More and more, I’m encouraged to see nonprofit organizations leaning into recurring giving. Leaders are recognizing that the Subscription Economy has made consumers and donors comfortable with discretionary giving on a monthly recurring basis.
If you don’t yet see how the Subscription Economy is reframing monthly giving, I’d encourage you to see my 2021 post How the Subscription Economy Makes Sustainer Programs Possible.
Today’s post assumes that you already see an opportunity with sustainer giving, but you want to quantify it — for your board, your leadership team, or a key decision-maker.
Three Key Metrics
When making the case for investment in sustainer giving, there are three key metrics to review in the process:
- Growth rate reflects the number of new sustaining donors there are coming into the organization. It’s easiest expressed as a percentage growth for each of the past three to five years.
- Retention is the first place the value of sustaining donors becomes apparent. For most organizations with an automated giving (i.e., not check-writing) program, multi-year retention hovers around 90-95%.
- Long-term value (LTV) is where the true power of recurring giving shines. In our research, the LTV of a monthly donor is anywhere from 3-5X the LTV of a traditional single gift donor. In a recent analysis of ten different nonprofits, we found that the five-year LTV of a sustainer ranges from $1,240 on the very low end, up to $2,444 on the high end. The average was $1,956.
With these three metrics, you can make a very simple model showing the potential additional income from improving your growth rate, retention, or LTV. In other words, you can go to your decision-makers and show that an X% increase in growth rate will result in $Y additional LTV to the organization. You can also show an estimated cash flow with these three figures.
LTV is the #1 Metric
The single most important metric when making fundraising decisions is LTV, and nowhere is that more important than with your recurring giving program.
Every metric that you look at, every decision you make with regards to your sustainer program, should consider the LTV. Case in point — if you are only looking for the cost to acquire a donor to be as low as possible, you will never invest heavily in recurring giving. Why? Because it costs more to acquire a recurring monthly donor than it does to acquire a single gift donor.
Put another way, if I offered you a choice between two options:
Choice A: 100 new donors at a cost of $80/donor
Choice B: 100 new donors at a cost of $250/donor
Which would you choose?
Hopefully, you sense the trick question here…I didn’t give you the information you really needed to make a good decision!
Let’s say you asked me the question — what is the LTV of the donors acquired in each scenario?
Choice A:Same as above — LTV of a new donor is $491
Choice B:Same as above — LTV of a new donor is $1,703
Now that we understand the LTV of a donor, let’s look at how these choices would play out.
Long Term ROI: 6.1
Long Term ROI: 6.8
Choice B would end up resulting in nearly TRIPLE the net income going to ministry and at a better ROI.
If you’d like to know more about how your organization could benefit from a sustainer program, we’re happy to help. Feel free to reach out here.