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Sep 5, 2017

The Last Word in Measuring Engagement

If you could summarize the consultant chatter over the past decade into one phrase, I would nominate “donor engagement” as the winning phrase.

But what does that mean exactly?

As a donor behavior scientist, I am a firm believer in what Peter Drucker said: “If you can’t measure it, you can’t manage it.” So, here at Analytical Ones, we’ve developed a new Engagement Score (ES). We think it’s the last word in measuring engagement.

Over the past decade, we’ve been experimenting with many different models to best measure engagement. The problem is they tend to get far too complicated. And sometimes a simple metric is better than a perfect metric.

Last week, my business partner stumbled upon this reddit link and shared it with me:
https://i.redd.it/fy0zvuob8tfz.jpg

Basically, this link shows the different ways Starbucks calculates Long-term Value (LTV). To summarize, their “average” 20-year customer LTV is $14,100.

Think about that. The average beverage costs between $3-$4 at Starbucks. Talk about engagement.

Now, at Analytical Ones, we think a 20-year LTV is far too long of a period. We use a 5-year LTV instead. Starbucks 5-year LTV would be $3,525.

Our new ES is based on two assumptions: 1) That engagement is best measured by LTV; and, 2) Starbucks is the Gold Standard of engagement. OK, this may not be a perfect model because it doesn’t consider volunteering and other measures. But we think any of our model’s deficiencies are mitigated by the beauty of its simplicity.

You can calculate your ES by dividing your organization’s 5-year donor LTV by 3,525, then multiply by 100. Or, by equation: ((Nonprofit LTV/Starbucks LTV)*100.)

For example, if the nonprofit organization has an LTV of $350, their ES = 9.9. If the nonprofit was a child sponsorship organization with an LTV of $2,100, their ES = 59.6.

So, what’s your ES?

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