The master formula for online fundraising optimization

Published by Tim Kachuriak

Since online is a laboratory (not a channel), you can solve the question “How do I grow my revenue?”.

I use “solve” here because the problem of growing revenue is, in fact, an equation.

Using the equation we’ve developed, I’m going to show you how growing revenue is actually a very straightforward problem.

When you grasp the key ideas I’m about to share, you will trade guesswork and assumptions for a methodical process that returns specific answers to your questions.

What you think you want is wrong

Let me start with a controversial suggestion: You don’t really want to grow revenue.

At least that’s not what you really want.

I could toss you all sorts of wacky tactics to boost revenue short term. A lot of people do that. You may be spinning on that hamster wheel right now…

Here’s an example. Do you know the easiest way to boost revenue?

Volume.

Just ask until they give or give up on you. Burn your list down.

Now, obviously you’re not going to do that. But that’s my point. You’re not really after revenue growth at any cost.

Further, while that’s a distant end of the tactical spectrum, it illustrates another important point. Revenue growth is, on its own, not a particularly helpful metric. It may be beneficial – indeed the goal of the program – but that revenue is donated tells us little or nothing about why it was given.

Let me suggest a different paradigm, a more accurate description of what you’re really after. You don’t just want revenue growth.

         You want predictable revenue that is growing.

Of course, if it is predictable, you understand what drives it. And if you understand what drives revenue, you can work to influence and increase it.

See where I’m headed?

It’s one thing to suggest the next campaign is going to be better than last because that one generated more revenue than the previous (“It’s a trend!”). It’s another thing altogether to know exactly what you need to do in the next campaign to continue (or accelerate) that growth “trend.”

When you look only at revenue, each campaign is an isolated event. If online fundraising was regulated like financial instruments are, you’d have to insert 25 pages of disclaimers describing how past revenue numbers are not indicative of future returns.

To correct the non-sequitur: revenue is what you want. Why you get it is what you really need to know. The revenue number from your last campaign is useful only if you understand why you got it then (and can apply those lessons in your next campaign).

The point is, you need insight more than you need isolated wins.

Without insight, you’re on the hamster wheel…

It’s foolish to bank on accidents (even happy ones). Isolated wins are unpredictable and usually fleeting.

Insight is what makes predictable revenue possible.

Without insight, you’re on the hamster wheel of expiring tactics. You start every campaign from scratch, hoping to achieve better results than last time, well, because you want to.

You probably start every year at zero and have to generate more than last year (because your boss or board or whoever want more) with no reliable way to predict results. You may have vague ideas about needing to send more appeals, get more people, etc. But…

Every campaign is a discrete event, a coin toss.

And as online fundraising becomes more crowded, results trend downward – email open rates, click-through, conversion rate, etc. More competition requires more effort to achieve the same results.

That’s a volume game – a race to the bottom where the winners get there first or more often until the donor hits eject. It requires constantly chasing new and shiny objects which might possibly (you hope) break the jaded gaze you helped create.

This is a trap that ensnares all participants in the end. A race with no winners.

This is esoteric but important. Unless you’re an agency billing hours based on an endless parade of new tactics, you need to understand this.

Commodity returns make your online program just another cost center. On the other hand, approaching your online program as a laboratory makes it a unique advantage, a source of insight and above-market returns.

Shift your mindset:

“Tools, technology, and the latest shiny objects won’t solve my real problem (and it’s impossible to keep up!). I need reliable, repeatable insights that lead to predictable revenue.”

“I should focus on understanding my donor and improving my message. Successfully doing that will solve my problem instead of distracting us chasing isolated wins and starting every campaign from scratch.”

Please don’t hear this as criticism – it’s not. You should hear opportunity. And feel relief.  This is the clarity of a path forward to a reliable, predictable, sane online fundraising program.

This is your invitation to hop off the hamster wheel once and for all. You may have had this thought before:

“I need to get off the tactical hamster wheel. I need a better strategy, better messaging, and the right tactics.”

Now, you can get there. Here’s how.

The source of insight

Insight is the key differentiator between isolated wins and predictable growth.

Where does insight come from, exactly? And how is it different from just measuring each campaign result against the last?

Insight comes from a systematic approach to your online fundraising campaigns:

  • Measure – gather data on each step of the conversion process; you can’t optimize what you don’t measure
  • Interpret – understand valid data and reach valid conclusions; you can’t respond to data that is invalid or unintelligible.
  • Optimize – Build upon learnings to produce measurable increases in the variables that matter.

Testing produces data. Data leads to insight. Insight to optimization.

Not exactly rocket science, right?

If you were expecting some sneaky tactics or shiny new tech tools, sorry to disappoint. This is scientific testing and, when you get into split testing, some pretty complex statistics. But don’t let that scare you off – our framework for testing (and the tools available below) make it accessible for everyone.

 The key is what you measure, what you test, and how you test; the mechanics of the matter. Let’s take a look…

Mindset shift: Revenue is just the measuring stick 

Revenue is the easiest measure – but it’s among the least useful. It’s the evidence that your testing is working (or not).

Start thinking about Revenue as the result of the underlying variables that actually matter—symptoms of the health (or sickness) of your program. Because by the time you can count revenue, the important stuff has long since passed.

Saying “we need more revenue” is like a football coach saying, “we need to score more points.” It’s not untrue, but it’s not very helpful either.

If you aren’t looking deeper than bottom line dollars, you’ll never get past superficial tactics.

In that case, you’re not optimizing, you’re guessing – and I guarantee you’re leaving serious dollars and impact on the table.

Beyond concepts: The Flux Capacitor of Online Revenue Maximization (FCORM) Formula

Understanding concepts like…

  • the internet is a living laboratory you can harness for your organization
  • the “measure, interpret, optimize” paradigm validates hypothesis leading to insights
  • revenue is the passive outcome of what matters in your program

…is important. I would even call them breakthrough concepts, critical to settling on the right strategic focus. Those ideas could change your organization as they have transformed my agency’s focus, even purpose.

But they remain just that: concepts.

This is the turning point. Once you realize how important these ideas are…once you understand the concepts and the power of optimization…

…you still have to know how to do it.

Knowing what to measure, how to measure, when to measure – and then what to do with all the resulting data – is not easy.

We’re going to take an intensely practical turn here as I share with you the simple formula we use in every test.

The formula is called the Flux Capacitor of Online Revenue Maximization (FCORM for short). Yes, from Back to the Future because it sort of looks like the flux capacitor that makes the DeLorean do its thing. See?

Screenshot 2015-12-29 10.51.12

(T) Traffic  X  (C) Conversion Rate  X  (A) Average Gift = (R) Revenue

Yes, you see that right. Just three variables dictate online revenue:

  • Traffic
  • Conversion Rate
  • Average Gift

From every step of every campaign to your entire program, that simple formula is the difference between isolated wins (“what’s everyone else trying these days?”) and predictable growth.

FCORM is the framework for insight. Within this simple framework, you can test what makes your donors give—and where your biggest sticking points are right now.

We will dig deeper into the strategy and tactics for lifting each variable. The important point right now is to realize that this simple formula dictates 100% of your revenue. You can apply the FCORM to an individual campaign or look at variables over time throughout your entire program.

The FCORM framework is a major lever in your online fundraising program. To grow revenue, start thinking like this:

“I need to grow traffic, increase conversion rate (visitor to donor), and increase average gift. If I focus on those 3 simple things, I’ll increase my revenue.”

Do you want to see what this focus looks like in practice? Browse our library of experiments and see how we test into FCORM lifts.

A few deeper Reflections on the power of the FCORM:

The power of the Flux Capacitor is not quite time travel (we’re still working on that) but I promise it can dramatically change the future of your organization.

The main point is the simplicity of the FCORM framework. But I can’t help myself…the deeper implications of FCORM are so powerful I have to share a few:

  1. The FCORM is literally more than the sum of its parts. Since the FCORM variables are milestones in a single larger conversion process, lifting two or all three variables will increase revenue more than the sum of the lifts in each variable.
  2. Testing within the FCORM framework doesn’t yield best practices. It produces unique insights into your organization that give you a durable advantage. These are insights that can be applied from one campaign to the next—and better, from your online fundraising program throughout the rest of your organization.
  3. Because of 1 and 2, you can stack small, incremental wins to dramatically increase revenue.
  4. The FCORM gives you remarkable focus on what matters most. When you examine your data within the FCORM framework, you can trace month over month changes (or year over year or email over email) back to their source. You can isolate causes. You can spot problems. You can investigate and solve very specific tactical problems.
  5. FCORM makes setting your priorities simple. Since you can trace each step of the Revenue picture, can clearly see the area that is holding you back. You can easily identify the “low hanging fruit” where solving one problem will yield big impact.
  6. FCORM liberates you from noise and shenanigans. Instead of trying to keep up with an endless string of new tactics, you can ignore everything but the one variable at the top of your priority list. How much more effective could you be if you could simply ignore 99% of the noise that surrounds fundraising tactics?

Step 1 for optimization is knowing what to focus on first. Run the FCORM self-analysis to instantly see where you stack up against others AND where your biggest opportunities are (hint: take this info and go to our research vault, then copy some experiments targeting this variable).

Screenshot 2015-12-29 10.54.53

 

 

 

Conclusion (For real this time)

Your online fundraising program is critical to your success because it is a laboratory where you can test into insights that flow into your organization. The FCORM is the formula that keeps you focused on the right priorities and provides the context to easily (and correctly) interpret testing data.

This is the turning point epiphany – where concepts and theory get practical. You should be thinking, “OK, this isn’t just conceptual…it’s not even complicated. We can do this. And this can transform our organization.” Hopefully you’re even thinking:

“Growing my online revenue is actually SIMPLE. It may not be easy but it is simple. Only 3 variables determine my Revenue. I must relentlessly focus on my FCORM metrics (and that lets me filter out all the noise, so I actually have time to do it).”

Next post, we’ll look at the FCORM in detail and cover another formula – this one all about designing tests to boost the FCORM variables. We’re getting more tactical as we go deeper.

For now, bask in the simplicity of the FCORM. Those three variables (Traffic, Conversion Rate, Average Gift) are all that matter. You can safely – even boldly – ignore everything else.

A Few Resources:

Here’s a quick list of helpful links:

  1. See the FCORM in action in our experiments library.
  2. FCORM Report – Quickly see how you stack up in the FCORM framework (and which variable you should focus on first for big wins).
  3. Get the most concentrated, useful optimization resource available: The Optimization Edge. It’s pure value straight to your inbox once a month.

About the author:

Tim Kachuriak

Tim won “Best Stage Presence” for the 1991 Pittsburgh Boys Choir.