The Most Common Analysis

The Most Common Analysis

This year, we have been interviewing (and hiring) new analysts for our growing company. One of the candidates we were talking with recently asked us a great question: What is your most common ad-hoc analysis? Anyone who has worked with nonprofit organizations is likely familiar with this one. And sadly, it’s killing nonprofits: The Stop Acquisition Analysis. A healthy donor database requires a significant investment in acquiring new donors each and every year to replace the inevitable lapsing of current donors. We all have seen the LTV on new donors. An investment in new donors generally breaks even some time in year 2, and then those donors are profitable from year 3 onward. The problem is that nonprofit boards of directors are oftentimes focused solely on the current fiscal year. When budgets are tight (when aren’t they?), the first place they look to cut their budget is new donor acquisition. And thus, begins a descent into nonprofit hell. With your data and our stats tools, we can put together an analysis of what the (bleak) revenue projection looks like when you stop acquisition. The lack of new donors will cause a decline in file size. A decline in file size results in a decline in revenue followed by a decline in the organization’s budget – which of course will lead to a cut in new donor acquisition the next year. And then, the descent into nonprofit hell accelerates. One of my career goals is to see the day when the Stop Acquisition Analysis is not so popular. Until then, if you are fighting for your acquisition budget from a...
Busting Myths: “Multi-Channel Donors are More Valuable”

Busting Myths: “Multi-Channel Donors are More Valuable”

This is a longer one. If you don’t like details, skip to the ending. The Question For at least the last 10 years, I have heard it said often that donors who give through more than one channel are more valuable than those who give to only one channel. Let’s take a deeper look with a typical org’s data.          Where the Myth Began First up is the misleading calculation that has been used to justify that Dual-Channel donors are more valuable than Single-Channel donors – Lifetime Value of Single-Channel vs. Dual-Channel Donors: Simply comparing the LTV of Dual-Channel to Single-Channel donors paints what appears to be a clear picture: Dual-Channel donors aresignificantly more valuable.                                 While technically true from one perspective, in the actual spirit of the analysis, it is false. Dual-Channel has an inherent bias in that it requires a donor to have 2+ gifts, thus inflating their value against many single-gift, Single-Channel donors.               An Insightful Tweak                        A more rigorous look controls for the problem above by comparing the value of donors who have given 2+ gifts.                                 When you look at it this way, Dual-Channel donors ($847) are still more valuable than Direct Mail Only donors ($258), but in this case slightly less valuable than Online Only ($936). What Does This Mean? Does that mean you should stop cultivating your Online donors in the mail for fear of downgrading them? Absolutely not. Online Only donors are generally harder to retain than Direct Mail. In fact, Online donors are lot less likely to give multiple gifts in the first place. 44% gave a 2nd gift within 3 years...
Is Your BOD on Hopium?

Is Your BOD on Hopium?

I saw the term “hopium” for the first time in a recent blog by Victoria Christensen and immediately became fond of the term. As Ms. Christensen defines it: hopium is a false sense of positivity in the midst of dire, evidence-based scientific research. Now, while her context for using the term was not related to fundraising, I couldn’t help but think of all our nonprofit friends who are in the midst of finalizing their FY20 budgets. For our context, here’s an example of how to use the term “hopium”: If your BOD has asked you to increase revenue 10% next fiscal year without any increase in your development budget, they are on hopium. I don’t recall much from my Philosophy 100 class as a freshman in college, but I do remember the Latin term Ex Nilo Nil Fit coined by pre-Socratic Greek philosopher Parmenides: From Nothing, Nothing Comes. I believe there is a national hopium epidemic in our nonprofit board rooms today. Boards continue to ask development professionals to achieve lofty goals without adequately equipping them with the resources they need to get the job done. And we wonder why turnover in nonprofit development departments is so high… So, before you take your next development leadership role in a nonprofit organization, do some research to make sure the BOD isn’t on...