Think about Acquisition This Way?

February 3, 2016

 

Whether you spend $1 or $125 to obtain a new donor, chances are you aren’t spending or investing enough. That’s because very few calculate acquisition costs with lifetime value in mind.

 

It’s not just costs like postage, printing, mailing lists, and design; it’s also the steps you need to take immediately after a prospect responds and throughout that critical first year.  

 

For example, most who respond to an acquisition mailing aren’t donors yet.  They may eventually become donors, but make no mistake…it’s what you do to transform their status from a qualified lead to donor that is key to both lifetime value and the future of your organization.

 

Let’s say you’re spending $800 per thousand pieces of mail and receiving a 1% response with a $20 average gift. That part of the acquisition process has cost $60 per new donor or lead.

 

1%of 1,000 = 10

10x20 = $200

$800 - $200 = $60 per donor/lead

 

What you do next determines whether and how fast this investment is recovered and begins producing net income.

 

If all you do is send out an acknowledgment and, say 3 appeals per year, you  might recover an additional $20 per each lead during the first year. That still leaves you with a negative $40 per donor/lead for that year. What’s worse is that given today’s poor first-year retention rates, those original 10 donors will shrivel down to 3 or 4 next year.

 

This is where phase 2 of acquisition comes in. It’s in the expenditure of additional funds in the first days/weeks after the donor’s initial response. That’s the key. How so?

 

I would most certainly recommend spending at least an additional $5 or so on a thank you phone call to welcome each new donor. It’s easy to do and a low-cost action that will boost the first-year retention rates immediately.

 

All of the results I’ve seen indicate that retention rates go up an average of 20-24% thanks to that phone call. And often subsequent gifts continue to increase as well.

 

Do you have any tips to add to the above that would increase retention of first time donors even more?

 

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