Lifetime Value A 360 Degree View of Donor Value

Transcription

1 Lifetime Value A 360 Degree View of Donor Value

2 Data: Your Program s Rudder Britt Fouks Director, Client Services, Paradysz A. J. Minogue Data Analyst, Direct Response, ASPCA Nancy Noble Director, Direct Marketing, IFAW

3 Why 360 Degree View of Revenue Large National Chapter Based Health Organization Full file had $1,145, in total gifts Direct Marketing Represented $432,161, But, the bigger story was that those direct marketing donors have contributed $861,645, to the organization

4 LTV: Use in Prospecting

5 LTV Use in Prospecting LTV has many applications. Before you begin utilizing in acquisition planning, it is important to ensure all of your marketing partners are on the same page regarding how LTV should be used for your program. A good way to find out is to ask the following questions: What metrics are most important to your organization? What priority will LTV have in planning and what LTV variables will be most important based on that priority? Varied uses in prospecting (evaluating/justification of higher investment levels)

6 Organizational Goals/Benchmarks Although every nonprofit is concerned with donor value, each organization has unique challenges & goals What planning metrics are most important to your organization? Donors Acquired Net Revenue/Investment Donors with $20 gifts ROI Use of LTV may be dictated by these or other organizational goals

7 Priority of LTV Once organizational goals have been identified it is much easier to understand the value and priority of LTV in your acquisition program The following slides walk through potential uses for LTV based on organizational goals When organizations think about using LTV they see this as a wholesale switch in planning (either/or situation) but there are less or more aggressive ways to use LTV in prospecting

8 Role of LTV 80/20 Rule LTV may have a focused role in acquisition planning ; using LTV to validate the bottom 20% of a list plan investment Pros: Ability to control the investments at the bottom of a list plan (business as usual up to a point of investment and using LTV in the bottom 20% (highest investment files) List A- Mid-level Upfront Investment Upfront Donors 1,339 Upfront Avg. Gift $11.90 Orig CPDR $1.44 Conversion % 32.0% 12 Month LTV CPDR $1.11 List B- High Upfront Investment Upfront Donors 722 Upfront Avg. Gift $12.14 Orig CPDR $1.75 Conversion % 39.0% 12 Month LTV CPDR $1.07 Allows lower list investments with higher response rates but perhaps marginal LTV to have a place in planning to support overall acquisition needs

9 Role of LTV 80/20 Rule Cons: You won t make as much impact to acquisition by using LTV in acquisition planning. It will certainly help but may not adjust acquisition plans as notably or quickly as you would like Using LTV in this restrictive way may not move the program quickly but shows the board that you re looking at the value of donors brought in. Protects your acquisition investment The 80/20 Rule often does NOT consider the negative long term impact of lists with lower investments such as high response/low dollar lists who make upfront PL planning benchmarks Acq Gift Level Under $5 $5-9 $10-14 Upfront Donors 15,369 96, ,234 Upfront Avg. Gift $2.17 $5.66 $10.82 Original CPDR $4.79 $2.06 $1.22 Conversion % 42.8% 44.0% 42.4% 12 Month LTV CPDR $2.55 $1.43 $0.98

10 Role of LTV Holistic Use List Name Total Order Qty Upfront PL/Donor ROI 12 Month List A 70,000 ($2.98) 1 List B 18,000 ($3.81) 4 List C 25,000 ($7.54) 2 List D 15,000 ($8.54) 1 List E 30,000 ($9.67) 4 List F 38,802 ($9.69) 4 List G 20,000 ($9.79) 3 List H 75,000 ($9.94) 4 List I 40,000 ($10.37) 4 List J 13,942 ($10.48) 1 List K 35,000 ($13.60) 4 List L 50,000 ($16.09) 1 List M 48,000 ($16.74) 1 List N 50,000 ($17.07) 1 List O 0 ($17.30) 4 List P 25,000 ($18.84) 2 List Q 0 ($18.84) 4 List R 15,000 ($19.82) 1 List S 0 ($19.91) 4 List T 15,719 ($19.95) 1 List U 0 ($21.60) 4 List V 0 ($23.48) 3 List W 16,500 ($23.80) 1 Weightng Acquisition/Renewal Metrics is another way to utilize LTV in planning Pros: Ensures ALL lists are evaluated by their upfront PL metrics as well as their value to renewal Cons: ROI is a reflection of the investment cost 12 months ago. This strategy discounts exchange to rental changes

11 LTV Metrics ROI 12 Months Many mailers use ROI at 12 months to determine a list s value in acquisition Pros: Considers LTV pay off for all lists; no list forgotten or marginalized Cons: Basing LTV on acquisition performance 12 months old may not fit in the current environment; assumes that response is stagnant (either puts you in a position of being too bullish or missing out on opportunities) Discounts the performance and treatment in renewal; if renewal treatments are not in sync with LTV interpretation list mix/volume can be greatly impacted Excluding certain segments in renewal LTV can be skewed Renewal Schedules can also impact LTV Costs may not be correct subsequent costs can be difficult to capture. Make sure they are correct before interpreting ROI

12 LTV Metrics: Conversion Conversion information in LTV reporting helps identify those audiences with higher % conversion to renewal Pros: Helps identify segments contributing heavily to renewal Fast way to uncover renewal performance impact from package changes in acquisition (i.e. non premium to label) Cons: High conversion does not always translate to strong ROI and therefore this metric s use has more benefit when evaluating renewal management vs. acquisition investment

13 LTV Metrics: Subsequent Value/Donor This weighted metric allows you to interpret frequency of giving as well as total subsequent revenue by list List Mail Qty Cost/ Donor Conv. % Conv. Index LT Gifts/ LT Gifts/ Donor Donor Index LT Rev/ Donor LT Rev/ Donor Index Sub/ Value Donor Index Pros: List A 464,652 $ % $ List B 365,339 $ % $ List C 848,571 $ % $ List D 688,185 $ % $ List E 354,079 $ % $ List F 3,150,191 $ % $ List G 131,017 $ % $ List H 30,809 $ % $ List I 2,102,581 $ % $ Allows high frequency/lower giving and low frequency/high revenue donor segments to be evaluated on the same playing field Cons: Does not include subsequent costs Index is relative to the baseline you give it reevaluate your baseline often

14 Key Considerations Although LTV can have incredible value in acquisition planning, there are common pitfalls when utilizing it: Emotional Decisions it is easy to write off a list with value solely because it has weaker ROI or Net Revenues Instead of omitting the list, consider ways to improve it s renewal performance via new strategies Avoid the temptation of using industry benchmarks what is your organizational tolerance for ROI Evaluate the impact of making changes in acquisition. Is the use of LTV helping or hurting your program? Using LTV that is too recent avoid looking at LTV that is 6 months complete. It takes time for donors to be put into the mail stream and to renew

15 American Society for the Prevention of Cruelty to Animals A Case Study

16 Do Try this at Home Data in this report is, in some cases, approximated And even if it wasn t, theses are ASPCA results, not your results And our file is probably younger, less affluent, and more female than yours

17 Working in LTV is Scalable Start by finding the 12 and 24 month values by channel and compare ROII Calculate One Off s to Answer Questions On the Fly Look for LTV by Combinations of Transactions Then look for LTV by your Touchpoints/Solicitations Then Build in Additional Costs for ROI Account for Macro Influencers

18 Define LTV as Long Term Value LTV is the long term value of a donor or group of donors But how long is long term? Pick something, anything approach = 12 and/or 24 months Consider your program: How long have you been running a new channel? Why do this? To determine what you can spend on different types of donors.

19 Define LTV as Life Time Value Life Time Value is Predicative Beware: the Future is not Always Like the Past The bread, which I formerly eat, nourished me; that is, a body of such sensible qualities was, at that time, endued with such secret powers: but does it follow, that other bread must also nourish me at another time, and that like sensible qualities must always be attended with like secret powers? The consequence seems nowise necessary. AN ENQUIRY CONCERNING HUMAN UNDERSTANDING by DAVID HUME

20 They Might Be Giants Remember that data is always about what happened in the past, and if you base future growth on past performance, you run the risk of predicting that the boys in this chart would grow up to be giant men

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23 Calculate One Off s thru Tests Incorporate Inception Channel into the Sourcecode Logic in Your Mail/Call Plans Wait or Project For example, we don t have 24 months of data on Street Canvassing, but were testing them in Telemarketing and Comparing Initial Results

24 Calculate One Off s thru Queries Identify a Type of Donor, such as Premium vs. Non Premium Responsive Was the extra cost worth it after 12 months? Repeat for any Combination in any Channel Trouble You ll Run into Will Mostly Likely be on Comparing Costs, not Results For example, what s your Web ROI?

25 Donors and Multiple Channels DRTVTM DRTV WEB Guardian Internet Mail Member Support F2F TM Acquisition $23.76 $24.58 $ $63.88 $75.82 $75.86 $32.28 $48.27 DRTVTM $29.49 $28.15 $ $57.06 $74.95 $96.39 $39.00 $36.71 DRTVWEB $24.69 $36.34 $ $77.88 $76.08 $60.70 $31.43 $36.53 E Conversion $20.00 $20.17 $ $60.15 $ $47.50 $35.80 Gift Membership $50.00 $24.80 $ $82.00 $52.60 $87.50 $50.00 $31.45 Guardian Join Mail $ $55.26 $59.31 $ $32.29 Guardian Join Online $18.56 $21.92 $ $50.49 $57.38 $44.95 $27.50 $34.84 Honor / Memorial $49.00 $38.31 $ $ $ $ $29.38 $56.28 Member Support $60.89 $ $ $ $91.43 $ $36.00 $62.37 Social Media $21.00 $ $73.96 $70.94 $10.00 $25.00 Store Donation $18.00 $18.00 $ $55.52 $79.59 $25.00 $51.61 Website General $40.67 $35.38 $ $ $ $84.96 $99.29 $58.23 Grand Total $29.61 $33.45 $ $94.90 $80.66 $ $40.53 $40.43

26 It s not about how they give, its about the interactions you initiate Appeal Renewals Premium Appeal TM Friends & Family Guardian Invite Guardian Upgrade GX Calling Acquisition $82.26 $83.95 $89.93 $ $58.42 $88.56 $ $ DRTVTM $ $ $ $ $ $ $ $ DRTVWEB $ $ $ $ $99.69 $ $ $ E Conversion $ $ $ $ $25.00 $ $ $ Gift Membership $64.22 $59.16 $65.34 $96.00 $72.05 $65.19 $ $ Guardian Join Mail $ $ $ $95.12 $40.00 $ $ $ Guardian Join Online $ $ $ $ $ $ $ $ Honor / Memorial $ $ $ $ $ $ $ $ Member Support $ $ $ $ $ $ $ $ Social Media $78.16 $78.18 $94.17 $ $33.33 $ $ $ Store Donation $61.28 $77.78 $ $ $40.82 $92.06 $ $ Website General $ $ $ $ $ $ $ $ Grand Total $ $ $ $ $65.04 $ $ $254.49

27 Get Your Money for Nothing All those follow up s cost something ROII ROI

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29 You Can t Query Macro Influencers

30 International Fund for Animal Welfare A Case Study

31 IFAW s Mission is to improve the welfare of wild and domestic animals throughout the world by reducing commercial exploitation, protecting wildlife habitats, and assisting animals in distress. IFAW motivates the public to prevent cruelty to animals and to promote animal welfare and conservation policies that advance the well being of animals.

32 Offices in 16 Countries Fundraises in 8 Countries Receives Support from 70 Different Countries

33 A 360 Degree View doesn t just happen Coordinated database management & investment is critical Organization wide enhanced data management Implementation objectives for all Senior leaders Organization wide posting of transactions, interactions, costs and donor shared data Fundraisers utilize data analytics to support long term planning

34 Why LTV? Informs decisions for budget, pack, list and channel planning Provides a 360 view of donor giving, interactions and subsequent investment Helps raise flags around # contacts, subsequent expense (are you spending enough to get 2nd gift) Allows comparison of Sustainer Conversion and Bequests tracking metrics by channel

35 IFAW Acquisition Investment Acq. Channel Cash/One Off Donors Recurring/ Sustaining Donors Mail Prospects/ Advocates/Subscribers Online DRTV Telemarketing % Worldwide NEW % Worldwide of Active Donor Base % Worldwide Of Gross Revenue 92% 8% 100,000 70% 30% 50% 50% 250,000 New Worldwide Supporters Annually

36 DRTV spot

37 LTV 360 View Examples DRTV With DRTV spent 3 times as much up front Generated twice as many Sustainers 18mo Lifetime net/donor 52% greater than DM channel Results vary by country and channel mix

38 LTV 360 View Examples List 2 nd gift just one factor influencing LTV Sustainer conversion rate can determine success or failure 24mo LTV is a snapshot longer term view is critical

39 LTV 360 View Examples 3D/2D 2D Prem. lost more net/donor originally than Tote 2D Cards 2 nd gift rate slightly higher in 24 mo than Tote Bag (3D) Sustainer Conv % similar with both 12 mo view they looked similar At 24 mos 2D pack generating 70% better Net/donor At 36 mo 2D Cards acq. generating 123% better Net/origin donor with 360 view

40 LTV 360 View Examples Full View In the UK, donors giving in FY10 that had been acquired through DM in program generated 2.1 million as follows: 44% in origin source DM 20% in Sustainer giving 22% in other DM/online sources (cross sell) 4% in Planned Giving/Bequests ( 85,000 )

41 LTV 360 View Examples Bequest 77% of Bequest donors gave an original gift < 25 76% on file 10+ years 40% of Bequest donors were Sustainers at some stage 80% originated from DM and generated 1.37 mil.

42 The benefits of LTV 360 Identifies potential for each acquisition source by channel through cross selling on retention on conversion LTV analysis guides investment decisions LTV analysis encourages longer term thinking

43 Britt Fouks Director, Client Services, Paradysz A. J. Minogue Data Analyst, Direct Response, American Society for the Prevention of Cruelty to Animals (ASPCA) Nancy Noble Director, Direct Response, International Fund for Animal Welfare (IFAW)