Nonprofits need to pay attention to existing donors (with plenty of thanks and communication), but they must also constantly cultivate new donors. Just as businesses have costs associated with acquiring new customers, nonprofit organizations incur costs when they acquire new donors. If you can turn a one-time donor into a recurring contributor, you’ll significantly increase the lifetime value of that donor.
Donor Acquisition Cost
Most first-time donors are acquired at an upfront loss. 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 on appeals and marketing (including the salaries of fundraising staff and other related expenses) over a certain period. 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 organization before. You spend $1.00 per piece and mail to 10,000 people, so your cost is $10,000. You might see a 1 percent response rate or 100 donors. Add up all your donations — let’s say you received $8,000 in total. You have $10,000 in costs minus $8,000 in income, leaving you with a net loss of $2,000. When you divide that by 100 donors, your cost of acquiring a donor through this particular campaign is $20 per donor. If you can convert a percentage of these donors into recurring donors, your cost per donor would go down over time. Some databases have built-in tools that can help analyze the costs and benefits of donor acquisitions.
The Lifetime Value of a Donor
The longer you can retain a donor, the more gifts you can get them to give your organization — and the higher the value of those gifts, the higher the value of that donor over a lifetime. You can calculate the initial donor acquisition cost and the lifetime value using a table such as the one below:
|Initial Gift Data:|
|Total number of donors acquired in one year (or other timeframes)||________|
|Total amount given in initial gifts||$________|
|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)||$________|
|Cost per donor (acquisition investment divided by the number of donors)||$________|
|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 of data||$________|
|Net subsequent revenue (subsequent gifts to date minus cost)||$________|
|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 because there are so many variables involved — including the size of the organization and its fundraising staff, the number of donors, an organization’s fundraising history, fundraising goals and so on. Likewise, there’s no exact formula that can calculate exactly when you might see your initial investment in acquiring a donor pay off. But there are steps you can take to try to turn a one-time donor into a recurring donor, maximizing your chances of seeing a higher 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:
Ask For Monthly Donations
Make it easy for your donors to give monthly gifts. For online donations, include a field in your online donation form that lets donors opt to make a recurring gift each month. You can frame the ask in a way that makes donors feel valued; perhaps they are “Gold-Tier Patrons” if they give a monthly gift at a certain level, or they receive perks like special donor premiums (for more information, see the chapter “Giving Back to Your Donors With 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 your nonprofit again, they won’t feel motivated to give you to again. Communicate regularly with all donors, including first-time donors, through newsletters, updates, social media posts, and invitations to events. Show the donor the outstanding work your organization is doing and all that you’ve accomplished with their support.
Don’t Be Afraid to Ask Again
Many people fear that “donor fatigue” will set in if they ask for donations too often. But studies show that donor fatigue is largely a myth. Of course, you don’t want to ask for donations every day, but consider asking your donors for their support more than once a year.
Ask in Multiple Ways
Everyone prefers to give differently. Some people like the convenience of an online donation, while others mail checks. Some donors love the idea of going to a fancy event, while others think it’s a waste of time and money. You never know how people like to give unless you ask them in multiple ways. Don’t be afraid to send an email, an invitation to an event, and a fundraising appeal all in the same year.
Not every first-time donor will turn into a recurring donor — but those who do are an incredible asset to your organization. Because every recurring donor starts as a first-time donor, you’ve got to keep those new donors in your pipeline and work hard to turn them into recurring donors who will hopefully spend a lifetime supporting your organization.
- ^ Fundraising Report Card, “Fundraising Nightmare: The Cost of Donor Acquisition” https://fundraisingreportcard.com/donor-acquisition-cost/
- ^ The nth Factor, “What’s the Right Cost Per Donor for Your Organization?” https://www.nthfactor.com/2016/09/whats-the-right-cost-per-donor-for-your-organization/
- ^ Nonprofit Hub, “Going Back to the Well: Why Donor Fatigue is Not Real” https://nonprofithub.org/going-back-well-donor-fatigue-real/