I love data. Please don’t worry about me, I also like skiing, Star Wars, sneakers, dancing, and playing Lego with my daughter. I also really like people-watching. I can easily spend hours watching people and pondering why they are where they are, what they are thinking, why they are interacting the way they do. My Mum calls it nosey. I call it research.
My love of data is part of my nosiness. In fundraising, data represents people and the way they behave. And in some cases, it can help us understand not just the what they do but the why.
Here are six critical things you should be watching carefully:
The number of people who responded divided by the number you contacted.
This will be a number under 1.0.
Example: If I mailed 1,000 people with my Spring Campaign and 245 respond with a donation my response rate is 245/1000 which is 0.245.
This can be expressed as 24.5%.
Number of responses / Number of people asked = Response rate.
There is no best practice response rate, whether we’re talking acquisition or donor cultivation, other than that cultivation response rate tends to be 5 to 10 times higher that acquisition rates.
Take direct mail acquisition for example … if you have been doing this for many years your response rates will likely start declining as your exposure to available lists increases. If you are new to direct mail acquisition, mailing the same lists will likely get a higher response rate.
You should be able to find out the generally acceptable response rate by asking other fundraisers in your market though and use this as a benchmark. Most important is you compare your response rate to your recent past response rates to assess if things are on the up or down.
2. Average Gift
Income generated divided by the number of donations made.
Example: If I raised $65,000 from 245 people their average gift is $65,000/245 = $265.31
Average gift should be stable or growing, not declining.
Compare like campaigns, such as Christmas last year compared to Christmas this year. If your average gift is decreasing over time, you may have an issue with your ask strategy and/or your targeting. If it’s staying the same, you likely have an opportunity to test upgrade ask strategies.
New donors will pull your overall average gift down, so looking at average gift for new donors versus retained donors will ensure you aren’t making decisions for everyone that are influenced by a specific group, such as brand-new donors.
3. Return on Investment (ROI)
Revenue divided by expenses.
Example: If it cost me $3,000 to mail my 1,000 targets then my ROI is the $65,000 / $3,000 = 21.6 — I brought in $21.60 for every dollar I spent.
You should calculate ROI not only for a single project, but over time. Look at the return over 12 months, 3 years, even 5 years to get a better insight into the value and potential of that activity. Donor acquisition activity will rarely produce a positive result from the recruitment campaign alone, but will grow based on future giving. It’s also important for Monthly Giving programs, as the returns may be 12, 18, even 24+ months out from the initial recruitment.
BEWARE: ROI can be a blunt tool. Its two inputs are revenue and expenses. Reducing expenses can produce a better ROI, BUT reducing expenses in campaigns often leads to decreased revenue, leading to the same or even worse ROI. ROI does not tell you how much net income you generate for your cause. In fact, sometimes a low ROI will get you more income than a high ROI.
Where I find the most ROI most important is when looking at acquisition campaigns. You can compare the ROI of different acquisition activity to help with your investment decisions and you can monitor a particular acquisition activity over time to assess if it remains viable.
4. Second gift rate (usually measured within 12 months)
Number of new donors who made a second gift, divide by the number of these donors who had made their first and only gift, within 12 months.
Example: If I recruited 545 donors via my Christmas direct mail acquisition campaign in December and by the following December 263 of those donors had made at least one additional donation each then my second gift rate, over 12 months, would be 236/545 = 0.433 (43.3%).
It is rare in most markets for second gift rates – except for monthly givers – to be more than 50%.
You might say that a donor who has given you only one gift isn’t quite a donor — yet. It’s kind of like that way a first date is not relationship. That happens over time. Or not.
Second gift rate is usually measured over a set time frame, like 12 months. There are several factors that affect second gift rate. The main ones being the number of opportunities a new donor is presented with to give again, and how quickly they are asked again.
(See this blog for more on how you can secure this critical second gift: The Most Important Gift from Your Donor – It’s the 2nd, Not the 1st!)
I recommend assessing second gift rates after 3 months, 6 months, 9 months, 12 months, 18 months, and 24 months, as each of these will give you insight into how effective your communications in each period have been at engaging your new donors to give again. In some cases, I have seen second gift rates double between 12 and 24 months. The cost to secure the second gift needs to be considered to understand where there is value in continuing to ask.
5. Attrition rate
Monthly giving attrition is a measure of the number of people who were giving last year but not this year.
Example: If I recruited 200 Monthly Givers in January and I have 120 still giving then I know that 80 stopped giving the next January, then my attrition rate is;
80/200 = 40%.
Attrition is a very good measure of success of a monthly program, but not that relevant for one off givers.
6. Income per donor
Total income generated by a particular donor program divided by the number of donors who gave to that program. This gives you the average dollar amount generated per donor over 12 months.
Example: If your appeals program generated $600,000 in total last year and 4,500 unique donors who gave one or more times, then your annual income per donor was $133.33.
This measure tells me the relative value of your donors in your program and is even more helpful when benchmarked against the industry but it’s enough to start looking at your own levels over time. Income per donor should be increasing year over year. If it’s falling, there is a problem. If it is stagnant, you likely have some latent growth potential with your longer-term donors.
Acquisition usually drives down your overall income per donor (the average new donor gives less in a year than the average continuing donor), so it’s helpful to look at income per donor separately for new and continuing donors.
Happy measuring. Please get in touch if you want to take a deeper dive into how to measure you campaigns, programs or donors.
Related post: How to Use — or Misuse Donor Lifetime Value
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