Why are charities shifting from transactional fundraising to relationship-based fundraising? The answer is Lifetime Value or LTV.
What is Lifetime Value?
The LTV of a donor or member is a measure of the financial benefit that comes from an individual or organisation during the whole time they interact with you.
A focus on LTV requires a shift away from prioritising single transactions. Yes, it’s always wonderful to bank a contribution from a supporter, but what happens next? If your approach is fixed on one-off transactions you might simply sent out another mailshot or membership renewal letter. But how does that make a donor feel? And how do you know when the next donation will be made?
How many first-time donors give again?
There’s a consensus in research reports that less than half of first-time donors will donate again. That may or may not be the right figure for your organisation, but whatever your retention rate, even a small increase can make a major difference to the flow of funds.
That’s why more and more not-for-profit organisations are using data-driven CRM systems to help build longer-lasting relationships with their contributors.
How and when do you contact donors?
Building an effective contact cycle is a critical task for NFPs. If your thinking is purely transactional, you might be stirred into action if there’s a clear and present need for more funds. So you send out a mail shot, hope it achieves your fundraising goals, then do the same again at some stage in the future.
By contrast, a relationship-based approach will be based on analysis of:
• which donors are most likely to give
• when they are most likely to give
• how much they are likely to give
You need to ask the right questions of your database, and in most cases the answers will be there.
How to use analytics for fundraisers
With robust metrics in place, fundraisers can build a contact cycle for their donors and a predictive model for incoming funds. The donor base can be segmented, for example into regular givers, occasional givers and those who have given only once. The amount given will also come into focus, as will the LTV of donors. Data modelling will provide a dependable framework for building a contact cycle which maximises engagement and donations.
What types of communication should fundraisers use?
What you say and how you say it is a key part of contact cycle planning. To maximise response to a direct mail campaign for example, there needs to be a different message for donors who have not contributed for some while as opposed to recent donors. First-time donors will also respond better by welcoming them into the donor community.
A mix of mail, email and telephone contact can be used to engage and persuade existing donors. High value donors merit the highest level of effort, and that could include setting up meetings and events specifically for them.
To grow the donor base and broadcast messages about your organisation, other media options have a powerful part to play. That includes TV and press advertising, doordrops, web advertising, social advertising and content.
Analysis will show which types of communication yield the best returns. A properly enabled CRM system will yield fast and accurate analysis to help you refine your communications plan.
How automation helps relationships
The task of producing personalised communications for different donor segments at different times might sound daunting, but that’s where working with digital data comes to the rescue. With donor data, contact history and analysis all in one place, it is possible to produce and send out relevant communications at the right time using a range of automated functions.
Automation cuts out multiple time-consuming manual tasks. It also improves the speed and timing of getting communications out, as well as handling complexity and accuracy. And with all the data sitting in one place, systems can be configured to generate reports automatically.
The result of using automation effectively is to build better relationships with donors and members.
Don’t forget the human touch
As you can see, we back CRM systems to help NFPs move beyond purely transactional interactions to building longer term relationships. But in the digital world it remains as important as ever to stay true to your mission and communicate your values and purpose in a very human way. No-one engages deeply with robotic messages, and sharing your vision, passion and humanity with your followers is vital for long term success.
If you’d like to explore relationship-based fundraising, book a call now.
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