“You are what you measure.”
The older I get and the more experience I gain, the significance of such a statement grows. Measurement doesnโt just show progress or resultsโbut shows insights and, perhaps most importantly, shapes behavior.
In the context of nonprofits and fundraising, the act of measuring is often undervalued. This post aims to shed light on the importance of measurement, guide you on effectively implementing it, and suggest critical metrics that should be tracked.
The 4 Most Common Fundraising Metric Mistakes
Before we get into the essential fundraising metrics, letโs discuss four common mistakes nonprofits make in monitoring and evaluating metrics.
- Trying to track too much too often
- Tracking the noise and not the signal
- Not tracking the really important things
- No ability to track the really important things
1. Trying to Track Too Many KPIs Too Often
In the digital world, the amount of data available for tracking is vast, including metrics like average time spent on a site, bounce rates, traffic source growth, page views, and more. Additionally, various factors such as source, region, and time can further dissect this data, leading to an increasingly complex labyrinth of information. However, itโs important to note that not all this data is useful or insightful.
The challenge often lies not just in tracking these metrics but, more importantly, in understanding and interpreting them effectively, which can sometimes be overshadowed by the sheer volume of data collection.
Some metrics won’t even move very much in a week, month, or quarterโso spending the time to update your spreadsheet, dashboard, or whatever you’re using to track (another discussion) is genuinely a waste.
We try to have no more than 9 key metrics for our clients for the year. We use tools like Fundraising Report Card to get other historical metrics once every 6 months (or quarterly at most) to keep us focused. We spent our time tracking as lean as possible so we could spend more time interpreting and strategizing.
2. Tracking the Noise and Not the Signal
This is a tricky one, but the idea here is that you may look at the high-level metric, like total revenue, without looking at the underlying indicators, which may be a more accurate reflection of your work and goals (like transactions).
Another example is tracking traffic instead of conversion rate for your website. You can get a lot of traffic, but if no one signs up for an email, is โengaged,โ or makes a donation, youโre not looking at the actual value.
3. Not Tracking Really Important Things
Donor retention is one of the most critical metrics for your entire organization. And yet, in my experience, very few organizations even know what it is and what it has been, let alone tell you what it is and what theyโre doing to change or improve it.
The number of Facebook โlikesโ your page has is irrelevant if youโre keeping donors at a 30% rate. Not all metrics are created equal; therefore, they should not be treated, tracked, or discussed equally.
It sounds simple, but the hard work is figuring out the important stuff and rigorously tracking those metrics.
4. No Ability to Track the Really Important Things
Now, some really important things are not tracked because of limitations in the systems, tools, and infrastructure available. Take online donations as an example: If Google Analytics is not set up with goals or eCommerce tracking, it becomes difficult to determine which traffic sources, fundraising campaigns, or strategies effectively lead to donations. Without this information, decision-making is largely guesswork, akin to flying blind.
Tracking donor lifetime value (LTV) can be challenging, though modern nonprofit CRMs are improving in this regard. However, because of its complexity, this vital metric often goes unmonitored in many organizations. While I understand the difficulties involved, itโs important to note that this should not be an excuse for not tracking something critical to your organizationโs success.
If you want to lose weight, you buy a scaleโhow else will you know if youโre having success? Yet many organizations set goals for fundraising growth but refuse to โbuy the scaleโ and choose to use the abacus they already have. Or they get a third-hand partially broken scale. Or pay the milkman to tell them if they are losing weight (no offense to milkmen, just trying to pick someone you shouldnโt pay to tell you your weight).
So, those are some mistakes nonprofits often make regarding data and metrics. So, what are the actual metrics we should track and care about? Iโm glad you asked!
6 Fundraising Metrics You Should Care More About
1. Lifetime Value
When I build campaigns, I always choose โOne Metric That Matters.โ This is the one thing (more than any other) that Iโm interested in because it is most crucial to achieving and showing success. I believe that LTV is that One Metric That Matters for quality fundraising departments.
Or it should be.
And what is the biggest thing that helps boost LTV? It isnโt your fundraisingโฆ itโs your communication.
You need to talk to your donors more often, more specifically about what they want to hear, not what you want to say. If you do, youโll start increasing their LTV and, ultimately, your overall fundraising results over time.
2. Donor Retention
In the charity sector, a significant issue has come to light: poor donor retention rates. While it is essential to continue acquiring new donors, there needs to be a heightened focus on retaining those youโve already attracted.
Donor retention is crucial for its impact on LTV and because loyal donors can become effective advocates and fundraisers for your cause.
People are inspired to share and act when they feel a strong emotional connection, but this only happens when they trust the organization theyโre supporting.
Ultimately, keeping donors engaged boils down to building trust. The greater the trust you develop with a broader audience, the more likely they are to participate in activities like peer-to-peer fundraising, volunteering, and promoting your organization. This approach not only sustains but also strengthens your fundraising efforts over time.
3. Total Transactions or Number of Donations
For many of our campaigns, we donโt have access to donor retention or LTV stats and metrics for our clients. Transactions or donations often end up being our One Metric That Matters (note that itโs not the total dollars raised here, but rather the number of donations made). We do this for many reasons, but the number of donations is what I call a โcascading variable.โ
A โcascading variableโ means it is something that if you have success with it there is a great chance that success will โcascadeโ down and lead to success in other key areas.
This is also why I donโt like having total funds raised as the main (and definitely only) goal. You can set a $50,000 goal, get one unexpected check for $45,000, and boomโsuccess, right? For the total goal, yes. But in the end, you have no idea about things like retention, donor acquisition, and LTV.
In theory, if you have more and more people making donations, you are more likely to also have success in retaining your donors, boosting LTV, acquiring donors, and even reaching your total funds raised goal. It can cascade. It also has the benefit of being pretty simple to track and more comparable year over year.
4. Average Gift Size
There are several factors to look at when measuring fundraising successโone of them being average gift size. This metric gives your team a ballpark figure of how much donors are contributing on average.
While a lower average size isnโt necessarily a negative indicator of fundraising success, it can suggest opportunities to engage donors to give larger gifts.
For instance, if youโre seeing a decline in average gift size during a particular campaign, it might warrant a need for trying a new messaging or segmentation strategy.
On the other hand, an uptick in average gift size shows that your current strategy is resonating with your audienceโbravo!
Remember, itโs not just about the quantity of the donations, but itโs important to consider the quality of each gift, too.
5. Gifting Frequency
If one of your primary goals is lifting average donor retention or number of recurring gifts, lifting frequency is a crucial fundraising metric to track.
Gifting frequency can be a powerful indicator of donor loyalty. After all, the more often someone contributes, the more committed they are to seeing your cause flourish.
So, how can you achieve a higher gifting frequency rate?
By nurturing donor relationships through efforts like personalizing content, communicating with them consistently, and diversifying the ways youโre interacting with them, you can keep donors engaged year-round.
This leads to converting more one-time donors to recurring donors or incentivizing recurring donors to give on a more frequent basis (e.g, quarterly to monthly).
6. Acquisition Costs (Fundraising ROI)
Itโs important to understand the total amount of dollars your organization is raising, but another metric that shouldnโt be overlooked is acquisition costs, or fundraising ROI.
At the end of the day, knowing the cost of acquiring new donors is essential in balancing your costs versus revenue, allowing you to create a more sustainable fundraising model.
Knowing these numbers empowers your team to make more informed decisions about resource allocation, ensuring youโre focused on right strategies that yield the highest ROI.
What To Do With These Fundraising Metrics
Great, so youโve got some new or renewed interest in some old metricsโbut what do you do with them? Here are three non-technical things you should do with these metrics:
- Track them
- Think about them
- Set goals & share them
- Create a metrics dashboard
1. Track KPIs Regularly
Unless you are an enterprise organization, tracking these every quarter is probably good to balance the time to get the data and be able to extract any value from it. Lifetime Value and Donor Retention can be tricky to get a read on until a full year is complete, as most organizations have some key quarters/seasons that heavily skew their data. But whether itโs once a month or once a year, make sure you track these metrics.
2. Think About Your Metrics Beforehand
Keep these metrics in mind before a board meeting, a new campaign, or in staff meetings. Will this decision help improve Lifetime Value? Donor Retention? Transactions?
The importance of metrics lies in their ability to reveal what strategies are effective and how they influence behavior. However, having a clear idea of the behavioral changes you aim to achieve beforehand is essential.
For example, if you observe an increase or decrease in donor retention after six months but havenโt implemented any intentional strategies, then this change in retention rates becomes almost irrelevant.
Itโs crucial to connect your actions with the metrics to understand and leverage their significance.
3. Set Goals & Share Them
There is immediate accountability when things are made publicโeven just to a few people. Itโs why I think more people should post their giving and donations publicly and why goals and metrics should be accessible. For instance, if my gym attendance were reported on The New York Timesโ front page daily, I would be far more motivated to ensure I go to the gym consistently! This principle of visibility fostering responsibility applies broadly.
Informing your board, a friend, or a colleague about your goal to improve donor retention from 45% to 55% adds a layer of accountability and positive pressure. This commitment encourages you to implement strategies and make decisions to achieve that target.
Organizations can leverage both financial and non-financial incentives to motivate employees in the nonprofit sector. If goals related to donor retention are publicly shared or tied to a bonus system upon achievement, itโs likely to influence employee behavior. This shift in approach can, in turn, positively impact donor retention or any other chosen metric.
To help keep your team aligned on fundraising goals, Virtuous comes with a Gift Ask Pipeline. Within this tool, you can create goals both on an individual and team level. We see this most utilized to track and secure major gifts.
4. Create a Metrics Dashboard
Your nonprofit CRM should come with an interactive fundraising dashboard that highlights your most valuable KPIs, like donor retention, average gift, and LTV. This gives you a high-level overview of how your nonprofit is performing in real-time, whether you want a general view or campaign view.
Virtuousโ responsive dashboard is the first thing you see when you log into the platform. There, not only can you view your top metrics, but the dashboard can be customized for every individual user.
For example:
- Fundraising: The fundraising manager can set their dashboard to see total funds raised, total number of donors, and gift frequency.
- Marketing: The director of marketing might choose to see average acquisition costs, email click-through-rates, and conversion rate.
- Finance: The financial analyst can opt to see more accounting-driven metrics like breakdown of revenue channels or net assets.
We recognize that your CRM software is utilized by more than just your fundraising team. Our responsive platform empowers every team member to access the data insights relevant to their respective roles while still fostering collaboration across your entire organization.
Final Thoughts
Itโs always the right time to begin monitoring the correct metrics while also discontinuing the tracking of irrelevant or superficial ones. Key metrics like LTV, donor retention, and transaction numbers deserve more attention.
If you can establish effective tracking systems, consider these metrics in your decision-making, and publicly set your goals, youโll steer your efforts in a positive direction. This approach not only guides your strategy but also introduces a layer of accountability.
