By Dean McJannet
Acquisitions are among one of the biggest concerns for fundraisers today. An aging demographic, list trade saturation and fatigue, and the growing difficulty to procure new and productive lists, are at the forefront of fundraising challenges. As concerning as these challenges may be, they also present opportunities for data-savvy fundraisers to take these problems head on and drive new and innovative success!
There are a few issues that really attract the attention of our peers in fundraising: program cost, revenues, net revenues, donor attrition and acquisition. The most important of these is acquisition. Without acquisition, without replenishing those donors who have left (or will leave) we fundraisers face paramount consequences to the success of our programs.
Is acquisition really the concern?
There are two sides to acquisition. Pure acquisition is one. Retention is the other. Our need to acquire is rooted in the fact that we lose a certain number of donors during the year. Typically, we look to our list trades and list rentals and base our selections on the past performance of these lists. We use highest response rate or highest average gift as the “go-to” performance metrics for this.
But are we missing something? The short answer is…yes. By evaluating the quality of a list by only looking at its ability to acquire a new donor we are missing quite a bit. We are sacrificing the short-term outcome of a superficial response rate and average gift size for establishing meaningful long-term relationships that will not yield better lifetime donations, but can have greater systemic benefits, such as engaged advocates for your organization.
If you are like most organizations, you have a reasonably deep history on who you have traded with (or lists you have rented), and the associated performance of these trades or rentals. Here is a simple analysis that would redefine how you could enhance your list trade or rental program.
IDing quality donors
Start by identifying those list trade and rental sources that produce some of your best donors. You want to identify lists that bring on quality donors.
Let me define what I view as a quality donor. These are donors with great LOA (length of association), a high performing LTV (lifetime value), a better-than-average second-gift conversion rate and among the lowest attrition rates.
In other words, donors who stay longer, give more and are more easily retained in-program. It’s interesting to note that these individuals may not necessarily be the best performing out of the gate. In fact, the trade or rental list that produced these donors may have had an initial lower response rate and or lower average gift size at acquisition versus other trades and rentals, but in the long run they produced higher quality donors.
Using these criteria, you can now identify and select your best donors, mapping them back to their original trade or rental sources that initiated their first gifts. This will help you identify which trade lists or rentals have yielded the highest percentage of these great donors! With this metric at hand, you can incorporate other list factors such as cost, availability, etc. to create your organization’s “List Trade and Rental Priority” ranking.
Now here is where it gets fun. I like to model the impact of this year’s acquisition using this new ranking and its indicators to forecast the impact of my current acquisition program across the next three years.
Typically, I see an increase in the net cost to acquire donors in year one. However, as these donors come from lists that generate quality donors, their three-year performance projection more than justifies the initial investment. Even if these lists have potentially lower response rates and average gift size at acquisition.
Why is this?
1. These donors have lower churn rates. So, providing you have adequate source volume, your donor file is now growing more significantly, not because you are increasing your acquisition efforts but because you are holding on to more of your newly acquired donors.
2. Net revenues improve because these donors have a better LTV. You are spending the same money on a donor but acquiring one who gives more and stays longer. Better ROI, same cost!
Explore new trades and rentals, as well as continuing to trade and rent with some of your traditional list sources. You will need these smaller volumes as the “control” for your program and monitor your new trading list and rental priorities.
Data holds such wonderful opportunities for fundraisers. Managed and used properly it will provide the answers to solving some of our most challenging problems.
Dean McJannet is president and chief strategist, iNFORMED.