Q & A: tenure and the donor loyalty thing
Howard Lake | 2 March 2009 | Blogs
A three-part blog on donor loyalty. Part one: tenure.
Q: there’s a lot of talk about donor loyalty – 627,000 hits on Google. But I can’t find much on how we should quantify loyalty though.
A: well, one way is to measure a donor’s tenure.
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Q: what’s that?
A: tenure is a time measurement, made most easily from data in a donor database. The word comes from a Latin root meaning to hold or possess.
Tenure, at least the way I choose to define it, is the number of years of continuous giving. You can think of it as a measurement of the donor’s lifetime relationship with the charity, but independent of their financial value. It’s the ‘L’ in LTV (lifetime value)
Q: why do you think donor tenure important?
A: because it quantifies the duration of a relationship between the charity and the donor. All fundraisers want lifetime-loyal donors (or say they do).
In general, long relationships provide reliable, predictable revenue, often leading, it is said, to increased involvement and engagement, major gifts and legacies. Long donor relationships are a sure sign of success.
Q: How come then that I’ve never heard of tenure?
A: good question. Fundraising has its blind spots. Take RFM (recency, frequency, monetary value) which is widely used. ‘R’ recency is the time since the last donation and the shorter it is the higher we value the donor. So fundraisers do look at time, but look in the wrong place. We don’t take account of the lifetime association that a donor has with us. RFM takes no account whatsoever of loyalty. That’s why RFM is questionable when used alone and unaided by other measurements.
Q: how did you find out about tenure?
A: in the 1980s in the National Blood Service. I knew that blood donors’ giving patterns could be written in a form of one or zero codes: 1 ‘gave blood when asked’ and 0 ‘was asked but did not give blood’. We called it ‘pseudo binary’ because the patterns of 1s and 0s looked like binary numbers (numbers to the base 2).
But it was while I was working in Canada. Another dataholic and me wanted to measures of donor loyalty. We decided ‘years of continuous giving’ could be calculated relatively easily. We had good SPSS tools, good transaction-level data and know-how.
Q: how is it measured?
A: you identify the donor’s first ever gift (by sequencing by date ) and then extract the year part of the date – easy in SPSS. Then you identify their last ever gift and extract the year. You subtract the earliest from the latest to get ‘tenure’. Note that if the donor has only been on file 1 year you must correct for that because 2008-2008 = 0.
Q: but you said it is years of continuous giving. Explain please.
A: for a donor to show ‘perfectly loyal behaviour’ the yearly giving pattern should be unbroken. You can, if you’ve some technical skills, code donor behaviour as ones and zeros. A plain 1 means ‘gave in the year’ and 0 means ‘did not give in the year’.
So donors with three, five and ten years of uninterrupted giving create loyalty patterns:
| Now >> past years | ||||||||||
| 3 years loyal | 1 | 1 | 1 | |||||||
| 5 years loyal | 1 | 1 | 1 | 1 | 1 | |||||
| 10 years loyal | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
It works the same for cash givers, monthly givers and those hybrids that do both.
Q: neat! So you can ‘see’ loyalty as patterns.
A: yes. Believe it or not, a lot of donors behave just like I describe. Above five years loyalty, historic LTVs (lifetime values) are always conspicuously large. And high tenure/high loyalty donors are reliable very likely to re-donate. In the examples above, each donor has a 100% retention rate.
Q: can you take to a more sophisticated level?
A: sure – instead of 1-0 patterns you can, instead, calculate the value in your local currency:
| Now >> past years | |
| 5 years loyal | £25 £25 £45 £10 £25 |
And you can add the number of gifts per year in the same way. You create I summary of the donor’s giving behaviour.
I’ll say more on tenure in the next blog: the range of tenure values and of course, to be ultra fashionable, the donor journey.
About Howard Lake
Howard Lake is consultant editor of UK Fundraising. He founded the site in 1994 and successfully sold it in 2022. As director of Giving X Ltd he is exploring growing giving on a massive scale.
He is the founder of Fundraising Camp and co-founder of GoodJobs.