If you want a strong Fall acquisition season this year, your prime planning time is right now. Acquisition is challenging enough in a good economy. In today’s economy, many nonprofits struggle to bring in new donors at an acceptable cost. So how do you know if you’re doing well or not? Take stock of these four questions below and measure your program against them. If you’re in a good place, celebrate and get ready for a great Fall.
If you find some areas for improvement, get to work quickly!
1. How many donors are you acquiring or reactivating each year?
The average nonprofit loses 15% of their donors each year from “natural” causes (i.e., moves, deaths, disinterest, change in financial ability, etc.). Some organizations do better than that. Others do much worse. In fact, I’ve seen some that lose 25% – 30% annually. Regardless what the percentage is, your acquisition program needs to at least replace those donors lost to natural attrition. If not, your file (and your revenue) will shrink. If you have revenue growth goals for the future, you’ll need to replace for attrition AND add net new donors as well.
2. Are the donors you’re acquiring high quality?
This is a tough question for most organizations to answer. When I ask it, I usually get a response like, we’re acquiring a lot of donors. Thousands more than before. Quantity is one thing to measure, but it doesn’t tell you anything about donor quality. If you’re acquiring thousands of donors at a $9 average gift, chances are your program is delivering a pretty low quality donor for your organization. Low dollar donors tend not to upgrade over time as much as donors who come on at a higher gift amount. And they also tend to renew at lower percentages too. But this doesn’t mean you should only target $100+ donors.
You should strive for a balanced approach that delivers the highest number of donors at the lowest Cost Per Donor (CPD). This type of approach will help you balance quantity and quality. You can achieve this balance by targeting the right potential donors (i.e., make sure you have a mix of lists that produce high response and others that yield higher average gifts), and by optimizing your ask amounts (you want an ask string that delivers high enough average gift without depressing response rates).
3. What are you doing to make sure the donors you acquire continue giving in the future?
Nationally, 50% of all newly acquired donors NEVER make a second gift to the organization that just acquired them. That’s right. Half the donors you acquire this Fall will never give you another gift (on average). But there are some things you can do to improve that number. In fact, many of the organizations I work with have 2nd gift rates of 60%+.
To improve your 2nd gift conversion rate you’ve got to do some things that a lot of fundraisers, board members and nonprofit executives find appalling. Things like inserting a reply envelope in your thank you receipt package, sending a customized welcome package to new donors, sending a follow-up appeal to new donors within the first 30 days, and mailing at least 12 appeals per year (in addition to your newsletter). This frequency of solicitation has a drastic and positive impact on 2nd gift conversion and retention.
4. What are you measuring?
It’s not enough just to measure the number of donors you’re acquiring or the income from your acquisition efforts. It’s also not enough to measure the success of your campaign based on average gift and response rate. Those are all important factors that you should include in your analysis. Your acquisition efforts should be measured against two numbers. Cost Per Donor (CPD) and Long-Term Donor Value. The first is simply an upfront calculation of the total cost of your acquisition effort divided by the number of donors acquired. The second is a calculation of revenue per donor less the cost of cultivating those donors over their lifetime (typically measured in 5 or 10 year increments).
It’s important to measure both of these metrics on a regular basis, because together, they tell you how effective your acquisition program is. For example, if your CPD is $50 and your LTDV is $100, that means your NET per new donor is only $50. However, if your CPD is $35 and your LTDV is $100, your NET per new donor is $65. And that’s a better ROI on your acquisition investment. Knowing these also helps you understand how much you can afford to invest in acquiring a donor. If your LTDV is $400, it might be worth investing up to $100 to get a donor. But if your LTDV is $150, a $100 CPD would be inappropriate.
If you’re acquiring donors through multiple channels (i.e., direct mail, Internet, radio, events, etc.), you should track these two metrics by channel. Doing so can help you optimize your acquisition investment so you’re spending your acquisition dollars in the most effective manner.
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