Unpacking Long-Term Value

It's important to know the Long-Term Value (LTV) of the donors you acquire. This helps you justify the expense of acquisition. It's also important to understand the donor performance underlying LTV. Here's a basic table that does just that:

The table tracks the 5-year performance of 1,000 donors acquired in Year 1. In Year 1 the average donor gave 1.4 gifts with an average amount of $30.

In Year 2, only 400 donors continued giving. As is usually the case, these donors brought an increase to giving frequency and average gift. And they added $26 on average to their cumulative LTV.

The active donors from Year 2 become the beginning number of donors for Year 3. There are fewer donors than the prior year due to attrition. However, these donors have stronger retention (% Active). Again the performance of the donors continuing is higher than the year before. Less committed donors are leaving the fold. Those who stay have stronger giving performance.

At the end of 5 years, the cumulative LTV is $121. Each metric in the table -- % Active, Gifts per Active and Average Gift -- is instrumental in building to this eventual LTV.

If retention had been lower, the LTV would have dropped. That's why bonding donors through 2nd gift strategies is important. Same for lapse prevention and lapsed donor reactivation.

If giving frequency changes, so does LTV. That's why we need to give the donor ample opportunities to give to multiple offers and multiple channels.

Average gift also has an impact. That's where challenging yet appropriate ask amounts come into play.

The LTV metric helps you understand your organization's growth. At the same time, there's a lot going on underneath that helps us understand we can adjust strategies and tactics to improve it.