More is Not Always More

More is Not Always More

As we Atlanta Falcons fans know, just because you’re ahead at halftime doesn’t mean that you’re going to win. More is not always more. We all know that Acquisition Strategy is important for donor long-term value and for a non-profit’s long-term income, but HOW important? I recently did some analysis for a non-profit, and the numbers were striking – especially when looking at the donor’s initial gift size and the subsequent LTV. Due to a change in Acquisition Strategy, the new donor average gift jumped 48% from $46 to $68 between FY14 and FY15. And the projected 5-year LTV for the FY15 new donors jumped 49% over the LTV for the FY14 new donors, from $159 to $237. Not surprisingly, with the new acquisition strategy, the client had a decrease in number of new donors. But, with a 10% decrease in number of new donors, there is still a significant increase in revenue over 5 years: 5,000 new donors X $159 LTV = $795,000 4,500 new donors X $237 LTV = $1,066,500 If you factor in cultivation costs at an average of $7/year per donor (and the savings from not mailing the 500 donors NOT acquired) that’s a net increase of $289,000 over 5 years. If you continue this same acquisition strategy for 5 years, that’s a net increase of $1,445,000 for those new donors. So, all told, acquiring more valuable donors to start with makes a big difference down the...
Major Donors – In the Beginning

Major Donors – In the Beginning

Recently, an organization wanted to take a look at where their $1,000+ donors originated. After a quick channel analysis, we came up with this chart. For this nonprofit, 55% of their $1,000+ donors came in through their Acquisition Mailings. Another 23% gave their first gifts online. Four percent gave their first gifts to codes categorized as “Cultivation Mail” – mostly newsletters – and 9% of the $1,000+ donors gave their gifts to “Miscellaneous” codes like White Mail. So, Acquisition Mailings are extremely important – not just for the new donors they bring on for direct mail – but also as the entry point for future major donors. Over half of new major donor come in to the organization this way. Do you treat your newly acquired direct mail donors like they are your future major...
Net Dollars Not Donors Part 2

Net Dollars Not Donors Part 2

This may sound heretical, but counting donors isn’t as important as counting dollars. Here’s why: donors are not of equal value. For far too long in fundraising, there has been this assumption that “more donors are better.” This would be true if (and only if) all donors have equal value. But they don’t. I think I know we got here. Once upon a time an analyst figured a donor’s long-term value. Let’s say that value was $225. Then the DD thought, “Hey, all I need is more new donors. The best way to get more new donors is to lower my acquisition ask string.” Then 5-years later, the analyst recalculates the LTV and finds it’s only $100. The DD is angry with the analyst. They just spent $100 acquiring these donors. So the net value after 5-years is $0. “You said each donor was worth $225!” You know how the what happened. LTV Is tied to first gift amount. Lower the ask, you lower the LTV. Yet still, I talk with Development Directors who think 1,000 donors with an AGS between $10-24.99 are better than 10 donors with an AGS of $25-49.99. But when you take both acquisition and cultivation costs into the equation, as the table below shows, that’s just not true. Acquiring 1,000 donors with an AGS between $10-24.99 will yield a negative net revenue of $24,000 after 5-years. Whereas just 10 donors with an AGS of $25-49.99 will yield $490 in positive net revenue. If you want to change the direction of your fundraising programs, you first must change what you are...
Granny’s $5 birthday surprise won’t cut it any longer.

Granny’s $5 birthday surprise won’t cut it any longer.

I’m on the 3rd floor of a Michigan Avenue focus group facility with a group of healthcare donors. I’ve just finished describing the directions of one my go-to exercises. They’re being asked to allocate $100 how they please across the organization. A male baby-boomer, on the younger side of the boom, says something unexpected: “I can’t allocate $100… because I would be embarrassed to give this organization just $100.” What just happened? $100 is a decent gift for a direct mail donor right? $100 used to really mean something in this business! Not anymore. Not like it used to anyway. This particular focus group was 3 years ago. I’ve been following this trend through my other research since. In many settings we’ve validated that younger donors have higher first gift amounts in acquisition. But why? It’s the same reason granny sends $5 bills in birthday cards. Our perception of the value of a dollar is very different by generation. At least, that was my hypothesis. So, I tested this assumption on a survey of 300 donors. I asked, “What is the minimum gift you could make to an organization and actually make a difference?” This is an adaptation of the Van Westendorp’s Price Sensitivity Meter question: “At what price would you consider the product to be priced so low that you would feel the quality couldn’t be very good?” The results supported my hypothesis in a way a researchers only dreams about: Mean Response: Donors under 55: $171 Donors 55-70: $68 Donors 70+ $35 What does this mean? Well, in today’s world it means your low ask-strings in direct...
Disaster Donor Retention

Disaster Donor Retention

As our managing partner Bill recovers from Hurricane Matthew, it’s a good time to look at the trends of new donors who respond to natural disasters and their following year retention – or lack thereof. Below is a graph for a social services nonprofit in an area hit by a natural disaster in FY13. This graph shows the number of new donors acquired each year. There was an 88% spike in the number of new donors in FY13, then a 58% decrease in new donors the next year. Here is the overall retention for the same organization. Their overall Retention dropped 12%, from 53% to 46% in the year after the disaster (although retention recovered nicely in FY15). And in FY14, Second Year Donor Retention dropped 30%, from 26% to 18%! Often, there’s little that can be done to increase these new donors’ retention. They are motivated to give by the disaster and may not be converted to give to the organization’s overall mission. In surveys, many donors don’t even consider themselves donors TO the organization, but instead to the event. “I gave to Hurricane Matthew”, NOT “I gave to XYZ Organization.” Still, these donors should receive all of the stewardship that COULD make them convert to a long-term donor: prompt thank you letters thanking them specifically for their gift to the disaster (not a general thank you referencing general programs), follow-up information about the cause they’ve supported and how they’ve helped, and thank you phone calls for certain levels of giving. But, even more importantly may be to plan for the future: budget for the increase in mailing costs...
Acquisition Ideas for Small Nonprofits

Acquisition Ideas for Small Nonprofits

A friend recently asked me for some ideas on how to start growing a donor base for a small nonprofit who doesn’t have a lot of money to spend. This seems like that’s always a question, whether you’re working with a small nonprofit or a large one: What are some creative ideas to acquire new donors without spending a lot of money? As I told her, I’m always great at coming up with ideas as long as someone else will do the hard part – doing the work. So, I thought I’d pass along some thoughts. One of the first things I would recommend to look at is any resources that the organization has for an online campaign to start to build up a donor file. Who are your board members and what resources do they have? Do they have companies with websites and could they devote a section to your cause? Do your board members or does your organization have a relationship with local media like the newspaper or a radio or TV station that could help with a campaign to drive people to your website? Do you have a way to launch a concentrated online campaign around a particular issue? In addition to a lightbox on your home page, you could have other sites (like those board members’ company sites) drive potential donors there. I once had a client who launched a big campaign in conjunction with a car dealership (the owner was a board member) and the car dealership sponsored TV commercials for the organization to drive people to give (pun intended). Just some thoughts to...