Tag: ROI

About Younger Donors…

Steven  |  Repeat
Younger.

The next time a person at your nonprofit says, “We need to get younger donors!” have them read this:

Top 5 Mistakes: Chasing Younger Donors.

The post is from Bill Jacobs at Analytical Ones.  Bill’s been analyzing nonprofit databases and fundraising effectiveness for 25 years, and he knows what he’s talking about.

He lays out the two main arguments for why nonprofits should not chase younger donors, and I’ll add three more:

  • The research I’ve seen indicates that older donors tend to give more than younger donors.  So all things being equal, a 70-year-old donor is more valuable to an organization than a 35-year-old donor in the near-term.
  • Older donors give you a greater chance of receiving a legacy gift.  Last I heard, the average legacy gift in the United States was North of $40,000.  So a 70-year-old donor is more valuable to an organization than a 35-year-old donor in the long term, too.
  • On average, most donors don’t stay on a nonprofit’s donor file for more than 5 years.  So even if you do manage to acquire a bunch of 35-year-old donors, the vast majority of them will have stopped giving 20 years before they’ve entered their prime giving years.

Read Bill’s post and have a couple of these numbers handy the next time someone brings up younger donors.

In fact, Bill’s whole “Top 5 Mistakes” series is great.  Easy-to-read, short and data-driven, what’s not to like?

And I think we all know this, but I’ll say it to be safe: there’s absolutely nothing wrong with younger donors.  Welcome them!  But unless your cause is massively attractive to young people, trying to acquire younger instead of trying to acquire older donors is not a good financial decision.

Net Revenue Available to Program

Steven  |  Repeat
Revenue.

Here’s a counter-intuitive truth to tuck away:

As a nonprofit’s donor file shrinks, their response rates for direct mail and email will tend to increase.

Wait, you might say… if a nonprofit is losing donors every year, why would their response rates be going up?

Response rates go up as an organization’s donor file is shrinking because the first donors to leave are the donors who are least engaged.  This means that the remaining donors are more engaged – and are more likely to respond to a piece of fundraising.

I saw this earlier today when I noticed that the year-end letter for one of our customers was sent to 18,000 donors this year, versus 23,000 donors last year. 

I thought to myself, “Well, at least their response rate probably went up.”

Lo and behold, their response rate went from 4.1% to 4.7%.

Their ROI went up, too: from 6.7:1 to 7.1:1

Hooray… right?

Nope.  They raised $20,000 LESS in net revenue.  (Remember, they sent the letter to 5,000 fewer donors.)

This is one of those times when two metrics that matter – ROI and Percent Response – went up.  But the metric that really matters – Net Revenue – went down.

The organization’s Board is happy that their ROI went up.  Weirdly, they are more proud of the increased ROI than they are worried about raising less money. 

Listen, I love to maximize ROI.  Probably more than the next guy.  But what matters most is Net Revenue.

I used to serve a brilliant fundraiser that always used the term “Net Revenue Available to Program.”  He’d never shorten it to “Net Revenue.” 

His insistence on using “Net Revenue Available to Program” was an outward sign of an inward focus that I took to heart: our primary job as Fundraisers is to end the year with as much money as possible to send to the programs in the field. 

Because you can maximize ROI and Response Rate all you want, but Net Revenue is the only thing you can send to the field.