Time to Update The 5-Year Value Metric

28 Jan Time to Update The 5-Year Value Metric

By David Allen, Development for Conservation

For the last several years, about this time, I have posted about a metric I’ve wanted to collect data on – the 5-year-value of new members.

Last year I asked everyone to look back at the donors who made first gifts (ever) to your organization during the calendar year 2014 and the amount of money that group of donors has given collectively since then.

The division of those two numbers provides an average: the amount of money donors recruited five years ago have given to the organization. That’s the 5-year-value of new members from 2014.

Of course, many of those new donors never gave again. Others gave two or three years in a row and then dropped out. And still others gave, dropped, and came back. But the 5-year-value still works as an average.

Last year, I heard back from 22 different organizations. The range of experience was from $174 at the low end to nearly $4,500 at the high end. And the median was about $1,100.

So let’s do it again this year!

Here’s what I will need from you, if you’re willing to participate:

• Isolate the members and donors you have who made first gifts to your organization at some point – any point – during the calendar year 2015.
• Now add up everything those donors have given to your organization – as a group – since then (through 12/31/2019).
• Send those two numbers to me – the number of donors and the total amount they have given. The email address is David (at) DevelopmentForConservation (dot) com.

Note that I do not reveal the names of the organizations when I report on the data.

If you did it last year as well, compare the two numbers. Are they similar? If they differ dramatically, can you explain why?

If you can, also isolate what it cost you to recruit those members and donors in 2015. What did you spend that year on recruitment? Did you try different recruitment strategies? For example, direct mail versus recruitment at events versus friends of Board members? If so, did you use source codes?

If you did, can you now determine whether the 5-year values were different with the different strategies? (If so, I’d love to hear about your experience!)

And now is a good time to isolate what you spent on recruitment in 2019, too. It will help you with your 5-year metric calculations in 2022! Hint: if you are not capturing source codes already, it’s not too late to start. And you’ll be glad you did five years from now.

This are some of the points I make in workshop presentations:

• A 5-year value above $600 is turning out to be pretty normal. If your numbers are lower, you can probably do better. I’ll bring those ideas back in a future post.
• It can cost as much as $150-200 to recruit a new donor, depending on your method of recruitment. Many recruitment efforts cost less than this, but they can be difficult to scale.
• The 1-year Return on Investment (ROI) is often negative; it often costs more money to recruit a new donor than that person actually contributes in their first year.
• BUT – the 5-year ROI is pretty good.
• And (hopefully!) none of this includes planned giving.

It’s like a black box with $150 inputs on one side, $800 outputs on the other, and five years of donor communications, engagement opportunities, and renewal notices in between.

And finally, what are you doing to help improve your 5-year values? What have you tried that is working? What have you tried that isn’t (yet) working?

May I share your experience with others?

Cheers, and have a great week!

-da

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