In the nonprofit sector this is most often defined by transactional variables, namely some combination of R (recency of last gift), F (frequency of giving) and M (monetary amount).

The major problem is the almost tautological nature of the equation.  These are outcome measures on both sides of the equal sign.  This formula presumes (though we’re certain nobody says it this way inside organizations) good or loyal donors are born, not created.

Think about it, how do we manage the left side of this equation, which is supposed to be the means or causal side?  The only way is to push out enough stuff (through enough channels) to increase the likelihood of those good donors raising their hand, responding and thus, changing the left hand side of the equation and keeping themselves in the “good” bucket.

It seems silly and overly simplified to state it this way but this is precisely how the sector tends to operate – the group who pushes out the most stuff through the most channels wins (in a race to the bottom in our view).

What is the alternative?  Recasting the formula to include true cause and effect variables and a more accurate representation of what is actually occurring in the marketplace.  It is borderline heretical to say this but reality is reality; non profits do NOT directly impact donor behavior, only indirectly.  What you directly impact through the experiences you serve up across marketing, fundraising and donor service is how the donor feels or thinks about you.  This in turn causes their behavior.

The sector has got to start managing the business by understanding the causal levers it controls (i.e. the collective experiences) AND measuring the part you directly impact – how they feel and think.   The latter part of that statement is complicated.  There are far more bad ways to measure attitudes and needs and motivation than good.  Most of the work being done in the sector today is, to put it politely, not good.

It needn’t be the case.  The commercial sector, academics (and plenty of practitioners, including us) have spent enormous time, money and energy figuring out how to do it correctly.

By measuring and managing the business around real cause and effect and focusing on the pieces you directly control the organization can add tremendous operational efficiency and a heavy dose of reality into the business of retaining donors and deriving greater value by delivering greater value.