How to Measure the Value of an Online Supporter
Over here at Care2 we get this question a lot. And we should. Any nonprofit seeking to recruit online supporters should rightly be concerned with the ultimate value derived from such supporters. The following is an attempt to address this question, without any presumption that it will provide a definitive answer. Check out the simple calculator below, and if you want more a detailed explanation, read the discussion at the bottom of this post or give us call. We value the expertise of our colleagues and welcome any feedback or comments.
To use the attached calculator (see below Related Documents) simply enter the data from your organization. In selecting the number of addresses you can use a subset, such as all email gathered from a particular source or in a given year, or your entire file. If you are carrying a lot of inactive addresses the average value will of course be lower. The second calculator shows benchmark values from a recent study so that you can compare the performance of your names with those of other organizations working in the same field. The yellow cells are input (variable) cells.
How do you compare?
Here's a summary of the lifetime value per email from different issue areas, based on a recent benchmark study and assuming the 50% of the emails on each list go inactive each year.*
Benchmark average value of an email address
All areas $7.86
Public Affairs $2.69
Animal Welfare $6.99
*Source: This data comes from Convio's 2008 Benchmark Study covering more than 400 organizations.
The first challenge in answering this question is that different organizations use and value online supporters differently. Many nonprofits that have large, active email lists do little or no fundraising from their lists, others use these lists almost exclusively as a source of donations. The same goes for advocacy. In fact, some nonprofits have two completely separate email lists, one for advocacy, and one for fundraising.
A second challenge is that organizations vary greatly in how they measure this value. Some base the value strictly on the donations raised compared to the cost of acquiring an online supporter. Others factor in the value of advocacy, community, mission fulfillment, and branding.
In some respects assessing the value of an online supporter by measuring donations is the easiest, or at least most easily quantified, approach. There are many ways of measuring donor value, and here we've created a fairly basic calculator that looks at the value of an email address based on average donations over time.
The amount of money you are willing to spend to acquire an online supporter should be determined by the value that your organization will receive from that supporter (and permission to send messages to him/her, of course). If the main value you are concerned with is donations, then you will want to make sure that the donated dollars you receive from the average email address that you acquire is higher than the average price you paid for these addresses.
Don't fall into the trap of counting only the first donation. Instead consider the lifetime value of the email addresses you acquire. Most people who donate will do so more than once.
Thanks to Mark Rovner of Sea Change Strategies and Riche Zamor of Community IT Innovators for their feedback on this calculator. Of course, any mistakes or shortcomings are Care2's, not theirs. Thanks also to Vinay Bhagat at Convio for letting us use data from the 2008 Benchmark Study.
Q: How is drop-off measured?
A: This is the number of emails in your file that go inactive each year, there are different ways of determining whether an email is inactive, the most important thing is to be internally consistent in how you measure this. One common measure is if the email hard bounces, unsubscribes, or does not open in 12 months.
Q: Does this include offline giving too?
A: The Convio benchmark numbers exclude offline giving. However, if your organizations uses direct mail, telemarketing, and other methods for asking your online supporters for money this should be included. This will give you a more accurate picture. Organizations that use multiple channels to appeal for support report a higher value and larger gifts from their online supporters.
Q: Does this account for inflation?
A: To accurately assess the value of any activity businesses typically calculate the net present value of the asset. This takes into account all revenue generated by an activity into the future, discounted for inflation. We did not include a discount, or inflation, rate in this calculator, mostly for simplicity sake.
Q: Does this factor in the cost of email acquisition?
A: No, email acquisition costs vary greatly and are measured in numerous ways. The main sources of email list growth are site traffic, permission based list building (al la Care2), Google Adwords, direct mail list appends, and list rentals. The cost for each, and the quality of the addresses received can be vastly different from source to source. It is important to remember that there is more than one kind of cost, optimizing your web site for search engines may not require an out of pocket expense, but it may require a lot of valuable staff time and other resources.
Source: Frogloop, Care2's nonprofit communications and marketing blog: http://www.frogloop.com/