I’ve been discussing acquisition with various clients this year.
And the importance of following up – FAST – on any new donors you get.
Because if you don’t do this, the lifetime value of those donors will remain low.
In fact, you may never recoup the cost of acquiring them… if they never give to you again.
Today’s lesson is: if you’re going to invest in acquisition, have a plan to steward and upgrade your new donors.
Here are the numbers on lifetime value.
A new donor who never gives again has a lifetime value of their first gift only. For most organisations, this averages anywhere from $30-$100.
Here you are most likely losing money on the cost of acquiring them (a good benchmark for direct mail acquisition is $200-$400 per new donor).
A new donor who gives $100 a year for 5 years has a lifetime value of $500.
Say the first gift was on the low side. Let’s say $50. Well, hopefully you ask for – and get – at least one more $50 gift from them during the year. So that makes $100 a year.
Here you are most likely making a profit on the cost of acquiring the donor in year 2 or 3 after the first gift.
A new donor who converts to a $30 a month giver is worth $360 a year. If you retain the donor 5-7 years, that’s a lifetime value of $1,800-$2,520. Here you are definitely getting a return on your investment.
The optimum time for recruiting monthly givers? Four to 10 weeks after the first gift. If you can upgrade a new donor to monthly giving within that time, you’re obviously getting ROI much faster.
A new donor who becomes a $1000+ major donor is again worth more. If you retain the donor for 5-10 years, that’s a lifetime value of $5,000-$10,000+.
Of course, some major donors have the capacity to give a lot more. If you can secure a commitment from a major donor to give $5,000 a year for three years, that’s $15,000.
Or if you can secure a commitment to fund a program at $20,000 for three years, the lifetime value skyrockets to the initial $60,000…
Plus whatever they may give thereafter if they are properly stewarded.
And the last hurrah… A new donor from whom you can secure a bequest can be worth anywhere from $2000 to $2 million extra to your charity.
Obviously, the really big ones are more rare – you’re more likely to have bequest averages of $20,000-$40,000.
These numbers really help when trying to explain to a Board why they need to look long-term at acquisition. And why a donor journey or nurture plan is important.
Do you want the lifetime value of your donors to be $50, $2520 or $10,000+?
Improving retention and following up new donors with nurture and upgrade activities is crucial to get the best possible ROI from acquisition.
Acquiring (and losing) a donor is expensive. So you must do everything you can to maximise their lifetime value.