When it comes to building a thriving nonprofit, focusing solely on one-time donations can only go so far. New donor acquisition is expensive and it doesnโt offer predictability. This is where donor lifetime value (LTV) comes inโa strategic metric that provides insight into the long-term financial impact of your donors.
Understanding why donor LTV is so essential allows your organization to grow sustainably and predictably.
What is Donor Lifetime Value?
Donor lifetime value estimates the total amount a donor will contribute to your organization throughout their relationship with you. Instead of focusing on individual gifts, LTV accounts for the full picture:
- How much do donors typically give per gift?
- How often do they donate each year?
- How many years have they remained active supporters?
The calculation will look like this:
Average donation size x Average number of donations in a year x Average number of years giving to the organization
For example, a donor who gives $100 twice a year for five years would have an LTV of:
$100 ร 2 ร 5 = $1,000
This isnโt just a helpful numberโitโs a tool for understanding how your efforts to build donor relationships translate into long-term revenue. You can use this information to better understand what you need to do to hit your goals and retain your donors.
Related: Understanding the Power of Average Gift Amount in Fundraising
Why is Donor Lifetime Value so Important?
Hereโs why LTV matters:
- Informed decision-making: It helps you determine when your acquisition costs will break even and which channels deliver the best return.
- Efficient resource allocation: By focusing on the lifetime value of donors, you can prioritize efforts that lead to sustainable, predictable revenue streams.
- Reduced reliance on new donors: Constantly acquiring new donors is costly. Focusing on LTV shifts the strategy toward strengthening existing relationships, which tends to be more cost-effective.
LTV is a great tool for determining where to spend your acquisition budget. By analyzing the LTV of donors acquired through different channelsโsuch as direct mail, digital, or televisionโyou can identify which methods attract supporters who contribute the most over time.
For instance, if digital consistently brings in donors with higher LTVs than direct mail campaigns, it would be wise to prioritize digital in your budget. LTV also helps you pinpoint the break-even point for each channel, giving you a clearer picture of which investments are delivering the highest returns. With this insight, you can make more informed decisions and focus your resources on the channels that drive sustainable growth for your organization.
Ultimately, LTV is about creating stability and sustainability for your mission.
How Does Your Organization Measure Up?
The Virtuous 2024 Nonprofit Benchmark Report looked at data from 370 Virtuous customers. On average, donor LTV varied depending on organizational size:
- All orgs: $648
- Small orgs (<$1M): $706
- Mid-sized orgs ($1โ5M): $1,207
- Larger orgs ($5โ10M): $856
- Largest orgs ($10M+): $555
How to Improve Donor Lifetime Value
[Caption: Learn how to create dynamic dashboards in Virtuous to track donor lifetime value.]
Boosting donor LTV doesnโt have to be complicated. It starts with strategies that deepen donor relationships and enhance their commitment to your mission.
Here are three key tactics:
1. Increase Giving Frequency
Encourage donors to join a recurring giving program. Regular, automated contributions create a reliable revenue stream while fostering a deeper sense of involvement.
2. Elevate Giving Levels
Use tools like dynamic ask arrays (personalized donation prompts) or donor management programs to guide supporters toward larger gift amounts. A small increase in gift size, when multiplied over time, can significantly impact LTV.
3. Foster Deeper Engagement
Engage donors beyond financial contributions. Involve them in advocacy, volunteering, or events. Donors who are invested in multiple aspects of your mission are more likely to remain loyal over the long term, leading to higher retention.
The Bigger Picture
Donor lifetime value is more than just a numberโitโs a lens through which nonprofits can build stronger, more meaningful relationships with their supporters. By understanding and improving LTV, your organization can plan smarter, allocate resources more effectively, and grow sustainably.
Take a moment to evaluate your current donor engagement strategies. By maximizing LTV, youโll increase revenue and cultivate a community of deeply committed supporters who will champion your mission for years to come.
Increasing donor lifetime value doesnโt happen in a vacuum. Download the 2024 Virtuous Benchmark Report to learn more about the metrics and tactics to grow your nonprofit.
