The magic metric: 2.6 gifts

Blackbaud’s Charitable Giving Report for 2020 just came out; it’s well worth a read

Of course, I turned right to the retention numbers: 29% first-year and 59% multi-year retention for offline-only donors; 25% first-year and 66% multi-year retention for online-only donors.

These are the numbers that ripple through your direct marketing program.  At these rates, if you recruit 10,000 offline donors today, there would be 2900 left next year, 1711 in year two, 1009 in year three, and so on.  (By year 17, you will have one donor left).

Let’s assume that each donor gives 1.5 gifts per year.  If you go out 20 years, you will get an average of 2.6 gifts (an initial gift and an average of 1.6 subsequent gifts) from a new donor, offline or online.

That’s it.

What this means as a rule of thumb is that if your cost to acquire a donor is greater than the 1.6 average gifts from that donor, you are likely spending too much to acquire a new donor.

Yes, this ignores that some folks increase their giving and increase it substantially, whether that’s an evolution to monthly, major, or bequest giving.  But it also ignores the cost of soliciting donors.

These are for the average organization.  And what it means is that the average organization likely can’t acquire donors quickly enough to scale as much as one would like.

What it means is that we need to be better than average.  We can:

  • Decrease your cost to acquire. 
  • Increase retention.  A 10% increase in retention will increase our window of safety to 1.9-2 additional gifts.  The most impactful changes are to second-gift retention because there’s so much room for improvement and because earlier improvement compound.
  • Increase the number of gifts per year.  Monthly giving is the best way to do this, because not only to you increase the number of gifts per year from 1.5ish to 9-10ish

The math is unrelenting.  And the good news is that you can run your own numbers to find your own magic metric – simply use your retention metrics to model the number of donors you will have over time and multiply by the number of gifts per year.  This metrics should give you your own rule of thumb as what your investment level should be and what levers you need to pull in your program.

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