Inbound marketing has flooded us with information and data. Some of us data geeks have never been happier. For others, the volume of metrics and KPIs (key performance indicators) can be overwhelming.
If you're a non-profit focused on increasing donations and donors, here’s a list of the 10 KPIs, put together by Network for Good, of digital fundraising KPI’s you must have a handle on.
New donor acquisition rate
This KPI is a simple and as broad as it seems. You can look at by time frame: How many new donors come on by month, each year? You can also look at it by channel and by campaign. You can also look at new donor acquisition growth as percentage over similar timeframes or campaigns.
Donor renewal rate
The most immediate donor renewal rate is year-over-year. Get the number of donors from last year (LYD) and determine how many of those same donors gave again this year (TYD). Then divide TYD/LYD to get your donor renewal rate. So if you had 100 donors last year and 80 of them donated again this year, your donor renewal rate is 80%. The challenge here is how far back do you go to consider a donor a "renewal" or "lapsed."
Net new donors
Net new donors looks at your new donors and renewed donors to reveal if you're treading water, falling behind, or gathering force. Your donor acquisition rate is usually a raw number. If 100 people donated this year who'd never donated before, that's 100 new donors. But what if your donor renewal rate is only 50% (50 people who donated last year didn't donate again)? The low donor renewal rate undercuts the value of your newly acquired donors. Calculating your net new donors highlights this critical gap and adds context to your new donor acquisition rate. This KPI is also important for gauging the engagement level of your donor base.
While new donor acquisition rates are important, relying on them too much to fund your organization puts a lot of pressure on your development team. You'll see when we talk about metrics such as cost to acquire donor and average donation. Repeat donations are vital to a strong, consistent flow of donations.
Time to first/second gift
This is a measure of time elapsed between a first and second gift. In essence, making sure your new donor is retained, and doesn't become a net new donor casualty. According to the Fundraising Effectiveness Project's 2015 report, only 19% of first time donors donate are retained, whereas 63% of repeat donors are retained. This argues strongly in favor of keeping the time lapse between first and second gifts as short as possible. The earlier you get a donor into a habit of giving to your organization, the higher that donor's lifetime value is likely to be.
Donor reactivation rate
Let's say you consider any donor who hasn't donated in the past five years to be lapsed. This is the pool you'll use to calculate how many you've reactivated. If you've run any donor reactivation campaigns targeting them (and you should!), you can also look at reactivation rates for each one to determine which are most effective.
Cost to acquire a donor (by channel)
This formula will tell whether a fundraising campaign or channel is worth the cost of operation. Take the cost of a campaign, e.g. you spent $8,000 on a PPC ad campaign driving traffic to your donations' landing page. Then divide that cost by the number of people who arrived at the landing page via the ads and donated. If that campaign brought in 100 new donors, the acquisition cost for each of those donors was $80.
Average gift (by channel)
Now, if the average gift from that PPC campaign was $50, that might not seem like such a great campaign. Slow down. We'll get to those metrics touching on the life time value of a donor. But now you can also see why knowing your donor retention and reactivation rates are so important. The cost to acquire a new donor will almost inevitably be higher than that first gift.
You can calculate average gift amounts by campaign and channel. The channel average is particularly important so you know where to focus your efforts, especially when you look at the average compared to the cost. For example, you may find that people donating through a dedicated donation landing page have a higher average gift than those who donate via the "donate" button on your organization's website.
Revenue per donor (by channel)
The raw dollars donated via each channel over a fixed time or campaign divided by number of donors. These include your different digital donation avenues, such as email and social media solicitations, as well as traditional direct marketing or ad campaigns. So if $100,000 is donated by 500 people from email solicitations last year, the revenue per donor for this channel is $200.
Put simply, this calculation shows your donation totals less the costs to generate those donations. You can look at this by channel, such as how much you raise via Facebook less how much you spend to maintain that channel. You can also calculate this by campaign and by donor type. When you calculate this by donor type, you'll have better insight into the different costs of acquiring new donors versus retaining or reactivating donors.
Lifetime value (by channel)
Finally! I've been talking about it, but here we are. The lifetime value of a donor is critical to understanding if you're attracting the right kinds of donors. That's why you also want to look at lifetime value by channel. Some channels may attract higher value donors than others.
To calculate LTV (lifetime value) you need some underlying metrics. To calculate a donor's LTV, you need their total donation amount, less the cost to acquire and retain that donor. The cost number will be less precise than total amount donated. If you calculate how much you spend per year on retention donation campaigns, you can add that average to the acquisition cost for that donor.
More valuable is the LTV by channel. To calculate LTV by channel, you need to know the average lifespan of that channel's donors, its average donation amount, the total number of the channel's donors and number of donations. Let's work this out with an example, say donors acquired through Facebook.
5 (average lifespan in years) x 100 (average donation amount) x [1000 (# of donations)/ 500 (# of donors)] = $1000 in LTV per donor for the channel.
Now if you know that your cost to acquire a new donor via Facebook is $100, that's $900 in mission money. Compare that to the $80 in cost to acquire a new donor via the PPC campaign, which has a LTV of $500. The PPC-acquired donors cost less to acquire, but have only half the LTV of your Facebook-acquired donors.
As you can see, no single KPI is an island. Individually they offer interesting snapshots. To get a more holistic view of how your fundraising is going and whether you're spending your development and marketing budgets to maximize ROI, you need look at the complete story these KPIs tell together. Use this as your starting point how to analyze these KPIs in context of each other.