As introduced in my previous post The Path to Donor Centricity: Knowing Your Donors through Analysis, the first step along the path toward donor-centric marketing is getting to know your donor. The crucial next step is understanding how much that person may be worth to your organization over the next few years. You can understand this value by building a future value model.
A better understanding of a person’s potential value as a donor enables you to decide how much to invest in them. Elements of that investment may include frequency of contact, channel choice, or how much time you spend planning the customer engagement strategy and journey.
To capture that value across your donor set, build a model that predicts the future value of each of your active and recently lapsed donors. From an analytic standpoint, this is the most straightforward part of my people-based analysis process.
Guidelines for building a future value model:
- Build separate models that independently predict retention, average gift, and gift frequency. Combine the outputs for a more accurate future value.
- Focus on revenue streams that you have today. If you are planning a new way to give (e.g., sustainer), then use “rules” instead of a model. My sustainers will give $19 a month and retain at X percent per month.
- Incorporate robust transactional, engagement, and third-party data.
- Focus on active donors first and then move onto deeply lapsed donors and prospects. You will need a different model for each of these groups.
- Remember that not all models are created equal. As much as you may think so, models are not commodities. Task your best internal resources or go find an exceptional partner.
- Break up the output into manageable groups like high, medium, low and no. Put concrete dollar values on each group.
Using a model with these characteristics will provide you with clear guidelines into how much you should invest in a group of donors and offer some general lessons into how your donors engage with you today. From the use of future value models, I have learned that for most organizations, digital donors are younger, more affluent, and more likely to convert to sustainers. Another lesson learned is that a donor’s value is more related to her past actions and income than to her age. Mid-level donors tend to span the all age ranges versus the older, smaller dollar donors.
Now that you are prepared to understand the future value of your donors, you can move on to the next step of the process and learn more about who your donors are and why they engage with you.
Also tune into our webinar, Path to Donor Centricity: The Analytic First Steps and connect with me to let me know: Do you factor future value into your decision making? What approaches have you seen work? Reach out at [email protected]