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Mar 28, 2017

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 measuring.

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