Here is a great blog from Alan Sharpe on why average lifetime donor value is the most important metric for fundraisers  In the post, he states:

“Nothing says more about the success of your fundraising program than the lifetime value of your average donor.  Average lifetime value, of course, is the gross income you receive from your typical donor during the time the donor is giving to your charity.”

Your goal as a fundraiser is to figure out how long your average donor gives to your organization, and how much that donor gives during that “lifetime.” You should know what this number is for every fundraising channel, and for all channels combined.

If your average lifetime donor value is high:

• Your donors likely stay with you for a long time. You are doing a good job of donor retention.
• Your average donor likely gives through more than one channel during her lifetime. You are doing a good job of multi-channel fundraising.
• Your typical donor likely increases the size of her gift over time. You are doing a good job of donor upgrading.

If your average lifetime donor value is low, or shrinking, you likely have one of the following problems:

• You are attracting the wrong kinds of donors in acquisition (one-gift, low-dollar).
• You are over soliciting, or under soliciting.
• You are treating your donors as ATMs, not people.

I would like to add another perspective that I think will become a bigger issue for fundraisers in the next few years. I think we need to start measuring the social influence on top of the donation. If Donor A gives $100 while Donor B gives $50, under current metrics, Donor A is twice as valuable. But what if Donor B influences three other donors to give $50? Now Donor B is worth twice as much as Donor A.

This is going to require new technology, new analysis and, more importantly, better collaboration between departments −one more reason why those internal silos need to come down. Do you agree?

Tags: donor lifetime, Lifetime value