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AI and Automation: Reducing Donor Churn and Maintaining Sponsor Interest

Greg RobertsJuly 5th 2019

Churn management is a vital element of any marketing strategy, and the NFP sector is no exception. Knowing what to track, and having a joined up view of all your donations data is vital for getting this right, and also opens the door to building innovative data-driven campaigns.

At our recent DataScience and Transformation in Charities event, I, Greg Roberts – Data Scientist at cloudThing, spoke about and demonstrated some of the awesome AI and Automation that is available to reduce churn and maintain sponsor interest- something hugely important for charities to keep their fundraising levels high. If you weren’t able to attend, don’t worry as I will cover the main points about how we can measure and analyse donor churn, and boost sponsor interest along with the benefits that this will bring, in this very blog- you're welcome!  

So, first things first, let’s make sure we understand what donor churn actually is before we dive in. Donor churn is the percentage of donors that have stopped donating/contributing to the charity within a particular time frame. To calculate this, you must divide the number of inactive donors/donors lost by the number of active donors that the charity had at the beginning of that specific time period. So, an example is if you started with 300 active donors and finished with only 285 active donors, your donor churn rate would be 5%. In an ideal Not-for-Profit organisation, the churn rate will be as close to 0% as possible. Knowing the churn rate in an organisation can really reflect how the organisation is doing and highlight the areas in which they need to improve in order to continue receiving support from their donors.  

OK, so why is it important to keep donor churn low (apart from the obvious fact that you don’t want to lose donors)? Well, here’s an interesting statistic for you: it costs five times as much to attract a new customer than it is to keep an existing one- that’s quite expensive. This is as true for charities as it is in e-commerce. To put it into more perspective, returning customers are more likely to spend roughly 67% more on the company’s products or services and with just a 5% increase in customer retention, it could generate a 25% increase in profit. With this increase in profit, it would mean that you would have to spend a lot less on the costs of acquiring new customers and in any organisation, the less you have to spend and the more profit you can obtain, the better! 

There are three general suggestions to keep donor churn at a minimum:  

Number ONE: Be Proactive. What do we mean here? As your donors are a key to keeping a charity running, you need to ensure that they know you care about them and their experiences. Let them know about your offers, appropriate updates and competitions they can get involved with before they ask you- this way they’ll feel valued and included and more likely to stay with you, therefore meaning less ‘pay-outs’ of trying to get new donors in.  

Number TWO: Who gets more of your attention? Many people try to focus on offering incentives so that they gain new customers- I agree that this is important, however your most valued customers are the ones you already have. Make sure to show your loyal donors that you appreciate them by offering them the incentives so that they choose to continue supporting you. They are giving to you so you need to make sure you are giving back to them as well- it’s just like a positive business relationship. 

Number THREE: Analysis is important. In order to minimise donor churn, you need to understand why some donors are choosing to leave. Once you understand this, you can begin to put in place (where necessary) plans to try to prevent it from happening again so that you can keep donor churn low and costs low as well.  

This takes us nicely onto what we can do in terms of how to measure and analyse the donor churn and this can be done by using Data Science…  

Measuring and analysing the donor churn  

Measuring the value you’re getting from your database is crucial to understanding how you can be more effective in activities which drive that value up. For example, you have hosted a charity cake sale event in order to raise money and want to see how many of your donors attended, if it was of interest to them etc. By understanding the following activities, So, what are some activities which are important to driving the value?   

  • Segmentation is an important activity. Understand the breakdown of your database in terms of activity: Highly Engaged (active > once a week), Engaged (active > once a month), Lapsing (last active between 1-3 months), Not active (active >3 months ago), Lost (active > 6 months).  

Understanding this segmentation can help you with identifying trends in active vs. lapsed donors. The rate of engagement may be a reason as to why your donor churn may be increasing or decreasing and although it is based on their activity, it can also relate to your activity with them. Low engagement could be a sign of a donor doesn’t feel valued and might be a signal of potential churn. Conversely, you don’t want to over engage and constantly bombard them- there needs to be the happy medium and this can be found by understanding the analytics and preferences of your donors.  

  • Segmentation by source: Direct/Online, Referral, Offline, Competition, OR even the type of content they engage with: Newsletters, Competitions/events, One-off campaigns.  

Segmentation by acquisition source is more about getting visibility on which channels are delivering higher quality customers. With this information, you can get an in-depth picture of how effectively your marketing funnel is for different channels. Tracking acquisition source against a customer for their whole lifetime will give you a clear indication of not just which channels are delivering the most prospects, but also which channels are generating the highest ROI over the longer term. Additionally, understanding how engagement with different types of campaigns differs between these cohorts can help you build a more targeted experience.  

Measuring impact against these individual segments is key. Measures such as:  

  • CLV – Customer Lifetime Value: A prediction of the net return attributed to the entire relationship with a donor. Being able to gauge this for different segments of your audience can help you predict what ROI you can expect from different types of campaign and which ones would be worth doing and with what end result (more donors gained with one event than another/more interest in some events than others depending on demographics and interests of surrounding donors etc).   
  • Subscriber churn – the percentage of your base who are becoming inactive or leaving you entirely. Again, you can then analyse this and understand why donors are leaving and improve this for future donors. 
  • Related to that, MRR Churn – the rate at which Monthly Recurring Revenue is lost from subscriber churn. MRR Churn is mostly used to measure churn from subscription products (a la Netflix), but is a valuable metric for any recurring model, especially where the monthly return isn’t constant across the database. Compared to subscriber churn, which will only tell you counts of people churning, MRR Churn will give you an insight into how the bottom line is changing over time. 

Understanding these metrics and how they interact in different cohorts plays a vital role in reducing churn- it will provide you with the information you need to improve outbound services, deliver more effective communications, and better understand your acquisition funnel. I promise it is a simple process and can provide you with so much useful intel to improving your organisation! 

A Summary and the Benefits  

Let’s take a quick overview of the blog for easy digesting:

  • All organisations, including Not-for-Profit, charity, public sector, etc, should be proactively working to reduce churn.   
  • It costs 5 times more expensive to get new donors- so understand the analysis of your donor churn and begin to make the changes needed to retain donors.  
  • A 5% increase in customer retention can mean a 25% increase in profit.  
  • To keep donor churn at a minimum: 1) Be Proactive, 2) Focus Attention on Existing Donors, 3) Analyse your Data.
  • Measuring and analysing the data received can help you in retaining customers and prevent you from losing further donors, therefore increasing your profit overall.   

I hope that’s given you some insight as to what donor churn is and how to maintain interest from current sponsors, and hopefully has showed you the business value that are available. Stay tuned for the next blog that will be on Predictive Science- when, where and how we can use it within the Not-for-Profit sector.  

In the meantime, if you found this blog useful, please feel free to let us know your thoughts and if you would like to see how tech can help put this principles into practice within your Not-for-Profit organisation, please get in touch today for a chat! 

© Greg RobertsJuly 5th 2019

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