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Chapter 9: Turning a One-Time Donor Into a Recurring Donor

Chapter 9: Turning a One-Time Donor Into a Recurring Donor

Nonprofits need to pay attention to existing donors (with plenty of thanks and communication), but they must alsoconstantly cultivate new donors. Just as businesses have costs associated with acquiring new customers, nonprofitorganizations incur costs when they acquire new donors. If you can turn a one-time donor into a recurringcontributor, you’ll significantly increase the lifetime value of that donor.
Nonprofits need to pay attention to existing donors (with plenty of thanks and communication), but they must alsoconstantly cultivate new donors. Just as businesses have costs associated with acquiring new customers, nonprofitorganizations incur costs when they acquire new donors. If you can turn a one-time donor into a recurringcontributor, you’ll significantly increase the lifetime value of that donor.1
Turning a One-Time Donor Into a Recurring Donor
Donor Acquisition Cost
Most first-time donors are actually acquired at an upfront loss.2 If acquiring new donors costs money,why do nonprofits even bother? It’s because of the need to replace donors who leave your organization every year —as no donor is guaranteed to give to your organization indefinitely.

Determining the overall cost per first-time donor for your organization involves adding up the money spent onappeals and marketing (including the salaries of fundraising staff and other related expenses) over a certainperiod of time. You can also take a look at your donor acquisition costs by the type of acquisition — for example,donors acquired via annual appeals or online appeals.

Let’s say you conduct a direct mail campaign, mailing to prospects who have never donated to your organizationbefore. You spend $1.00 per piece and mail to 10,000 people, so your cost is $10,000. You might see a 1 percentresponse rate, or 100 donors. Add up all your donations — let’s say you received $8,000 in total. You have $10,000in costs minus $8,000 in income, leaving you with a net loss of $2,000. When you divide that by 100 donors, yourcost of acquiring a donor through this particular campaign is $20 per donor. If you can convert a percentage ofthese donors into recurring donors, your cost per donor would go down over time. Some databases have built-in toolsthat can help analyze the costs and benefits of donor acquisitions.
The Lifetime Value of a Donor
The Lifetime Value of a Donor
The longer you can retain a donor, the more gifts you can get them to give your organization — and the higher thevalue of those gifts, the higher the value of that donor over a lifetime. You can calculate the initial donoracquisition cost and the lifetime value using a table such as the one below:

Initial Gift Data:
Total number of donors acquired in a one-year period (or other timeframe)     ________     
Total amount given in initial gifts   $________     
Average initial gift (the total amount in initial gifts divided by number of donors)   $________     
Total cost of acquisition   $________     
Acquisition investment (the acquisition cost minus amount of initial gifts given)   $________     
Cost per donor (acquisition investment divided by number of donors)   $________     
Subsequent Giving Data:
Total amount of subsequent gifts to date     ________     
Total number of donations   $________     
Average subsequent gift (total number of donations divided by total subsequent gifts to date)   $________     
Total cost of subsequent solicitations (this might require a ballpark estimate, followed by fine-tuning ofdata)   $________     
Net subsequent revenue (subsequent gifts to date minus cost)   $________     
Average subsequent net giving (net subsequent revenue divided by # of donors originally acquired)   $________     

There’s no set formula to determine the exact amount each organization should spend to acquire new donors, becausethere are so many variables involved — including the size of the organization and its fundraising staff, the numberof donors, an organization’s fundraising history, fundraising goals and so on. Likewise, there’s no exact formulathat can calculate exactly when you might see you initial investment in acquiring a donor pay off. But there aresteps you can take to try to turn a one-time donor into a recurring donor, maximizing your chances of seeing ahigher average lifetime value of donors.


How to Encourage Recurring Donations
Now that you understand the why of encouraging recurring donations, let’s take a look at how to accomplish this.Here are some strategies to turn first-time donors into long-time supporters:
How to Encourage Recurring Donations
Ask for monthly donations: Make it easy for your donors to give monthly gifts. For onlinedonations, include a field in your online donation form thatlets donors opt to make a recurring gift each month. You canframe the ask in a way that makes donors feel valued; perhapsthey are “Gold-Tier Patrons” if they give a monthly gift at acertain level, or they receive perks like special donorpremiums (for more information, see the chapter “Giving Back to Your DonorsWith Thank-You Gifts”).

Communicate with your donors: If a first-time donor gives a gift to your organization,receives a thank you and then never hears from yournonprofit again, they won’t feel motivated to give you toagain. Communicate regularly with all donors, includingfirst-time donors, through newsletters, updates, socialmedia posts and invitations to events. Show the donor theoutstanding work your organization is doing and all thatyou’ve accomplished with their support.

Don’t be afraid to ask again: Many people fear that “donor fatigue” will set in if theyask for donations too often. But studies show that donorfatigue is largely a myth.3 Of course you don’twant to ask for donations every day, but consider askingyour donors for their support more than once a year.

Ask in multiple ways: Everyone prefers to give differently. Some people like theconvenience of an online donation, while others mail checks. Somedonors love the idea of going to a fancy event, while others thinkit’s a waste of time and money. You never know how people like togive unless you ask them in multiple ways. Don’t be afraid to sendan email, an invitation to an event and a fundraising appeal all inthe same year.

Not every first-time donor will turn into a recurring donor — but those who do are an incredible asset to yourorganization. Because every recurring donor starts off as a first-time donor, you’ve got to keep those new donorsin your pipeline and work hard to turn them into recurring donors who will hopefully spend a lifetime supportingyour organization.



1 Fundraising Report Card, “Fundraising Nightmare: The Cost of Donor Acquisition”
https://fundraisingreportcard.com/donor-acquisition-cost/

2 The nth Facator, “What’s the Right Cost Per Donor for Your Organization?”
http://www.nthfactor.com/2016/09/whats-the-right-cost-per-donor-for-your-organization/

3 Nonprofit Hub, “Going Back to the Well: Why Donor Fatigue is Not Real”
http://nonprofithub.org/fundraising/going-back-well-donor-fatigue-real/

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