Donor Profitability Measurement
Posted by John Sauve-Rodd in Donor Profitablity, Downloads on April 9th, 2009
Abstract
Research in this paper examines, through analysis and a case study, the profi tability of individual donors.
The purpose is to examine these questions:
What can we learn about the range and distribution of donor
- profitability from case studies?
- Who counts the most, profit-wise?
- What are the implications for fundraising management?
The main conclusions are:
1. Profitable and unprofi table donors : About half of donors are profi t
making and half loss making in a year. Donors show a very wide
range in their annual net profitability.
2. It is down to a few : A very few donors create the annual net
surplus in a programme. In the case study shown, three quarters of
net profit was generated by just one tenth of the donors.
3. Strategy : A strategic focus on the few profit generators seems
obvious, and a new approach to fundraising management is
strongly indicated.
4. Changing fundraising practice : Discussions with charities, agencies
and consultancies suggest that cultural factors and a reluctance to
change ‘ the way we do things ’ impede the take-up of a profit-based
From Warmth to Wealth
Posted by John Sauve-Rodd in Downloads on April 9th, 2009
- How to get the best from wealth screening firms
- Combining wealth data with other variables
- Un-drowning:Scoring wealth &warmth Prioritising major gift prospects
Eight easy steps to calculate profitability, donor-by-donor
Posted by John Sauve-Rodd in Donor Profitablity, Downloads on April 9th, 2009
- You have to start by knowing all your costs, not just direct costs.
Requests for costs often brings sighs, scratching of heads and ‘I’ll get
back to you’, but persist, for you must have this information, including
salaries, overheads, everything. - Then build a costs model and apply all costs to donor gross
revenue for each and every donor - the results will be shocking, startling
and revealing. - Your costs model should be set up in three layers.
- C1 – direct costs, where most of the money goes.
- C2 – salaries, any social insurance, or training costs.
- C3 – your share of overheads such as heat, light, insurance,
corporate charges and the like.
Then, deduct these three from gross revenues to obtain net profit (P),
which will result in three profit levels.- P1 – the profit on direct costs.
- P2 – including salaries.
- P3 – with all overheads included.
You need all three profit levels if you are to truly understand how profit
(and loss) works at the donor level.
Q & A: tenure and the donor loyalty thing Part II
Posted by John Sauve-Rodd in Donor Loyalty on March 13th, 2009
Part two of a three-part blog on donor loyalty: measuring and using tenure.
Q: if tenure is years of continuous giving, what is the range of tenure values we might expect?
A: the minimum tenure, of course, is 1 year, but donors often show great commitment. Tenure can rise to many years.
I’ve looked at databases that were commissioned 18 years ago and found appreciable numbers of donors with 18-17-16-15 years of continuous giving. What amazing, special people. Founding fathers and mothers. Veterans. Partners. Advocates. Words are not enough.
Q: so tenure measures loyalty then?
A: you could say that, and for a charity with both a long organisational history and a database that has been carefully – make that scrupulously – managed, loyalty-as-tenure is there for anyone to see. But of course it does not indicate at all WHY the donor is loyal. For that we have to probe the heart, mind, values, experience-of-the-cause of the donor and that is another discussion entirely. It means listening to long term loyal donors intelligently and finding out about their motives.
Q: does tenure differentiate how donors behave?
A: Yes. There is not a great deal of experimentation or testing around (that I know of), but one instance I will tell you about gives a powerful illustration of tenure in action. A membership-based organisation was contacting its supporters by mail, and cut a second, small slot-like window in the envelope. In it they lasered ‘Member since <1985>’ or whatever date it was.
Q: that is so simple. What happened?
Q & A: tenure and the donor loyalty thing
Posted by John Sauve-Rodd in Donor Loyalty on March 2nd, 2009
three-part blog on donor loyalty. Part one: tenure.
Q: there’s a lot of talk about donor loyalty – 627,000 hits on Google. But I can’t find much on how we should quantify loyalty though.
A: well, one way is to measure a donor’s tenure.
Q: what’s that?
A: tenure is a time measurement, made most easily from data in a donor database. The word comes from a Latin root meaning to hold or possess.
Tenure, at least the way I choose to define it, is the number of years of continuous giving. You can think of it as a measurement of the donor’s lifetime relationship with the charity, but independent of their financial value. It’s the ‘L’ in LTV (lifetime value)
Q: why do you think donor tenure important?
A: because it quantifies the duration of a relationship between the charity and the donor. All fundraisers want lifetime-loyal donors (or say they do).
In general, long relationships provide reliable, predictable revenue, often leading, it is said, to increased involvement and engagement, major gifts and legacies. Long donor relationships are a sure sign of success.
Don’t forgive forgetfullness
Posted by John Sauve-Rodd in Knowledge on February 18th, 2009
Once upon a time, many years ago, a fresh-faced me sat at the feet of the direct marketing greats and eagerly listened, learned and remembered.
We – my charity colleagues and me, and our agency – applied what we learned and spread that learning amongst ourselves. And the knowledge proved accurate and powerful. It did well, raised a great deal of money at good ROI.
Soon, many of us in the fundraising community had about the same amount of knowledge and we applied it, getting better and better with practice.
This was a generation ago. Where did that learning go? I know it stayed inside my head. I replayed it at conferences and with clients, but it was just last year that I realised:
- Many fundraisers have forgotten that powerful stuff that we all learned and knew once upon a time
- There is no mechanism for preserving the best knowledge and passing it on to the new generation
- The sector suffers from amnesia, forgetfulness or is just plain distracted
- It has forgotten some of the classic, timeless fundraising knowledge that makes things work at their best
Here are 4 examples, anonymised, from 2006-2009, of what happens when you forget important, foundation knowledge:
- Junk e mail: the forgotten science of DM testing, laid down at least 40 years ago, resulting in untargeted, junk e mail campaigns ‘because it doesn’t cost us any more money to e mail everyone so why bother with all that testing malarkey?’. Words fail me.
- Using the donor’s data history comprehensively in communications: a top-drawer agency, founded a generation ago by DM greats, which obsesses over data analysis but forgets totally the potency of using highly personalised long-copy appeals with relevant data items inserted …leading to poor income results. Quelle surprise.
- The unexpected keepers of the flame: the agency whose charity client has such a high turnover of fundraisers that only the agency greybeards (and none of them over 50) know the history of the charity’s marketing.
- Still being asked the same questions: those of us still active with roots ten, twenty, thirty years ago sometimes reflect to each other that we are being asked the same questions now as when we began. Is nobody out there learning?
Profit
Posted by John Sauve-Rodd in Donor Profitablity on January 9th, 2009
originally posted: July, 2007
Ironically, all “not-for-profits” still have to realize a surplus. That’s what most people call profit. And, in fundraising, one of the most useful ways to monitor profit is at the level of the individual donor.
My interest—passion, as it has become—in donor-level profit began when I responded to a Swiss client who said, “You’ve done some great work for us, John. What do you want to tackle next?”
I said, “I want to look at some of the Big Questions. How about donor-level profitability?”
“Gehen Sie bitte so vor!” said the client (“Go right ahead!”). Carte blanche to dive into their data and examine profitability. And with pay!
What I found astonished me. Remember George Orwell and his famous book Animal Farm? In it, the pigs say, “All animals are equal, but some are more equal than others.” So it is with donors. But just how much so has been an eye-opener.
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About John Sauvé-Rodd
John began working in the not for profit sector in 1980 with the National Blood Transfusion Service, moving to a deputy director of fundraising post at Save the Children in 1984: "An experience which totally changed my life and set me forever on a career path in not for profit marketing."
In the 20 years since he quite Save the Children, he has taken his career into consulting fundraising and marketing IT, analytics and donor-based research.
His belief is summed up thus:
Data > Information > Knowledge > Insight.