The Most Important Metric - Lifetime Value
The way we calculate a donor’s value over the course of his/her lifetime is to divide the total of all previous giving by the total number of gifts. That yields the average.
It’s a tremendously important metric and shouldn’t be ignored by development pros. What this “average” implies is that if the value is high, you’ve been following your key donor and such metrics as cost to acquire a donor, average gift, attrition rate, renewal rate, average revenues–per donor per year, average number of gifts per donor per year, RoI, cost to raise a dollar, etc.
If the value is low, or shrinking, it’s altogether possible one of the following problems exists:
you’re attracting the wrong kinds of donors –those who give one gift at a low-dollar value
you’re either over or under-appealing to your donors
you’re treating your donors transactionally rather than personally
you’re failing to move donors up the donor pyramid
you’re not segmenting your donors on the recency, frequency, or $ value of their gifts, and therefore, are not maximizing the value of each donor in your database.
Here’s the point: when your average donors stay with you for a long time, and increase their level of commitment over time, you are clearly creating and maintaining meaningful, mutually beneficial relationships with your supporters.
How do you know that? Because the value of your average donor over his/her lifetime tells you so. And that’s why it’s the most important metric for you to know.
Do you have any particular metric that you follow and that guides your future decisions?