You’ve Acquired a New Donor . . . Now What?

Many nonprofit organizations acquire most of their new donors during the holiday period, loosely defined as October through December. Most nonprofits won’t see positive net revenue from their acquisition campaigns during this time period. The initial and subsequent gifts from these newly acquired donors will break even at a future point, usually between six and 24 months, depending on the client vertical and the acquisition strategy. The first step to breaking even (and starting to gain net revenue) is acquiring a second gift, thus cementing the donor’s relationship with your organization.

Therefore, second gift conversion rate is a key metric for determining the success of any acquisition campaign.

Second gift conversion rate is calculated as:

We recently completed a set of second gift conversion analyses for one of our large, faith-based client verticals. Historically, the timing of second gifts has been very consistent for this donor group. In addition to measuring the performance of past acquisition efforts, these analyses allow us to plan future donor conversion strategies taking acquisition channel and seasonality into consideration.

Here are a few key findings from this analysis:

  • Overall second-gift conversion rate is almost 62%.
  • 73% of direct mail-acquired donors who convert do so within the first 12 months after being acquired.
  • 88% of all donors acquired who convert do so within the first 24 months after being acquired.
  • Donors acquired during the holidays have a greater tendency to give their second gift during subsequent holiday periods than donors acquired at non-holiday periods.
  • While online-acquired donors have a lower conversion rate overall, a larger proportion of them convert within the first three months (40%) when compared with direct mail-acquired donors (29%).

Taking this analysis one step further, we also analyzed the historical donor value (sometimes known as lifetime value) of donors acquired five years ago by the length of time between their first and second gifts:

As seen in the graph above, there is a correlation between historical donor value and the length of time between first and second gifts.  In other words, for this client vertical, donors who give a gift sooner tend to have a higher historical donor value.

Organizations employ a variety of techniques in order to get that second gift quickly – new donor welcome packages, personalized thank you letters, voice broadcasting telephone calls – just to name a few. Video “appreciation footage” integrated into social networking sites, email links and website landing pages can act as a powerful communication vehicle and incentive to drive future engagement as well. What additional engagement strategies can you commit to testing in the new year, to get this critical second gift?

 

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Do you know the lifetime value of your donors?

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?