The Changing Complexion of Lifetime Value

By Nick Ellinger

I’ve argued that if you were stranded on a deserted island with only one variable and still had to run your direct marketing program (admittedly implausible), the total net donor lifetime value would be it.  It’s a measure that balances short and long-term, investment and return, invest to retain and bless and release.

And yet, how we measure lifetime value is increasingly incomplete because it doesn’t cover all of lifetime value. 

Traditional Lifetime Value Doesn’t Cover Social Impact of Donors 

Influence ripples through populations like still ponds ripple with the dropping of a stone. Each person is both influenced by and influences others.  That means that when someone takes an action with your organization, they make it more likely that people in their social network will do likewise, in the same way that social groups will grow to like the same music. 

Different people belong to different social groups and have different levels of influence within them.  Your future 5K team captains or gala table hosts — the people with the most influence over the best networks — remain hidden in traditional LTV calculations. 

That’s why we just added influence and receptivity scores to donor records. This Social Value modeling has implications for  

• Donor journeys: you’ll know who the most effective donor would be on the gala host committee and who would rather write you a check to avoid going (introverts of the world, unite by silently nodding in each others’ directions and curling up with a good book) 
• Acquisition investment: if we can quantify the additional value a donor brings through their ripples in their social pond, we can spend more to acquire them. 
• Acquisition targeting: if your parents, siblings, coworkers, and friends all donated to an organization recently, how likely are you to take the plunge?  Looking at the science of influence can tell you who is the most likely prospect for acquiring. 
• Facilitating influence: the tchotchkes that go into direct mail packages or back-end premiums often get a bad name, but they can also help your donor signal to their social network that they are a supporter. 

With these new measures, you can uncover hidden drivers of engagement, reduce wasted spend, and elevate campaign impact through smarter targeting of both direct donors and those who inspire giving in others. 

Traditional Lifetime Value Doesn’t Look at the Full Lifetime 

Usually, there is an artificial time horizon – often three, five, or ten years – put on lifetime value. However, we also know that a large part of a donor's value lies in the possibility that they may leave a legacy that extends beyond our lifetimes.  

One large national health charity finds that about 0.4% of its donors leave a legacy gift. The average planned gift is about $80,000. That means that their average donor leaves a $320 legacy gift.  

Generally, this means organizations are spending far too little to acquire donors. Last year, the average cost in DRTV to acquire a monthly donor across Moore clients was $307. If each of these donors averages a $320 legacy gift, they are getting these donors for free and can enjoy all the monthly donations they make while alive at no cost. 

More specifically, it means that donors who are more likely to be in that august 0.4% are far more valuable than those who aren’t. If legacy giving is a substantial part of the value the average donor brings to an organization, it becomes imperative to identify (read: model for) those most likely to leave legacy gifts. 

It’s also why Moore has donor ambassadors who can call on planned, mid- or high-level prospects to thank, support, and learn from them. An international relief organization was working to increase the value of its mid-level donors. Working with Moore Donor Ambassadors who contacted them through bespoke emails, phone calls, and/or handwritten notes, their average yearly donations increased by 10%, and their retention increased by 20%. 

Traditional Lifetime Value is Retrospective When You Want Something for the Future 

Let’s say you put a five-year time horizon on revenues to create your lifetime value estimate. That means you are looking at donors acquired in 2020. How much does that donor tell you about a donor acquired today? And how actionable is it? 

Ideally, you would look at a modeled solution — one that uses all an organization's historical data to predict the donors you have acquired or seek to acquire right now. If you are finding acquisition sources that look good on cost-to-acquire but acquire only donors ready to bail before gift number two, you want to be able to shift your investment to donors, channels, communications, or tactics that acquire better donors. That’s why you need modeling for forward-looking lifetime value. 

Is LTV still the best variable to analyze? Certainly, but more can be done to make lifetime value actually like the value you’ll get from a donor over their lifetime. By looking at donors’ social value, legacy giving, and future projections of lifetime value, you get ever closer to a full picture of your file, including the additional revenues that come with it.