By Jonathan Grapsas
This article was first published in Canadian Fundraiser Magazine
It simply isn’t acceptable as a fundraiser to not truly understand where your money really comes from.
I often hear conversations like this.
Freddy Fundraiser – “Hey, we’ve just did a prospect mailing which did really well. We got a two per cent response overall and one of the lists got a five per cent response! One of the lists we trialed however bombed and only got a one per cent response so we’re canning that one”
Fiona Fundraiser – “That’s great. Sounds like a success. Can you tell me which list got the five per cent response as I might just use the same one for my next prospect mailing?”
What’s wrong with this conversation? On face value a five per cent response from a prospect list is darn good, right? Surely that list is better than the 1 per cent one?
Not necessarily.
The problem is response rate is just one in a number of measures we should be looking at. Time after time when I talk to people about this sort of stuff they typically look at three metrics: response rate, average gift level and the cost to acquire.
Which are useful, but they don’t provide the full picture.
You see the problem with what Freddie Fundraiser is doing is looking purely at how someone has behaved in the first instance. What Freddy hasn’t factored in is the subsequent behavior of that group of five per cent of donors who responded.
How many of them go on to make subsequent gifts and what level?
How many of them upgrade their giving and/or donate in other ways (I.e. if they initially gave a onetime cash gift, how many went on to become monthly donors)?
Not to mention was there any rollout potential in this list? If the list has 1,000 records in total then frankly there are bigger fish to fry than going back to the same, tiny pool again.
But the key here is the net value that a group delivers for you. I’d argue that Freddy should look over a period of time, factoring in all costs (recruitment and ongoing), what net value this group delivers.
If only 20 per cent of donors recruited from the so called ‘better’ performing (five per cent) list ever give again and their average gift is just $10 will they actually deliver any net return at all?
And if the ‘poor performing’ one per cent response list delivers a 50 per cent second gift rate (of which half become monthly donors), an average gift of $50 and an average life span of 10 years, surely when you do the math their net value will be higher? Of course it will.
The point is, look at value, not just cost to acquire and the number of people you get through the door. These measures alone will give you a false picture of how you’re doing.
I’ve focused here on an example specific to direct mail, but looking at real value over time works across all channels. And I am working with clients now to dig really deep to get a clear picture of what’s working for them in terms of acquisition.
Right now it’s about smarter, not less, acquisition.
Contact Pareto Fundraising if you would like to commision a data analysis, it will help you prioritise, so that you can make the most of your budget.
About the writer
Jonathon Grapsas heads up Pareto Fundraising’s North American division and is a data geek of sorts. As a leading fundraising practitioner, Jonathon’s particular area of strength is helping charities develop ways to get their donors to take some form of action. His track record in delivering real growth in his clients fundraising programs is outstanding, as is his ability to motivate and inspire fundraisers to make real change.
You can contact Jonathon at jonathon.grapsas@paretofundraising.com or on +1 416 915 4114.
