Lifetime Value - a personal odyssey John Whitehead WaterAid September 2011 Cash Gifts v. Committed Giving • It is much harder to model lifetime value for cash donors than for regular donors. • Cash donors lapse after each gift, and you may only receive one or two gifts a year per donor. • Regular donors continue until cancellation and for monthlies you receive 12 gifts a year. How simplistic can you get? • One year value = annual value of the Direct Debit • Four year value = 4x annual value of the Direct Debit But we all know about attrition and how many donors you can lose in the first year. Direct Debit Retention by Recruitment Channel 100% 95.0% 90% 84.6% 88.7% 80% 72.7% 70% 60% 52.2% 50% 37.1% 40% 30% 20% 10% 0% 0 6 12 18 24 Months Inserts DRTV Face-to-Face 30 36 Version 1 Baseline Lifetime Value • Simple Excel Model • Initial DD value, factoring monthly attrition Version 2 • Baseline model plus the following factors, with associated costs. • Channel • Recruitment costs • Annual stewardship costs • Gift Aid rates • DP opt-out rates • Upgrade propensity • Cash appeal responsiveness Over what period? • I year? • 5 years? • 10 years? The relative performance of different channels does depend on the time horizon • Face-to-face may well break even first by virtue of the high average gift value. • Even after two years inserts probably have a lower ROI than either DRTV or F2F. • At WaterAid inserts start to pull ahead after three years. • We look at net LTV after 5 years, by which time inserts lead DRTV with F2F in a poor third place. • But in detail, some DRTV segments and some insert segments deliver similar 5year LTV. However… • …At the end of 5 years you could well have lost less than 30% of your insert donors... • …nearly 50% of your DRTV donors… • …and 75% of your F2F donors. • So the story continues beyond 5 years Does “donor half life” help? • We lose 50% of our face 2 face donors in 12-14 months • We lose 50% of our DRTV donors in 6064 months • But to lose 50% of our inserts donors takes over 120 months • Sadly, unlike radiation, the decay rate is not steady, so this judges channels like F2F too harshly... 5 Year Survival Rate • A channel with a high annual value and a high attrition rate may have a similar, or better 5yr LTV than a channel with a low annual value but a low attrition rate. • But you may have many more of the lower value donors left at the end of 5 years • Reporting the 5 year survival rate alongside LTV helps tell the full story. Our 5 year survival rates are something like this Inserts DRTV Face to Face 75% 55% 20% It’s all about survival folks!