fundraising metrics

Winners/Losers in Annual Benchmark

Blackbaud released the annual Luminate Online Benchmark Report this week, "nine years strong and more vibrant than ever."

It is must-read material; I encourage you to download and wade through the detail. It's a one-of-a-kind perspective, based on the activities of 685 organizations that sent out 6.3 billion emails and raised 1.5 billion dollars.

Yes. With a B. In Both cases.

(Or, you can cut straight to the chase and use the new "interactive benchmarking tool that visualizes your nonprofit’s performance within the industry.")

First, the good news.
• Housefiles are growing: median file size up 11.82%
• More of these constituents are giving: 15.19% of active addresses up from 15.08% last year (because organizations are "presumably doing a better job of cultivating their support.")
• Revenue is up 8.89%: number of gifts up 7.01% and average transaction up 2.05%.
• Fundraisers are hearing the retention drum beat. For the fifth consecutive year, first time gifts dropped as a percent of total online revenue. While revenue from first time giving was up 1.76%, revenue from repeat gifts was up 15.4% and from sustaining gifts up 16.85%.

But now the bad news.

Houseflies may be growing, but:
• Median online revenue per usable email address fell 2.89% (from $12.77 to $11.77)
• The percent of organization supporters who advocate fell by .69%

I would contend that both of these are tied to another, seldom-discussed factor: the report notes almost off-handedly that "industry-wide emails grew at a modest 2.9%."

Bear with me for a moment ...

I've been paying attention to these reports for a while. The report from nine years ago is a reflection of 30 Convio customers who agreed to share data, so that's not really a fair comparison. Let's just go back just five years, to the 2010 report.

That data was based on 499 organizations (compared to 685 this year) that sent 12,287 fundraising messages (compared to 425,575 appeals this year). Consider – from 24.6 appeals per organization per year to 621. That's a 25-fold increase.

While we have more people receiving email, they're also connected to multiple organizations. Which compounds that "modest growth" substantially. 

Look at how some of the key metrics compare across that five year period. Open rates are down. Click-through rates are down. And, as more organizations seek to build involvement through advocacy, the percent of advocates who donate is falling as well.

Yes, online revenue is growing, and will continue to do so. Still, I think we have an industry issue, but I'm not hearing anyone step forward to address it. It's called clutter. And it's an easy trap to fall into.

It's not hard to calculate how much additional revenue one more email in the Year End stream might add. It's only a little more difficult to project additional opt outs. It's almost impossible to know how many people will simply stop opening our messages. Or clicking through. But it's not hard to imagine that may suppress future response.

And that may be well worth considering!

The Halo Effect

I'm on the board of a local nonprofit that had tax credits available to donors who gave over a certain amount in 2013. Since I'm not the chick that can donate significant cash to the cause, I try to amp up the   "Talent and Time" portion of the good board member's trifecta of contributions: Time, Talent and Treasure.

That said, I asked our executive director if everyone on our file of potential donors knew about the credit. Mentioned that perhaps we should send out a couple year-end emails thanking them for their support in 2013 and inviting them to partake of the tax advantages of a generous year-end gift to our group.

The exec didn't want to bother people with a lot of year end emails so I suggested suppressing those who responded to the initial drop.

Results were impressive, but unexpected. The Halo Effect strikes again.
Several things to keep in mind:

  • One Channel Can Drive Another. Several major gifts were walked in by donors as a result of the email. Others mailed them in. The point is they knew these channels were available and their preference drove the bus here. Everyone wins.
  • Staying Top of Mind Year-Round. This organization invests in excellent PR. Even those donors who come to one event and don't actively engage with us year-round know what we're up to and the difference we're making in our community. That makes a difference when you come asking for gifts at the end of the year.
  • Staying Top of Mind Without Every Touch Including an Ask. Of ultra importance, friends. There's an integrated annual plan that includes a lot of storytelling, chances to engage with the org in person, progress reports, accolades and yes, we ask for help, but in a judicious and considered fashion …
  • Excellent Reactivation Tool. We had donors come in who used to support us, but had moved away. We had their personal email on file—and permission to contact them—so their physical address change wasn't a factor. They moved back to the city and wanted to help out with gifts and volunteer time.








The Alphabet Soup of Acquisition

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“What’s a realistic response rate to expect from acquisition?” I was recently asked.

Realistically, I don’t know how to answer that question.

Instead, I suggest, as a KPI, you should track CTA and LTV.

KPI: Key Performance Indicator

Don't get me wrong: I’m a huge advocate of measuring and monitoring performance. And response rates are an important metric.

For example, response rate can be a good metric to use to compare package performance … or list performance. But it's really only part of the picture.

Further, I would contend that while it’s important, it’s not strategic, i.e., it doesn’t provide a milestone you can use to assess progress toward your organization’s central business objective(s).

As Stephen Covey would say, First Things First.

A more strategic perspective would be to base your acquisition (or reactivation) efforts on what you can afford to spend. This is determined by calculating your CTA and LTV.


CTA: Cost to Acquire (Also referred to as CPD: Cost per Donor)

How much do you spend to acquire a new donor?

For a single mailing, you can look at the total cost of the mailing divided by the number of new donors.

Thus, if you spend $1,000 to mail 500 pieces and generate 10 new donors, you’ve spent $100 per donor.

Many organizations hold down acquisition costs by creating a special version of a donor package to help underwrite the cost of the mailing. If you’re mailing a package that costs 40¢ per piece, send it to 500 prospective donors and generate 10 responses, you have a much more palatable $20 cost per donor.

While you can track this by individual mailing, it’s more helpful to annualize it (consider a full year’s expense) to use as a budgeting tool.

Can you afford to spend $100 to acquire a new donor? Or even $20. You won’t know unless you compare that cost to LTV.

LTV: Lifetime Value (or Long Term Value)

On average, how much does a new donor generate over an extended period of time?

Calculating LTV is a bit more complicated. Essentially, it’s a means of averaging total revenue from a group of like donors over a three to five year period. As a simplified example:

If you acquire 100 new donors this year and that group gives a total of $2,500, the one-year return is $25 per new donor.

If, in year two, 40 of those donors give again for an additional total of $1,200, the two-year cumulative return is $37. ($2,500 + $1,200) ÷ 100 = $37.

If, in year three, 35 of those donors give again and give a total of $1,050, the three-year cumulative return is $37. ($2,500 + $1,200 + $1,050) ÷ 100 = $47.50.

And so forth. Which gives you a usable benchmark against which you can compare your cost to acquire.

LTV is one of the most strategic numbers to monitor, because it also forces you to track some other important metrics: conversion (how many new donors make a second gift), retention (how many of last year’s donors make a gift this year) and average gift.

Fodder, perhaps, for a future post!