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Bryce DelGrande By Bryce DelGrande • February 22, 2017

Donor Acquisition Cost: Why you should care and what to do with it?

As a tech company we talk a lot about CAC or Customer Acquisition Costs, but we aren't the only ones who should be looking at these metrics. 

Nonprofits can borrow for-profit metrics such as CAC to better measure and run their fundraising shops. Of course, we do encourage you to retitle such metrics to make sense for your organization... DAC or donor acquisition cost fits a little better! 

Most thought leaders in the fundraising industry about DAC in the context of acquiring new donors. How much does it cost to acquire a new donor and are we raising more from their average gift and lifetime value (LTV) to justify our acquisition strategy?

However, this opens the floor for a more basic question: What is a new donor? 

New Donors might already be in your database

WHAT?

Yes. "New donors" shouldn't just refer to donors who you have never had contact with, or don't exist in your database prior to the gift. We encourage you to think about new donors differently for several reasons: 

  1. DAC skyrockets after 3 years lapsed (also known as long lapsed donors)
    • Research shows donors who have not given in the last years require similar costs to 'reacquire' as it does to acquire brand new donors to your database. 
    • Research also shows that these 'reacquired donors' have roughly the same relatively smaller average gift size as brand new donors in comparison to organizations loyal donors.
  2. DAC doesn't account for cost of purchasing names
    • Acquiring brand new donors usually requires purchasing lists, which can get costly and diminish ROI. If you treat long lapsed donors as new donors to acquire you will get better ROI on your efforts simply by cutting out extra costs. 
    • Your organization is likely already doing regular data quality appendages around the three primary contact methods (phone, address, and e-mail). So you won't have to engage in extra efforts to ensure quality. 
  3. Opportunity to connect more personally 
    • While it may seem counterintuitive a disgruntled donor is often easier to engage than an ambivalent one. Many of your long lapsed donors left for a reason, consciously or unconsciously, this is your opportunity to address those issues and make them feel heard.
    • Try messaging around addressing their departure and offering opportunities for feedback - "Hey, we miss you." can be really effective as a subject line.  

 

Return on Investment

There are many ways to judge if you are getting the right return out of your acquisition efforts. 

The folks at Fundraising Report have a great piece on evaluating your organization's investment in bringing in new donors here. What I like about their analysis is that they talk about LTV as opposed to average gift size. 

Average gift size is a very shortsighted metric for measuring return on investment because the return you are getting on your efforts is not simply the first gift a donor gives. 

One of our board members, and CEO of Bloomerang, Jay Love also wrote a great piece on calculating LTV here.

 

Applying DAC vs. LTV principals to existing donors

Achieving the fundraising holy grail -

  • reaching the right donor (highest potential gift and future LTV)
  • at the right time (best chance of conversion)
  • for the right gift (biggest gift to the biggest need)

- may seem impossible but all of these components have markers to make this trinity a reality. 

At Gravyty we use machine learning to identify the first two parts of the fundraising holy grail and serve up these donors to your fundraisers at their perfect moment to do what they do best, converting on the last part. 

 

 

Using a combination of your organization's data and big public data sources we can identify these ideal donors in their ideal moments, including those who have been long lapsed. We look to converting the highest potential current, past and new donors for your organization. 

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This way instead of driving donations at the bottom of the pyramid where it is costly and has low returns, we will help you work to expand your capacity and reach at the top end of the pyramid.

Want to learn more about how our platform can help your team raise money as if they were twice the size without hiring a new fundraiser? Contact us today!