Commit to Donor Acquisition (and the Indian) or Die!

June 11, 2015

 

A few years back, right around the time the Chicago Blackhawks were beginning their renaissance as a meaningful sports franchise in Chicago, their head coach at the time, Hall of Famer, Dennis Savard, in a fit of pique after a particularly poor performance, said to the assembled press, “If they (the players) don’t want to commit to the indian, we can go upstairs and get them out of here.”  The slogan spread like wild fire throughout the city of Chicago. It is still a popular rallying cry today.

 

I’m reminded of that saying today as I consider the increasingly important role of yearly donor acquisition to any fundraising program.

 

Back just a few short years ago boards of directors, hesitant to spend money during the recession, were instructing their charities to cut budgets for donor acquisition. Some boards demanded that all donor acquisition activity cease until the economy improved.  They took the position of “We can’t spend money now hoping for a return tomorrow.”

 

This thinking was reasonable given the times (2007-08), but, in the end, shortsighted. Here’s why:

 

Reason #1 – Charities watched as their donor file shrank. A normal nonprofit’s percentage of active donors in their database shrinks by as much as 15% every year. In addition, the average attrition rate is 7% yearly. Donors move, lose their jobs, divorce, die, and do a host of other things over the course of a year. When these things happen, often giving stops. This is the main reason why you must acquire new donors to replace those who will stop giving. If you cut acquisition, as many of you did, the number of active donors in your database will shrink — every year. I promise.

 

Reason #2 – You will lose money. Cutting donor acquisition does save money in the short term. If your donor acquisition budget is $200,000 a year and you eliminate donor acquisition you might be tempted to say, “I just saved us $200,000. I’ve boosted our net income. Wait a year though, because approximately 1 year later at least 7% of your donors will have stopped giving and it’ll be bottom-line noticeable. How noticeable? Within 2-3 years the missing income from all the new donors you never acquired will be as obvious as a FORECLOSURE sign outside your front door.

 

Reason #3 – Your lifetime donor value will suffer. Each of your lost (or never gained) donors is worth, on average, hundreds of dollars in lifetime value. In some cases, they may be worth thousands. How many are you willing to lose? The donor that you fail to acquire today will never respond to your most successful direct mail appeals. That donor also won’t be around to become a member or give you a major gifts 8 years from now either.  And she certainly won’t leave you a bequest in her Will prior to passing away. You see, the majority of donors who join monthly giving programs, make major gifts, and leave bequests are annual donors via direct mail. They have a high lifetime value only because they gave that first gift.  No first gift no new donor, in other words. The lifetime value of every new donor not acquired is a big, fat zero.

 

Reason #4 – Your mission will suffer without new donors. Net income (fundraising revenue minus fundraising costs) is the only income you can use to carry out your mission. Every time you lose a donor, your capacity to bring about meaningful change diminishes. Every time you acquire a new donor, it increase.

 

If you want your donor file to increase, if you want your revenue from monthly gifts, major gifts and bequests to grow, if you want to continue to impact lives, you must commit to investing in donor acquisition every year.

 

Does this scenario sound familiar? Tell us your story, anonymously, of course.

 

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