By Alan Sharpe, CFRENothing says more about the success of your fundraising program than the lifetime value of your average donor.
Average lifetime value, of course, is the gross income you receive from your typical donor during the time the donor is giving to your charity.
Donors to your charity give different amounts. Some give a lot. Some give a little. Some give often, some give seldom. Some give one gift. Others give multiple gifts. Some give for a year. Others give for decades. Some give through one channel (direct mail, for example). Others give through multiple channels (direct mail, online, phone, special events).
Your goal as a fundraiser is to figure out how long your average donor gives to your organization, and how much that donor gives during that “lifetime.” You should know what this number is for every fundraising channel, and for all channels combined.
If your average lifetime donor value is high, then your donors likely stay with you for a long time. You are doing a good job of donor retention.
If your average lifetime donor value is high, your average donor likely gives through more than one channel during her lifetime (direct mail, phone, online, face to face, for example). You are doing a good job of multi-channel fundraising.
If your average lifetime donor value is high, your typical donor likely increases the size of her gift over time. You are doing a good job of donor upgrading.
If your average lifetime donor value is high, you are likely moving your donors up the “donor pyramid,” from single annual gifts, to multiple monthly gifts, to larger gifts (major or capital), and, eventually, to a bequest when they pass away. You are doing a good job of donor engagement and stewardship.
If your average lifetime donor value is high, you are obviously watching your key donor and revenue metrics, such as net cost to acquire a donor, average gift, attrition rate, renewal rate, average revenue per year per donor, average number of gifts per year per donor, return on investment, cost to raise a dollar, and so on.
If your average lifetime donor value is low, or shrinking, you likely have one of the following problems:
- You are attracting the wrong kinds of donors (one-gift, low-dollar)
- You are over-soliciting, or under-soliciting
- You are treating your donors as paycheques, not people
- You are not trying to move your donors up the donor pyramid
- You are not segmenting your donors based on recency, frequency and monetary value, and are therefore not maximizing the value of each donor in your database
When your average donors stay with you for a long time, and increase their level of commitment over time, you are clearly creating and maintaining meaningful, mutually beneficial relationships with your supporters. You know that because your average donor lifetime value tells you so.