5-Year New Donor Metric Report for 2022

01 Mar 5-Year New Donor Metric Report for 2022

1 March 2022

By David Allen, Development for Conservation

Two weeks ago, I asked you for data related to the value of your “first-gift” donors from 2017:

• Isolate the members and donors you have who made a first gifts to your organization at some point – any point – during the calendar year 2017.
• Now add up everything that group has given to your organization – as a group – in the five years (including 2017) since then.
• Send those two numbers to me – the number of donors and the total amount they have given. The email address is David (at) DevelopmentForConservation (dot) com.

Before I go any further today, THANK YOU!!! to all who sent me data. I got responses from 17 different conservation organizations ranging from those that recruited fewer than 20 new donors in 2017 to those who recruited more than 800.

I am so grateful – thank you!

BTW: I am still interested in more data, so if you have not sent me information yet, there’s still time. I am particularly interested in data from organizations that gave me these numbers in past years. (You know who you are.)

The context here is important, and it bears repeating. I got interested in this because the calculus for new donor recruitment is not favorable in the first year. It can often cost more than $100 to recruit a new donor and in many cases, well more than that. If that same donor gives, say, $50 – well, recruitment doesn’t seem like much of a worthwhile investment.

But what if we look at what those same new donors give over a five-year period instead? Is it possible that new donors give several hundreds of dollars, or even several thousands in their first five years?

Yes. In fact, break even for most organizations is somewhere in the third year. By the fifth year, the return on investment is significant.

More importantly, the 5-year value of new donors incorporates other important metrics like renewal rate, average gift, and lapsed-donor recovery. The higher these metrics are, the higher the 5-year value will be. This is also true for renewals and appeals, donor engagement, donor stewardship, and organizational communications – the more effective these systems are, the higher the 5-year value will be.

In fact, the 5-year value calculation (both for NEW donors and for ALL donors) might tell you more about your fundraising program health than any other single metric.

I have focused here on the 5-year value of new donors, but you could easily run 5-year value calculations on your entire constituency, or even other parts of the constituency.

Once again, I am impressed this year by the range of experience. Here are several observations from the data, together with information I requested in follow-up conversations:

• I now have information from 40 different organizations, though I have five years of data from just six. Four years of data from another nine. In other words, we need to keep in mind that this is still a small sample size. I got 2017 information from 17 different organizations.
• The 5-year average reported to me from 2017 ranged from $300 to more than $4,000. The average was $996 – call it an even $1,000.
• Said another way: The 17 organizations reported on nearly 2,500 donors. The impact those 2,500 people have had averaged $1,000 in the five years since then.
• Obviously, the numbers are heavily influenced by the organizations that recruited more new donors (in this case, they weigh the average down). So, it’s also possible to average the experience of the 17 participating organizations. That average is $1,138.
• And if you line the organizations all up, the organization in the middle – the median organization – saw a 5-year value of $813. In other words, half of the organizations reporting had 5-year values more than $813 and half had less. (BOTH organizational numbers are improvements over previous years.)
• In fact, the organizations that reported 5-year values of more than $813 were much higher. Six were more than $1,000, and two were more than $3,000 – driving up the average experience while not affecting the median experience.
• As in past years, most of the organizations reporting high values were also raising money for specific projects; not just in 2017, but in the years since then as well. They were engaging their members and donors in the mission work, and not just in operations fundraising. I think this is important – money follows vision, so regularly engaging donors in real conservation projects will result in more money donated across the board.

I’ve been curious to measure the COVID effect, if there is one. 2017 would be the first year where two of the five years were COVID years. In fact, there is an effect related to recruitment in 2020 and 2021 – as in there was an enormous uptick in recruitment overall. Many organizations recruited twice as many new members each of the past two years as they did in the years before 2020 and at least one reported a four-fold increase in 2020 over 2019. But will they renew? is the relevant question.

I’d say the jury’s still out on that one, though it looks good so far. The 5-year new member metric will be very interesting three years from now regardless.

What I can tell you this year is that the 5-year value metric suffered for organizations that depend on events for their fundraising, and organizations heavily dependent on electronic communications (including Giving Tuesday events) for their fundraising. This was true for about a third of the organizations reporting data. Actually, that’s probably good news, because when we go back to in-person events, these donors are likely to come back as well.

So where do you fit in? And more importantly, how can you use this information?

I like the idea that we count things that will help us make decisions, and we make decisions based on what we learn.

And I’ll remind everyone that numbers are just substitutes for the stories they represent. By themselves, they mean very little. Numbers become meaningful when they are seen in context with other numbers.

There is no 5-year value standard above which is “good” and below which is “bad.” The stories that should matter for you are these:

• We spent $$$ to recruit ### donors in 2017. Since then, those donors have contributed $$$$. Therefore, the investment we made in 2017 was (was not) worthwhile.
• The 5-year value of donors who came in from this recruitment strategy was substantially greater than the 5-year value of donors who came from that recruitment strategy. (For example: events versus social media versus direct mail.) Therefore, we should do more of this and less of that going forward.
• Our 5-year value has steadily increased (decreased) in the last several years. Here’s what we should do about that.
• Or perhaps it spiked in a specific year. Looking back, it’s clear that _____________.

Can you tell these stories for your organization? Now with those newfound insights, take responsibility for continuous improvement. The 5-year value of your donors is not something that just “happens” to you. It is something you can affect. It’s something that you can influence. Standing on the scale every day can help you lose weight. Measuring the 5-year value every year can help you increase it.

Here are several ideas for improving the 5-year value:

• Focus on the first-year renewal rate (see The Importance of Recruiting First Renewals). The more people renew that first time, the better your 5-year value will be. In my blog post from November 2016, I offered several strategies for improving this first renewal rate. They included:

• • Phone call thank yous for joining.
  • Sending a special newsletter right after they join jammed with information about land trusts work and how they can plug in.
  • Focusing some proportion of the social media and emailed communications to people who have just recently joined and may not understand the significance of what they are seeing and reading.
  • Hosting special new donor engagement events such as information meetings or field trips especially for new donors.
  • Checking in with them using a postcard at the three, six, and nine-month marks to remind them of the difference their contributions make in your programs. Mention especially any leverage their giving made possible, for example as match for federal or state funding.

• Don’t give up on lapsed donors. Donors lapse because they forget. They lapse because the project they were interested in is no longer in play. They lapse because they get distracted by some other philanthropic priority. Some also lapse because they hate you or they die, but this is not normally the case. So why not go with the “they forgot” theory? Send lapsed donors three or four special letters – we miss you so much, or similar – each year? I guarantee that this will be cheaper for your land trust than replacing them with new donor recruitment.
• Ask for more money. When you ask for a specific amount of money, you increase the chance that donors will respond. And when you ask for larger amounts than they have given before, some will respond with larger gifts. Assuming you send multiple renewal letters, I have no problem asking for $100 in the first letter (for everyone who is not giving at that level or higher to begin with). You can always back off the ask amount in the second or third letters.
• Use paper and use the mail. Some organizations are not getting good renewal results because they have discontinued their quarterly paper newsletter. This is nearly always a mistake. Others are only using email for renewal notices. This is OK, but if you’re losing half of your donors each year as a result, it may be costing you more than it is saving you.
• Space your electronic and paper communications throughout the year. And time at least one paper communication for 2-3 weeks right before the first renewals go out.

All of this costs time and money, of course, and we all have a lot to do already, but if you can document that the results over five years include an increase in giving worth hundreds of dollars per donor, you can justify the cost.

Using metrics to help you make decisions includes helping you making decisions about how you spend time and money.

OK – your turn. What are you doing to increase your 5-year value of new donors?

Cheers, and Have a great week!

-da

PS: Your comments on these posts are welcomed and warmly requested. If you have not posted a comment before, or if you are using a new email address, please know that there may be a delay in seeing your posted comment. That’s my SPAM defense at work. I approve all comments as soon as I am able during the day.

Photo courtesy of Pixabay.