Average Gift Size Testing and Statistical Significance

Average Gift Size Testing and Statistical Significance

Last time, I discussed testing the statistical difference in response rates. In this blog, we will tackle average gift size testing. I’ll start with the problem we always run into: someone will give us the average gift sizes of a test and control, and ask if the difference is statistically significant. The problem with that is you can’t use summary statistics for testing average gift sizes. Here’s why: average gifts are susceptible to skewing. For example, you could have the control have an average gift size of $75 and the test at $25 and the two metrics still may not be statistically significant because the control may have had a single $5,000 gift that is skewing the results. Therefore, in order to properly conduct statistical testing on averages, you must have the whole distribution of gifts. Each and every gift. There are a number of different tests one can use to test significance. One of the most common is called a T-test. In SPSS, the stats software we at Analytical Ones use, this test is easy to run and analyze. Just like in response rate testing, you also need to know the level of test confidence you are comfortable with. The level of confidence is indirectly proportional to the level of risk in making a change. Again, for direct marketing tests, we recommend using a 90% level of confidence. No one is going to die if we make a bad decision – unlike pharmaceutical testing. The trick with all this is the need to look at BOTH average gift size AND response rate when evaluating the “winning” package. Often...
The Medium and the Message

The Medium and the Message

I recently read an interesting article that reported on research from the USPS. It’s called “Why Direct Mail is More Memorable”. Now, the Post Office certainly has a vested interest in promoting direct mail, but aside from that, it’s a worthwhile read. If you have an extra 3 minutes, you should check it out. To summarize the study, the USPS partnered with the Center for Neural Decision Making at Temple University’s Fox School of Business to do the research. They studied people’s response to mail and print ads using Eye Tracking, Core Biometrics and Functional Magnetic Resonance Imaging – high tech stuff. Their findings? The article reports that the study participants spent more time with direct mail and print ads than they did with digital ads and they also remembered the messages more quickly and confidently with direct mail and print ads. “Physical ads elicited a stronger emotional response than their digital counterparts and, overall, had a longer-lasting impact.” Their conclusions are no different than what most savvy marketers already know – an integrated campaign is always the strongest campaign. We are creatures that like to touch things, interact with things. Including direct mail in a campaign gives a distinct advantage in being able to deliver a deeper...
More is Not Always More

More is Not Always More

As we Atlanta Falcons fans know, just because you’re ahead at halftime doesn’t mean that you’re going to win. More is not always more. We all know that Acquisition Strategy is important for donor long-term value and for a non-profit’s long-term income, but HOW important? I recently did some analysis for a non-profit, and the numbers were striking – especially when looking at the donor’s initial gift size and the subsequent LTV. Due to a change in Acquisition Strategy, the new donor average gift jumped 48% from $46 to $68 between FY14 and FY15. And the projected 5-year LTV for the FY15 new donors jumped 49% over the LTV for the FY14 new donors, from $159 to $237. Not surprisingly, with the new acquisition strategy, the client had a decrease in number of new donors. But, with a 10% decrease in number of new donors, there is still a significant increase in revenue over 5 years: 5,000 new donors X $159 LTV = $795,000 4,500 new donors X $237 LTV = $1,066,500 If you factor in cultivation costs at an average of $7/year per donor (and the savings from not mailing the 500 donors NOT acquired) that’s a net increase of $289,000 over 5 years. If you continue this same acquisition strategy for 5 years, that’s a net increase of $1,445,000 for those new donors. So, all told, acquiring more valuable donors to start with makes a big difference down the...
Net Dollars Not Donors Part 1

Net Dollars Not Donors Part 1

Somewhere over the rainbow in fundraising, two metrics were established as the gold standard: gross revenue generated and the number of donors acquired. And that’s a shame. It’s a shame because you can optimize these two metrics into organization ruin. Let’s take gross revenue. The reason it is used is because it’s simple to measure. But it has a serious drawback: it doesn’t account for what you spent to raise that money. It’s like a habitual gambler bragging about the $1,000 lottery winnings they had the night before while omitting the fact that have bought a $5 scratch ticket every week for 10 years. So their real ROI is 0.38. Wahoo! Seriously, if you are using gross revenue as your fundraising goal, you need to stop it and start using net revenue. It’s just bad stewardship to use gross revenue...
Fundraising Facts Over Fundraising Feelings

Fundraising Facts Over Fundraising Feelings

We have entered an interesting season in America. Seems like “facts” are being treated like just another opinion. And the consequence is that if facts and opinions are equals, then making your direct response fundraising decisions based on feelings is an equally valid approach. And that would be a mistake. A HUGE mistake. I was reminded of how feelings can misguide us. We completed one of our Offer Forecasting studies last month. Offer Forecasting leverages online surveys to predict whether donors will open a direct mail piece. It also measure donors’ likelihood to give to a certain offer. Before our latest Offer Forecasting study went into the field, everyone at Analytical Ones made friendly wagers on which of the nine offers we were testing would be rated the highest by the donors. Knowing the client and their donors as well as I do (I mean I’ve worked with the client for years, plus I have 20-more years of direct response experience) I was pretty confident that the offer I chose would win. And my pick came in dead last. In. Dead. Last. My business partner has a great saying when fundraising “experts” try to predict how donors will respond. She will say emphatically: “Repeat after me. YOU are not the target audience!” This why we at Analytical Ones always base our recommendations solidly on the facts. And though it may be trendy at the moment to go with your feelings, we implore you to use fundraising facts over fundraising feelings in...
Our Top 5 Most Popular Blogs of 2016

Our Top 5 Most Popular Blogs of 2016

As we close out 2016, we wanted to take a moment to thank you for reading, sharing and commenting on our blog posts. We hope you were able to use a few of our analytical insights to win, lift and keep your donors and supporters. We also thought you might enjoy looking back at the most popular blogs of 2016. Our top posts focused on how the election affected – or didn’t affect – holiday giving, the value and scarcity of dual channel donors, major donor modeling, how direct response ROI is connected to net revenue and one reason direct mail continues to work. In case you missed any of these posts, here are the links to our top 5 blogs of 2016: 1. How the Election Results Will Affect Holiday Giving 2. Dual Channel/Schmual Channel 3. The Power of a Major Donor Model 4. The Correlation Between Direct Response ROI and Net Revenue 5. To Have and to Hold Thank you and Happy New...