There’s no question that it pays to take the time to calculate the lifetime value of a donor, especially when fundraising is all about the numbers.
Dig past the dollar signs, and the numbers become fortune tellers, showing you how effective your fundraising efforts are and hinting at changes that could make big differences in the future.
Knowing the lifetime value of your donors is key. If the number is high, it indicates you are raising sizable gifts and convincing donors to give year after year. If the number is less than you would like, there could be problems: too many small, one-time gifts, too much or too little solicitation, too little engagement with donors.
Calculating the average lifetime value of a donor requires data that you should be collecting about current donors. Here’s the equation, and a simple explanation of how to get the numbers you need to do the calculation.
With this number in hand, you can study ways to improve it. For example, through some simple shifts in marketing, the average annual donation can be bumped up.
You can also use strategic marketing to lower the donor attrition rate. In our example above, decreasing average attrition 5 percent would increase the average lifetime value of a donor to $433.
Develop a thank-you program that includes written and person-to-person communication. For example, use your contact management system to send automated thank-you notes to new donors. Follow up with thank-you phone calls from staff, board members or those who benefit from gifts.
Keep donors informed. People like to know how their gifts are being used. Reach out to them with news about your organization. These pieces, whether direct mail, email or social media posts, are not blatant fundraising appeals, but are designed to inform donors so that when they are asked to support the organization, they will understand why their help is needed.
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