How To Measure Loyalty
In this mini-debate from DMNews, three approaches to measuring loyalty are advanced:
1. Lifetime value — the person who buys (donates) the most over the longest period.
2. Share of wallet — the person who devotes the largest percentage of their spend (or donations) in your category to your product/brand (or nonprofit).
3. Referrals — the person who acts as your most enthusiastic evangelist, converting the most consumers (or donors) to your product/brand (or nonprofit).
Thinking in fundraising terms, which of these do you think is the best measure of a donor’s loyalty? If you could identify the members of each group in your donor file, which group would you invest in the most?
Of course you could play it safe and say: "Combine all of the above!"
Each approach can yield a dollar value, assuming donors volunteer critical information. But you would probably be measuring the past. And what’s more important to you, confirming past loyalty or predicting future loyalty?
Is there any reason to believe one of these approaches somehow better identifies the donors with most future value to your organization … or do you just have to "believe" in continuity … those who have done the "most" so far (however measured) will just keep on truckin’.
BTW, DMNews picks share of wallet. Agree?
Tom
P.S. Have you read our DonorTrends white papers on donor loyalty? They’re available here.
P.P.S. Today’s the last day to complete our mid-year Fundraising Assessment survey, so we can include your observations in our report this week.
To be brief: all loyalty measures focusing on monetary value*fail to calculate the net profitability* of a donor. I think loyalty (dictionary: faithfulness to commitments or obligations) is one of life’s overwhelmingly important attributes, but in fundraising loyalty without a net that is positive is senseless. Too many charity managers (and you fellows know this) pursue aggregate net profitable mass groups of donors without separating the truly profitable from the rest.
That’s it.
How long has a customer stayed with you? Isn’t that what loyalty is about?