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.
2 responses to “How To Measure Loyalty”
Behavioral Science Q & A
Integrating an individual giving appeal with other communications from a charity can have both positive and negative effects, and the outcome largely depends on how it’s executed. Advantages of Integration Brand Consistency: Maintaining a consistent appearance and messaging across all communications can reinforce the org’s brand identity and strengthen brand recognition and trust among your […]
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I’m not aware of any in-market tests specifically comparing recurring vs. gift frequency language. I suspect the answer might not be the same with all gift frequencies, nor with all people. It sounds like a great opportunity for you to test and find out what works for your audience. Based on the literature, here’s a couple […]
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Based on what we know from existing data, those renewal notices can actually be pretty effective in getting people to donate. They tap into our psychology – creating a sense of urgency, reminding us of past support, and using personalization to make the message hit home. They’re playing on our natural tendencies to feel obligated […]
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Interesting question. I had a quick look at the testing done on this topic. On the positive side, in all cases, over half of donors decide to cover the fee. In some cases, it goes as high as 65%. Not a negligible percentage at all. Here’s another test from iRaiser showing consistent results (see point […]
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There’s just one thing to consider when designing a supporter journey: the supporter. More specifically, you need to take into account: Who the supporter is i.e. their identity, which is the reason they support this cause, and their personality, which describes the way they “see” and process the world. These will determine the kind of […]
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I’m not an expert in this but a quick search surfaced this article on the effect of tax reforms on 2019’s charitable giving. The researchers didn’t find a reduction. Actually, they observed an “increase in charitable contributions in 2019, even with the lower tax rates and the dramatically smaller number of taxpayers who itemize their […]
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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?