In our digital age where a donor’s every action is documented, it’s becoming easier and easier to fall down the rabbit hole of so-called ‘vanity metrics’ when measuring your nonprofit’s success. Social media platforms, websites, CRM systems, and email marketing platforms all offer data for every little thing imaginable.
You can track bounce rates, click through rates, social media likes and shares, web traffic sources, page views, post impressions… the list can go on indefinitely! And that’s not even to mention the infinite ways you can then further segment your data, such as by region, age, gender, or time. It’s all enough to make your head spin! While these insights may be somewhat useful, you never want to lose your focus on the 2 donor metrics below that matter most.
Metric #1: Your Donor Lifetime Value (LTV)
Understanding the Lifetime Value of your nonprofit’s donors is an absolutely essential and fundamental fundraising metric. Your LTV is a calculated dollar amount of the gross revenue your nonprofit can expect to receive from a single donor from the moment they first donate to their final gift.
While there’s no absolute rule for how to calculate your LTV, here are two formulas you can play with:
1. Donor Lifespan x Average Donation x (Total Number of Donations ÷ Total Number of Donors) = LTV
2. Donor Lifespan x Average Donation x Donation Frequency = LTV
Of course, the higher your Lifetime Value, the better! It’s with this metric that you can convince stakeholders that your organization can afford to spend additional money on things like appeals, marketing, or expanding the size of your team.
Your LTV is also a reminder of the bigger picture: after calculating for operating costs, a fundraising event might have net your organization a profit of a seemingly underwhelming $400 from 100 donors. But when you take into account the LTV of those donors is $500 per donor over the next 5 years… well, your fundraising efforts begin to look a lot more worthwhile in the eyes of your stakeholders and supporters.
Metric #2: Your Donor Retention Rate
So many nonprofit blogs and online resources focus on the weird and wonderful multitude of ways to raise funds and acquire new donors. Of course you should always be aiming to acquire new donors — but not at the expense of the supporters your organization has been fortunate enough to already have won over.
Here’s how to calculate your donor retention rate:
Number of Returning Donors (Year 2) ÷ Number of Previous Year Donors (Year 1) = Retention Rate (%)
Donor retention rates for charities across the board have been pretty abysmal in recent years (reportedly only 45.5% in 2017, according to the Fundraising Effectiveness Project). So why is this one of the most important metrics that you should care about?
First, donor acquisition costs (DAC) are high: it can take a few years to recoup the amount of money the average nonprofit spends in marketing/recruitment costs to attract a first-time donor. Keeping your donors happy and acknowledging their ongoing commitment toward your cause increases your LTV.
But even more importantly, your long-term supporters are most likely to become your organization’s most passionate advocates and volunteers. Sometimes they may even take fundraising initiatives into their own hands with peer fundraising, leveraging their social media, email contacts and offline networks.
When you win over the trust of your donors beyond their initial gift, they become invaluable long-term partners in your mission. Prioritize your relationships with the supporters you already have before going out and seeking out new ones!
Don’t Lose Focus By Tracking Too Much
While sifting through analytics on your website, email campaigns, and social media might provide some interesting insights, don’t lose sight of what really matters. Weekly or even daily monitoring of every little scrap of data available to you is a surefire way to induce burnout within your team, when tour organization’s resources that might be better spent elsewhere. Focus on growing these 2 major donor metrics mentioned above, and other so-called ‘vanity metrics’ will fall into place.
