[GUEST POST] Why Fundraiser Lifetime Value is Critical for Your Peer-to-Peer Fundraising Success
One of the key elements of a peer-to-peer fundraising strategy is ensuring that your champions who are fundraising with you feel empowered to leverage the relationships they have with their own networks. The ability for supporters to communicate with their networks will allow your campaign to proliferate across a wide variety of social networks, and your best fundraisers will be the ones who can master communication with their friends, family, and acquaintances.
Yet poor communication is also cited as the reason why most donors stop coming back to your organization and with retention rates absolutely plummeting across all revenue streams, optimizing your communications strategy should be at the top of your nonprofit’s list of priorities.
While most research concentrates on retaining the relationship with donors to your organization, very little attention is being paid toward ensuring the most effective fundraisers for your campaigns are retained. The reason for this retention focus should center on the importance of Lifetime Value.
What is Lifetime Value?
There’s an increasing amount of attention being paid to Donor Lifetime Value, which is defined as the prediction of how much money you can expect to receive from a donor during the lifetime of their giving. This is important for a few reasons, but the primary one is that it will typically cost your organization $1.25 to raise $1 from a new donor.
If viewed solely through the lens of one year, this would cause most executives to have a heart attack. That is why Lifetime Value (LTV) is such an important predictive indicator since it provides a clear path toward a strategy on fundraising engagement.
With a focus on the fundraisers that your organization acquires, who in turn acquire and retain their own donor networks, this means that it is vitally important to concentrate on Fundraiser LTV as well. Being able to predict the value of your network’s fundraising potential will guide your program’s managers toward concentrating on the most effective and powerful fundraisers.
High value fundraisers may also not necessarily be the ones raising the most money for an individual campaign but instead are bringing in extremely energized donors who are excited about the mission as well as supporting the fundraiser themselves for years to come.
Why this matters to peer-to-peer fundraising
There’s ample research to show that while overall growth in giving in the nonprofit sector increased by only 1.8% in 2018, peer-to-peer fundraising’s biggest events fared worse. In a review of the industry’s 30 largest peer-to-peer fundraising events, we saw a 2.7% decrease in revenue.
Yet there are many positives for the industry as a whole, with do-it-yourself fundraising and livestream fundraising posting extremely impressive gains. Fundraisers who are passionate about a cause have a wide variety of options at their disposal to activate their social networks and raise money.
When just 10% of your donor base is retained, then your organization will see an increase of 50% in net growth. Your fundraisers are the front line for ensuring these donors keep coming back to your organization. Being able to calculate the effectiveness of your fundraisers will empower your organization to project long term gains, which leads us to the idea of Fundraiser LTV. Yet how can we actually calculate this?
How to calculate Fundraiser Lifetime Value
In order to calculate your Fundraiser LTV, you’ll need to gather a few data points around your fundraisers and donations they are bringing in. There are three pieces of information you should run reports in your peer-to-peer fundraising platform to obtain:
- Fundraiser retention: how long the fundraiser maintains a relationship with your organization. Looking through historical data on how many years this individual has initiated a fundraising page with your organization is what’s needed here.
- Average campaign donation amount: what is the average donation that your fundraisers bring in? Make sure that when analyzing this alongside other giving data in your nonprofit CRM that you filter your results to gifts contributed to fundraisers and not regular annual fund donations or other non-peer-to-peer fundraising campaign gifts.
- Frequency of campaign donations: applying this to peer-to-peer fundraising is a bit tricky, but a simple way to go about it is to measure the total number of donations made during the time period of your campaign (let’s say years) and then divide that by the total number of donors to that peer to peer fundraising campaign in that same time period. If your campaign brought in 5000 donations from 1000 donors, then that’s a frequency of 5 contributions per donor.
If you want to then calculate the Fundraiser Lifetime Value, then bring all these items together.
FLTV = Retention Rate x Average campaign donation amount x Frequence of campaign donations
How to put FLTV in action
Calculating this information against campaigns that occur year to year will give your organization insight into the most effective peer-to-peer fundraising events that you are putting on. Is your FLTV higher for your do-it-yourself campaigns or perhaps your traditional 5k run/walk event? Are there particular benchmarks that you’re looking to see for your fundraisers and do your perceived “high performers” stack up to the reality of what the data says?
A few ideas to put your data into action are:
Increase Fundraiser Retention Rate
Examine the ways you are onboarding and re-engaging your fundraisers over the course of your campaigns. Have you instituted a welcome kit to prepare them for your campaign? Have you done anything special for your fundraising captains, such as a VIP after party?
Think about the ways that you can make your fundraisers feel like rockstars during the entirety of your campaign and beyond, and watch those retention numbers rise. The longer you keep a fundraiser, the less work it will be to raise money from your network.
Increase Average Donation Amounts
Ensuring that you are prepared for your campaign is key to its success, but also focusing on ways that your fundraisers can maximize their results is an easy way to increase the bottom line success of your event.
One little way that may have a big impact is optimizing the gift amount options on your fundraising pages. There’s good evidence showing that pre-selecting or even highlighting the preferred gift amount on your donation pages that are higher than your previous campaigns will lead to increased revenue.
Increase Frequency of Campaign Donations
One of the trickiest yet most powerful strategies your organization can implement is to encourage a recurring giving option around your peer-to-peer fundraising campaigns. The reality is that many of your fundraisers’ donors will treat this as a one-time gift made due to the relationship they have with the fundraiser.
Yet the ability to turn a donor into a recurring giver will have a major ripple effect on your lifetime value from the network. Donors making a recurring gift online can have as high as an 80% to 95% retention rate and can vastly increase your net revenue of your fundraising campaigns. If you focus your strategy around creating excitement for your fundraisers to encourage and obtain recurring donations, your organization will make a major impact in your capacity-building potential.
Tying it all together
Ultimately, the role of a calculation like Fundraiser Lifetime Value is to ensure your organization is focused on the most impactful relationships that your campaign can activate. There are a lot of passionate folks that may be interested in your cause but your organization only has so much time and energy, so putting into practice automation where necessary so you may free up time to focus on relationship building with the most effective fundraisers in your campaign is a good usage of the FLTV calculation.
Metrics are an important component of any long term success but your organization’s ultimate goal is to focus on building relationships and exciting your supporters around your mission. Use metrics like FLTV as a guide but always put the mission and fundraiser’s experience at the forefront of your strategy.
Did you know that Cathexis Partners is a Neon One Certified Consultant? They help clients utilize our peer-to-peer fundraising platform, Rallybound – learn more about our software today!.
By Tim Sarrantonio, Neon One
Tim Sarrantonio is a team member at Neon One and has more than 10 years of experience working for and volunteering with nonprofits. Tim has raised over $3 million for various causes, engaged and enhanced databases of all sizes, procured multiple successful grants, and formulated engaging communications and fundraising campaigns for several nonprofits. He has presented at international conferences and is a TEDx speaker on technology and philanthropy. He volunteers heavily in his home Niskayuna, NY.