Warning: Today’s post is for stats geeks.
The potential lifetime value of our donors drives many of our fundraising decisions, quite rightly. Perhaps, though, we too often overlook a downside … the actual lifetime cost of maintaining each donor.
Acquisition is expensive. A $50 cost for a $25 first-time gift is not uncommon. Mileage may vary.
Most organizations then spend more on that new donor in the form of a welcome kit and a newsletter or two. Then …
More than half of first-time donors never give again. Ouch … a significant net loss.
That’s a lot of bad news, so what’s the useful thought out of all this?
First, lifetime value calculated across all donors — one-timers and multis — is a fair measure of the health of your fundraising program.
But maybe it’s worth staring at the new-donors expenses for two reasons.
First: Make sure that your communications to first-time donors is as effective as possible. Get a second gift moves them into a whole new realm of potential value, so go for it.
Second: When going to lapsed donors, consider more than the recency of the last gift. A lapsed multi is pretty much always worth the effort. (By that I mean someone who has giving multiple years in a row, but not made a gift in the last 48 months, or whatever your “active” measure might be.) Even long-lapsed multis have proven their potential lifetime value.
But you might want to segment a long-lapsed small-gift one time donor separately. These people lost you money when you first acquired them. They never really demonstrated value … only expense.
I’m not suggesting that you don’t mail this latter group. Just that you segment them and measure the response results separately from other lapsed donors. And track their subsequent giving behavior.
They are different. It may cost less to RE-acquire these people than to acquire wholly new donors. But they may once again have LESS LIFETIME VALUE on average than those newly acquired donors.