What's a Donor Worth? WETA Utilizes Lifetime Value Analysis to Understand Passport Impact
What’s the value of a single donor to a PBS member station? When it comes to donor acquisition, many stations focus on measuring new donor value based on a one-time pledge gift, or in the case of sustainers, an annual gift value — especially when considering budgeting for the fiscal year.
But what about the real net value of the donor after costs? And what about future years? Shouldn’t we be looking at the long-term net value of a donor?
Those are the questions WETA began asking. As WETA began looking at the actual numbers — from annualized income across channels to projected five-year revenue and acquisition costs — they realized that the system had been undervaluing members acquired through WETA Passport and some other channels.
“It was leading stations to the wrong conclusions and the wrong investments,” says Jeff Regen, WETA’s vice president of membership marketing & development services. WETA took note of how stations quickly judge the performance of campaigns. “They look at the initial gift, for one-time gifts, or at the sustainer gift multiplied by 12,” he says. “That’s the standard across public media. It’s been this way for years.”
WETA identified three ways this approach was limiting results. First, different sources of donors have different retention rates. For example, the retention rates for new, direct mail-acquired one-time donors are much higher than the retention rates for one-time donors acquired through TV pledge or Passport.
Second, different donor sources are characterized by different ratios of one-time donors to sustainers. For example, Passport sees much higher sustainer rates than other channels, TV and FM pledge tend to have moderate sustainer rates and direct mail has almost no sustainers. As a result, Passport-acquired donors at WETA had a significantly higher 12-month retention rate (55 percent) than TV pledge (37 percent).
Third—and most importantly—acquisition costs diverge greatly for different types of donors. “Some channels, like Passport and online, might have small Facebook campaigns but the acquisition cost is basically zero, outside of staff time,” says Regen. “Others, like direct mail and canvassing have high acquisition costs while TV and FM pledge have moderate acquisition costs.”
Those initial costs substantially impact the lifetime value of a donor. “The most you’re ever going to spend to bring in a new member or reengage a lapsed member is from that acquisition cost,” Brandon Hemel, WETA’s chief data analyst, explains. Across the board, maintaining a membership has approximately the same cost. But actually acquiring that member in the first place varies significantly. “You’re typically going to spend a lot more to bring in a new member through direct mail, canvass or even pledge than you will through digital channels,” says Hemel.
The following WETA-produced graphic highlights these differences, and takes into account every expenditure — from premiums and studio time to mail costs — with a few exceptions (see disclaimer).
The Value of WETA Passport
Considering that five-year lifetime value while subtracting acquisition costs gives a much more accurate portrait of the true value of new and reactivated donors. “The thing that stood out to me was Passport,” Hemel says. “We think of Passport members as $60-a-year donors, compared to TV or FM pledge where you’re getting $120 out of one person or $210 out of another.” But while the gross gift amount of pledge-acquired donors may be higher over a 12-month period, they don’t tend to maintain a relationship with the station as long.
In other words, WETA Passport donors aren’t such low-dollar donors when you consider their lifetime value. With Passport, “we’re going to keep more donors who are giving on an automatic basis for content, as compared to someone who might give because they really want the Thank You Gift from Hamilton’s America from the Spring Pledge Drive,” Hemel says.
Meanwhile, Passport is also content-driven, but in a way more closely tied to mission. As a result, it has the highest sustainer ratio of any major donor acquisition channel. Passport members continue to give, month after month. “Passport donors are significantly more valuable than you think,” Regen says. As seen in the Projected Five Year Net Revenue graphic, Passport donors deliver large amounts of revenue in later years—even though their income within the first year is less than that of TV pledge-acquired donors.
Hemel and Regen noted a few other realities to consider from their research.
- Direct mail donors lose money in the first year because they are expensive to acquire, but have strong subsequent value due to strong retention rates and the highest propensity for donors to upgrade. Hemel says direct mail donors are also among the most likely to leave bequests. “It has a unique ability to bond members to the mission,” he says.
- TV pledge donors have lower retention rates and moderate acquisition costs, which reduces their overall long-term value.
- Canvassed sustainers have high retention rates, but large upfront costs reduce their long-term value.
- Non-Passport online donors are especially valuable as they have high average gifts, high retention rates and little-to-no acquisition costs outside of staff time.
As a result, WETA has determined that Passport and other online-acquired donors are more valuable than they initially appeared.
That doesn’t mean abandoning pledge, however. “None of this is to suggest that we drop these other acquisition channels,” says Hemel. “The mix of channels is critical to our stations’ and system’s health.” Each acquisition channel plays a role in member growth. “What we’re saying is we should be focusing on long-term value. Don’t leave something out of the mix — like Passport donors — simply because they look like low-dollar donors. They remain on the file for much longer.”
Regen says TV pledge may provide the biggest immediate shot in the arm during a focus on the fiscal year, but stations should consider long-term value as they look to the future. “We are not saying you shouldn’t do TV pledge or direct mail or anything,” he emphasizes again. “But as a system, we are underinvesting in Passport, given how important it and how important streaming is for our future. Long-term, we’re going to see more value out of digital channels like Passport.”