October 22, 2013

Redefining Measurement and Value

Generations of fundraisers have been trained to measure success around one specific metric—revenue. While the interpretation may vary; gross vs. net revenue, campaign ROI, long term value, the driver for fundraising tends to be oriented around campaign revenue and progress toward overall budget.

As analytics tools have evolved, and as data storage and warehousing have allowed for more sophisticated tracking and measurement, some organizations are also tracking more robust metrics, such as metrics of overall “value” to the organization beyond the fundraising program and understanding donor influence. This post is about these evolving measurement metrics and how organizations are redefining what “value” means in an omni-channel, silo-breaking world.

In order to “measure success,” the first step is defining the success metric. Some organizations take a relatively short-term point of view on this matter; frequently not because of some kind of organizational shortsightedness, but rather based on their ability to measure performance and the tools available.

Offline, this many mean looking at metrics like long-term value of a donor (let’s say 3-5 years post initial acquisition), or perhaps breakeven for lists (how many years does it take to payback for the names acquired), and in some cases, even donor migration into other programs within the organization.

Similar measurements are being adopted online; what is the value of a donor based on their origination source (not just to the initial call to action, but perhaps over a period of 12 months). Online more so than offline, program migration is a popular success metric, such as how many of my one time donors become sustainers or how many of them can I get to sign up for a peer-to-peer fundraiser or recruit others?

As organization re-organize to become less siloed and have a more holistic view of their constituent value the metrics are evolving as well, and this trend will only continue to accelerate as organizations realize linear value attribution is no longer enough to really understand a constituent’s impact on the bottom line.

To use a simple offline example: years ago, a client asked whether they should stop mailing their $10 donors, because while making marginal net revenue on this segment, it wasn’t really a home run from a revenue perspective. The question, at its core, was “are these people worth the effort?”

The answer, in this case, was a resounding “yes.” Looking at a measurement of value past just the direct fundraising contributions, we realized the consistency of giving may be significantly more important than the overall dollar value. As it turned out, a percentage of these lower dollar donors, those who had a history of giving to the organization for years, were writing the organization into their estates: the estate settlement value of this sub-group within this lower dollar segment over a long range of years was significant and therefore justified the investment in direct mail to cultivate the relationship. As a young strategist, this was one of my first key lessons into the importance of understanding what you are measuring and what your measurement horizon is before making a call about the real value of a program or constituent segment.

Incentive-based programs are a good example of the need to clearly define the measurement horizon ahead of the start of any campaign. At what point will you measure and declare the outcome? Let’s use the example of an incentive-driven or premium campaign. Say you do a test: some portion of your audience gets an email telling them that if they give a gift today, they will get a free backpack. Some other portion just gets asked to give. Generally speaking, marketing wisdom will tell us that offering a free backpack will get significantly more opens and donations. So, if your measurement horizon is that individual campaign and number of conversions rules the roost, your incentive will likely win and you may roll out with it as your new control.

But what if your measurement metric is longer-term: a metric like retention? Another “known” in our industry is that premium-acquired donors are notoriously harder to keep and you have to continue giving them stuff to get them to stay. So, maybe initially you didn’t get as many folks giving from the non-incentive test, but if your measurement period is say 12 months cumulative giving from the initial test, you may find that 12 months from now a much higher proportion of the non-incentivized folks are actually still active with you, and their overall net revenue to the organization is higher because you don’t have to keep spending money on subsidizing incentives to keep them engaged.

This point speaks to the larger issue that the industry is focused on, and is struggling to crack: How do we really measure overall constituent, not just direct response donor, value?

Calculating the value of a constituent that is not exclusively donation or fundraising driven can be tricky and is still an evolving practice: What is my value if I have given zero dollars but recruited 14 people to walk on my team? Am I worth more or less than someone who has given $250 this year? This kind of metric requires an organization to dig into the data and create some baseline key performance indicators that may be used universally to connect constituent’s interaction together: so for example, on average, someone who is recruited to participate in walk donates $25, and some percent of those recruits will actually become organizational supporters, so perhaps the overall value of each recruit is $27.50 in the first year, which means if I recruited 14 people, I am worth $285.

This is a simplified example of value attribution. Sophisticated tools and models are allowing much better insight into this kind of value. With social feeds, third party fundraising, and the advent of swipe to give, connecting all the dots into a measureable “value” view may still be a dream for most, but, with every added nod to understanding the increasingly complex and interconnected touch points between organizations, their supporters, and the supporters friend and networks, we can chip away to getting closer to a measurement approach that redefines “value” for the next generation of supporters.

Miriam Kagan is senior fundraising consultant at Kimbia . Reach her on Twitter at @MiriamKagan.

Miriam Kagan
Miriam Kagan is senior fundraising consultant at Kimbia. Reach her on Twitter at @MiriamKagan.
Interest Categories: Evaluation
Tags: Evaluation, measurement