will contribute to long term value, monitoring the proportion of active donors that have upgraded, and the value of the upgrade allows you to monitor the contribution your upgrade program makes.
The last element you need to consider for RG recruits is their propensity to make additional contributions. This is usually in the form of a response to a cash appeal. The recruitment channel is usually the main determinant of whether a regular giving recruit will also make cash gifts, but there can also be variation by list source, payment type, age and other variables.
Once these metrics have been calculated, the next step is to look into any underlying variables that influence them. These will include channel, age, payment method, agency (if Face to Face), DM list and gender. Monitoring and slicing by these factors will allow you to pick up any sub groups that are over or under performing, and adjust your strategy accordingly.
Cash Recruitment
When we look at a cash recruitment program, the metrics that need to consider are different.
Second gift rate is usually the first that is measured. As per attrition for regular givers, this can be looked at after three, six and twelve months. What needs to be measured, along with the second gift rate, is the value of the second gift as this will be a key factor in the long term value of the new recruits. Donors that upgrade on their second gift are flagging to you that they have the potential to donate more – looking at the asks these donors receive will help maximise their long term value.
Along with second gift rates and value, the number of subsequent gifts per year will be a driver of long term income. Those recruits that respond to multiple appeals in the year following acquisition will go on to be some of you best donors.
The proportion of new cash donors that convert to regular giving will vary depending on your strategy – testing of the best approach is ideal if you have enough recruits.
Ongoing Costs
The final element in any assessment of the long term return from acquisition is costs. The recruitment cost is fixed at the time of acquisition, but the ongoing costs can be controlled. By looking at the performance of the new recruits using some of the metrics outlined above, it is possible to quickly ascertain which donors justify the extra expenditure – such as donor care – and which groups of donors need to be cost managed.
Cost management of donors is particularly important if the recruitment contains large volumes of low value one off recruits. These donors need to be given the opportunity to make additional gifts, but by keeping an eye on their net contribution we can make sure that the program as a whole is not compromised by their poor return.
In the same way, monitoring the return from upgrade, additional cash asks and reactivations to regular givers will ensure the net return is maximised.
Creating reports to look at the performance indicators above, when combined with campaign analysis of the initial acquisition, will allow decisions about acquisition and donor development strategies to be made promptly and therefore profitably.
If you need assistance with recruitment analysis and planning, we’d love to help you out. Give us a bell on 02 8823 5800 or email us at canyouhelp@paretofundraising.com.
