Know Your Donors’ Future Value
Who are your highest value donors? A major gift officer would likely answer the question with a list of the top 10 donors from the past year or current top prospects. A direct marketer might quote the top RFM segments or pluck a group with the largest previous contribution. These answers focus on the short term and consider only one silo of the organization.
Ask the Right Value Questions
Understanding the true value of a donor relies on asking the right questions. The answers may differ, but each fundraiser must ask a few fundamental questions to provide an actionable view of value.
- Are we considering only financial value?
- A donor’s value goes beyond financial contributions alone. Value can be bolstered by a number of other factors, such as the donor’s participation in events, advocacy, influence network or even the use of services.
- What programs are we measuring value?
- Many donors engage across a multitude of channels and programs. Defining the included programs provides clarity to both the analysis and the communication within the organization.
- What are the value drivers?
- Many drivers influence a donor’s financial value to the organization. Identifying which are most important to you enables more accurate prediction of future value.
- Over what period are we measuring value?
- Most think one year, quarter or campaign at a time. That short-sightedness leads to an overworked donor and prospect pool. Evaluating decisions with a longer term view enables true file and value building.
Answering these questions is the most challenging part of predicting future value of a donor … the rest is just math.
Tips for the Math
Admittedly, “just math” is said with tongue firmly in cheek. Remember, not all math is created equal. As much as you may think so, models are not commodities. Your math can be improved by better structuring the analysis.
- Build predictive models for each of the defined value drivers. Independently predict drivers like retention rate, average gift, planned giving likelihood, etc. By projecting each driver separately, you improve accuracy and provide flexibility for future strategy shifts.
- Cluster the outputs into actionable groups and assign the groups a specific predicted value range.
- Tune the models to focus at different stages of your donor relationship. Predicting the value of a 10-year donor versus a new prospect requires different data and techniques. I suggest you break population in active, newly acquired, lapsed and prospects.
- Focus on revenue streams that you have today. If you are planning a new way to give (e.g. sustainer), then use “rules” instead of a model. “My sustainers will give $19 a month and retain at X percent per month.”
- Incorporate robust transactional, engagement and third-party data.
Leveraging Donor Value
After splitting your donors and prospects into actionable value groups, you can decide how much you are willing to invest in each donor. This view will enable you to shift budget toward higher value groups, focus on efficiently maintaining relationships with lower value groups and eliminate the lowest value groups from your prospecting. From there, you can build the program elements, including frequency of contact, channel choice or planning the donor engagement strategy and journey.
With a firm understanding of your donors’ future value, you can immediately see improvements in your budgeting; modify your organization’s planning process from short sighted toward multi-year value; and shift from a myopic focus on the channel or program to one that revolves around the individual donor. Continue with me to my upcoming column, as I explore the next step of the analytic journey, donor segmentation.
At Merkle, Chris is a senior leader in the Quantitative Marketing Group and leads a team of talented analysts leveraging advanced predictive techniques to drive net revenue and build donor pipelines for some of the leading nonprofits in the country. He strives to drive insight into donor data across all fundraising programs, use this knowledge to build constituent engagement that maximizes long-term donor value and ensure his partners thrive today while building a foundation to advance their mission over the long term.
Chris brings to Merkle over 10 years of experience in nonprofit marketing, analytics, and thought leadership, having previously served on the executive committee at the leader in higher education marketing. Chris has had the opportunity to partner with some of the largest and most recognizable institutions in the country to leverage personalized marketing to achieve their enrollment and advancement goals. Prior to his time in higher education, Chris held various analytic positions in financial services. Chris holds a BS in Systems Engineering from the University of Virginia and an MBA from the Darden School of Business.