A New Perspective on Measurement
A change in thinking for the nonprofit industry
All measurements have trade-offs.There is no singular metric that can completely capture the multifaceted nature of a nonprofit organization’s objectives.That’s because every organization has differing resources and opportunities and ultimately pursues things in a unique fashion.
TrueSense has seen a number of organizations move through a process to transform how they measure success.The key factor in selecting the right measure of success is creating clarity for the strategic achievement of your goals. For example, it does no good to measure the growth of your active donor file if your goal is anything other than simply counting donors.
What we have counseled nonprofits to consider, and what most of the organizations we serve have done, is to move away from gross revenue and donor file size as the primary measurements of success.
Those metrics still matter but are less important than long-term net revenue and identification of future high-value contributors (like major and legacy gift likely donors).
When you boil down all the metrics, what truly matters is long-term net revenue and the chance of building a relationship with a donor that can make a transformational gift.This connection justifies a nonprofit’s use of their limited expense dollars and human capital invested into activities that will future-proof their program.
Why Long-Term Net Revenue?
TrueSense Marketing has been counseling the nonprofits we serve since 2017 to look beyond gross revenue as a meaningful measurement and to consider long-term net revenue as the superior metric for determining financial success.
Why the shift?
In terms of long-term net revenue, we want to know that each constituent on your file deserves your initial investment of expense dollars as well as ongoing cultivation and stewardship investments, regardless of initial giving level, channel of origin, year acquired, or post-conversion behaviors.
To demonstrate what this looks like, we have provided a simplified example of this type of thinking on the right, where we have an $75 cost-to-acquire a donor that gave an initial gift of $50.
When Investments Pay Back
There are three key metrics baked into the long-term net revenue calculation. Above we can observe both the initial cost to acquire and the ongoing cost to support this donor over time inclusive of cultivation, stewardship, milestone, and recapture expenses in the total cost line.
Plotted against these expense lines we can observe in the blue line this donor’s five-year long-term value based on their transactional giving over time.
What we can note is that while this donor likely showed up as “net positive” in individual cultivation campaigns they were targeted in, the reality is that, in absolute terms, this donor does not begin to produce true long-term net (the total revenue surpassing the total cost invested in them) until the third year they are on the file. The industry at large has finally begun to realize that gross revenue pursuit was one of the core reasons for churn and burn program performance.
Pipeline Myth-Busting
The real story of donors that upgrade
We combine our focus on long-term net revenue with the concept that pipeline movement needs to be a donor-centric, conditions-based activity instead of a one-size-fits-all approach.This thinking derives from several agency-wide analyses we have performed in the last few years to better understand mid- and major-donor giving patterns.
Many organizations envision a scenario where they acquire donors into their program and then systematically upgrade them step by step up the giving pyramid, moving them from low- or small-sum donations to mid-level and beyond.
The data tells a far different story when interrogated properly.
The Data Reality
What we observe is that for each first-gift amount (which represents the initial gift a donor made to an acquisition effort online, offline, or to an event), even after 10 years of giving very few ever escape the original gift level where they entered the organization.
We also know from our own, as well as publicly available, industry data that it takes an average of 7–8 years for donors acquired below $100 to migrate above $1,000.
These two data points are the fundamental tenets of our mid-level programs (yes, plural) approach. We use advanced analytics to help nonprofit organizations focus on identification first, separating donor audiences into fast-track and slow-track paths, each with their own objectives and strategies to achieve them.
Brand Trust
Impacting share of wallet
Brand trust is the amount of respect and loyalty your constituents have for your brand, or how strongly they believe you can deliver on the promises of your mission. It is a public perception often shaped by a mixture of firstperson experiences and marketing communications.
TrueSense has an in-house Giving Sciences team that includes a staff of primary researchers.This enables us to perform national primary research studies for the clients we serve to evaluate sentiments and perceptions across prospect and existing donors.
For the clients we serve, we have repeatedly demonstrated through analysis how Brand Trust and Awareness correlates with Share of Wallet and, for that reason, brand trust is a metric we believe more nonprofits need to track, as it impacts nearly every aspect of their fundraising programs.