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Topic: Volume vs Value – a Framework for Donor Acquisition in a Tough Market
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Volume vs ValueA Framework for Donor Acquisition in a
Tough Market :
Mathew NevilleDirector of Public Engagement, World Vision UK
8th October 2014
Key Objectives of Presentation
Our focus on the volume of supporters has the potential to actually destroy value
1. The Value of our base and not the number of
supporters should be the key metric that drives
behaviour
2. But what is value and how do we measure it?
A Framework for Investment
Use all four of the following approaches
1. Strategic value: does the plan have the right amount of investment into areas of strategic value that will reach the target audience through own-able channels and will reduce exposure to risk?
2. Optimising the mix: does the plan focus on the channels that deliver the best financial value and is the econometric impact fully understood?
3. Maintaining multiple channels: does the plan contain investment into multiple channels to ensure that we don’t become overly reliant in one area?
4. Exceeding the minimum replacement rate: does the plan include enough budget and activity to recruit more acquisitions than cancellations when projected ROI is taken into account?
The Strategy Map
4 fundamental questions in defining strategic value
Who is our target Audience?
How will we sustain
competitive advantage?
What is our position in the
market?
What is the operating plan?
1
2
3
4Inspire the UK to take action
that transforms the lives of the world’s poorest children:
= Raise Income & Influence
A Framework for Investment
Use all four of the following approaches
1. Strategic value: does the plan have the right amount of investment into areas of strategic value that will reach the target audience through own-able channels and will reduce exposure to risk?
2. Optimising the mix: does the plan focus on the channels that deliver the best financial value and is the econometric impact fully understood?
3. Maintaining multiple channels: does the plan contain investment into multiple channels to ensure that we don’t become overly reliant in one area?
4. Exceeding the minimum replacement rate: does the plan include enough budget and activity to recruit more acquisitions than cancellations when projected ROI is taken into account?
6
Optimising The Mix - CPA
CPA analysis tells us to invest in channels that have the lowest cost per acquisition
CPA
1Non-TV Advertising #1
2F2F A #2
3F2F B #3
4Festivals #4
5Girls Night Out #5
6TV #6
•Advertising, and F2F A and B look like best
investments•TV CPA is nearly double
F2F so looks like bad investment
7
Optimising The Mix - LTDV
LTDV tells us to invest in channels that generate the most cash over the lifetime
•LTDV is income less CPA and all associated
service costs•Girls Night Out and TV
look like significantly better investments compared to CPA
•F2F B is only 1/6th as valuable as GNO•TV looks like an
attractive investment
Lifetime Value
1Girls Night Out #1
2Non-TV Advertising #2
3TV #3
4F2F A #4
5Festivals #5
6F2F B #6
8
Optimising The Mix - IRR
IRR uses a combination of cost, LTDV and time value of money.
•IRR uses 10 year value over CPA
•Non-TV advertising still looks like best channel
•F2F A is now more attractive than TV
despite generating less cash over lifetime
IRR (Total)
1Non-TV Advertising #1
2Girls Night Out #2
3F2F A #3
4Festivals #4
5TV #5
6F2F B #6
9
Optimising The Mix – Unrestricted Impact
IRR uses a combination of cost, LTDV and time value of money.
•Picture changes when you realise that three
channels actually have a negative impact on unrestricted cash
•What are the future implications of this?
IRR (Unrestricted)
1Non-TV Advertising #1
2Girls Night Out #2
3F2F A #3
4Festivals #4
5TV #5
6F2F B #6
10
Optimising The Mix - Ranking
Interesting to consider how different measurements will impact decision making
IRR (Total)
1
Non-TV Advertising
#1
2
Girls Night Out
#2
3F2F A #3
4Festivals #4
5TV #5
6F2F B #6
Lifetime Value
1
Girls Night Out
#1
2
Non-TV Advertising
#2
3TV #3
4F2F A #4
5Festivals #5
6F2F B #6
CPA
1
Non-TV Advertising
#1
2F2F A #2
3F2F B #3
4Festivals #4
5
Girls Night Out
#5
6TV #6
•A focus on CPA only could actually destroy value further down the line and erode unrestricted cash
•Should each channel have a ‘hurdle rate’?
IRR (Unrestricted)
1
Non-TV Advertising
#1
2
Girls Night Out
#2
3F2F A #3
4Festivals #4
5TV #5
6F2F B #6
11
Optimising The Mix – econometric understanding
Online is the best channel no matter what measurement you use – but why?
CPA Lifetime Value IRR (Total)
1online #1 1
online #1 1online #1
2Non-TV Advertising #2 2
Non-TV Advertising #2 2Non-TV Advertising #2
3F2F A #3 3
Girls Night Out #3 3Girls Night Out #3
4 F2F B #4 4TV #4 4
F2F A #4
5Festivals #5 5
F2F A #5 5Festivals #5
6Girls Night Out #6 6
Festivals #6 6TV #6
7TV #7
7F2F B #7
7F2F B #7
•How should we understand the inter-play between channels –especially the most valuable? How is activity in one channel (i.e. TV)
driving sign-ups in another channel (i.e. Online)?
A Framework for Investment
Use all four of the following approaches
1. Strategic value: does the plan have the right amount of investment into areas of strategic value that will reach the target audience through own-able channels and will reduce exposure to risk?
2. Optimising the mix: does the plan focus on the channels that deliver the best financial value and is the econometric impact fully understood?
3. Maintaining multiple channels: does the plan contain investment into multiple channels to ensure that we don’t become overly reliant in one area?
4. Exceeding the minimum replacement rate: does the plan include enough budget and activity to recruit more acquisitions than cancellations when projected ROI is taken into account?
A Framework for Investment
Use all four of the following approaches
1. Strategic value: does the plan have the right amount of investment into areas of strategic value that will reach the target audience through own-able channels and will reduce exposure to risk?
2. Optimising the mix: does the plan focus on the channels that deliver the best financial value and is the econometric impact fully understood?
3. Maintaining multiple channels: does the plan contain investment into multiple channels to ensure that we don’t become overly reliant in one area?
4. Exceeding the minimum replacement rate: does the plan include enough budget and activity to recruit more acquisitions than cancellations when projected ROI is taken into account?
15
Spending at the Minimum Replacement Rate
We have under-spent our minimum growth requirement and our minimum replacement rate
Blended ROI has been 3.8
If ROI stays flat, we must spend 26% of income to stay flat
*
The alternative to this approach is to increase ROI2
1
