Lifetime Value (LTV)
Researchers like Prof. Adrian Sargeant and psychologist Jen Shang see LTV as fundraising's most critical metric. LTV is the amount a donor gives in sum, from first gift to last, from acquisition to bequest.
The LTV of a direct mail-acquired donor beats that of a F2F-acquired donor until the three year mark. Then for a couple of years, the LTV of F2F is better. After five years, the LTV of a direct mail donor begins to catch up again "if the charity is good at appeals and major donor work," says Sean Triner, Pareto's co-founder. "And beyond 10 years, direct mail LTV begins to hammer F2F if the charity is good at bequests."
The problem (or opportunity) is this: most charities, research shows, realize only a tiny fraction of potential LTV, because most new donors don't stick around very long.
Organizations lose new donors remarkably fast. Blackbaud's chief scientist, Chuck Longfield, reported in 2013 that 70 percent of first-time donors are gone within a year. His sample is vast. And the percentage is perennially dismal.
Retention is a bit better for donors acquired through F2F. With F2F, inertia works in favor of the charity. Canceling an automated gift requires energy and action, whereas ignoring a second direct mail appeal requires neither.
But even with F2F-acquired donors, to use the best data I know,[1] 40-50 percent stop giving within 12 months. And F2F donors under age 45 often cancel before the charity's had a chance to recover the high cost of acquisition (roughly $320 to acquire a F2F donor vs. roughly $60 to acquire a DM donor). Retention is worst for cash donors acquired through digital: 80 percent make no second gift.
Charities have a serious disease: they're hemorrhaging donors. There is a cure, though. We can do a better job of delivering what donors crave emotionally: appreciation and thanks. In my view, that's a "great" donor newsletter's chief job: delivering emotional gratification.