Congratulations! Your direct marketing staff has let you know the good news:
- File size has increased!
- Response rates are up!
- ROI is increasing!
- Gross income is ahead of budget!
- Net income is ahead of budget!
- Donation conversion rate is growing!
- Facebook likes continue to grow!
The trick is that your numerate direct marketing staff is putting their best foot forward. (If they aren’t good with numbers, then you have other, more serious issues.)
They aren’t lying, of course—just presenting the data that presents them in the best light.
That means it’s up to you to ask the questions to make sure you are on the right track. The problem with any single metric is, as either or both of Karl Pearson and Peter Drucker have said, “That which is measured, improves.” My corollary to this is, “What isn’t measured is sacrificed to improve that which is measured.”
After all, if you don’t make your revenue goals, “I didn’t know” isn’t going to fly with your board. Here are a few key metrics to keep your eye on.
File Size and Response Rate: Are You Getting the Right Donors?
If you are just measuring file size, there is a temptation to bring in new donors at any price. Giving donors premiums, for example, usually increases response rate on the front end, but attracts the wrong type of donor for retention. The same is true for retention activities that may increase response rate, but turn off your best donors.
Consider measuring and tracking the commitment and satisfaction of each donor. If you are bringing in quality donors, these will increase over time, as will the value of your file. If not, this is also valuable intelligence. Amnesty Belgium cut its face-to-face donor churn in half by measuring these indicators, then focusing its acquisition with those canvassers who were bringing in quality leads. The same discipline applies to the mail, the phone and the electron just as well.
You can also track if you are getting donors with the right identity. For many organizations, people with a personal cause connection are twice (or more) valuable than those without. Did your latest acquisition campaign get these preferred donors?
(And always track average gift alongside response rate. One can very easily increase your response rates just by asking for less money. But I have a whole paper dedicated to ask string science.)
ROI: Are You Investing Enough?
If you were to mail one mail piece—you could pick the perfect donor, the language for that donor and the right amount to ask for—your ROI on that one piece would be astronomical.
The trick is that every additional donor or potential donor with whom you communicate cuts your ROI. This is the immutable law of diminishing returns. Lower ROIs can often mean the right amount of investment.
So, if you look just at ROI, your staff has an incentive to cut investment that may be essential to sustaining you in the long term just to look good for their review.
Gross and Net Income: Income at What Cost?
Gross revenue goals are very easy to hit. If you measure these alone, you will certainly hit them. You will not, however, like what happens to your costs, as this gives incentives to spend like drunken sailors or worse, Congress (rim shot).
Net revenue goals are, alone, little better. Net income goals can be hit by not acquiring new donors. This is a bad idea—possibly one of the worst ideas. Conversely, an acquisition binge can increase the size of a donor base very quickly, but spend money even more quickly. Income and file health metrics must be considered in tandem.
You also need to look to the long-term viability of your program outside of file health. One way to increase your revenue is not to take risks: mailing all control packages, using the same phone script you always have and running the same matching-gift campaign online that you did last year.
This not only hampers any chance at long-term growth; it creates a fragile program that will not survive the next scandal, emergency, messaging change or the like. Testing carries costs, but they are costs that must be born to preserve innovation and prevent long-term fatigue.
Donation Conversion Rates: Does This Mean a Better Page or Fewer Donors?
There’s one organization that I’m aware of with a web donation form conversion rate of almost 60 percent. Their secret? Well, they do have a good form, as a result of incorporating feedback.
But that’s not the whole story. They also aren’t sending as many people to that form as they should be. It’s hard to find, and they aren’t doing online outbound marketing efforts, like Google Grants, efficiently. As a result, only truly dedicated potential donors are finding their way to entering their details.
In email, an effective paired metric for conversion rates is click-through rate. If only your best prospective donors click on something, most of them will convert. More click-throughs mean a lower conversion rate, but no one should be punished for effectiveness in generating interest.
Facebook Likes: Does What You Are Measuring Matter?
How much value does getting a donor to like you on Facebook add to your organization? Probably somewhere between zero and a number largely indistinguishable from zero. Knowing this number will help you understand the value of the real estate you may be dedicating to this task in your email welcome series, on confirmation pages, in the mail and more.
You might also want to ask how much things, like donor satisfaction, matter. You should be able to draw a straight line between increasing satisfaction and increasing donor value, so that you likewise know how much you are willing to spend to satisfy a donor and gain their loyalty.
In summary, any one metric can be gamed; it’s essential to create checks and balances to make sure you will have a marketing program in the long term.
We recommend at least one goal from each of these categories:
- Financial: long-term value, gross income, net income, etc. (And we’d recommend long-term value, as it is a function of revenue, cost,and time on file)
- Operational: e.g. campaign ROI
- Donor: e.g. donor commitment and satisfaction
- File health: e.g. number of highly committed donors
A good metric is like a cholesterol test—it points to a potential problem and gives you an indication of a solution.
Even more important and the thing that you, senior-level executive, can provide most is a sense of clarity around goals and priorities. If you say, for example, “It is more important that we have a solid, valuable donor base in the longer term than short-term results,” that highlights the metrics you care most about: long-term value, commitment, satisfaction and file size for the right type(s) of donors.
So, be careful what you goals you set—you might just achieve them.