Why acquisition isn’t your only strategy for growing your regular giving program
Chris Paver – 9 August 2022
It takes the average UK charity two years to recoup the acquisition costs of a £5-a-month donor, according to the latest commentary. That’s before a single penny actually makes its way to the cause to which the donor is giving. That’s a confronting statistic and it’s not likely to get any better with inflation, which is expected to make donor acquisition even harder.
So what can charities do about this? We recommend taking a holistic approach to growing your regular giving program, implementing effective retention and conversion strategies to complement your acquisition efforts.
Here’s our top tips:
Tip #1: Get to grips with your data
To grow your regular giving program, you first need to know your baseline stats. Start by understanding how long it takes your charity to recoup a newly acquired donor across each acquisition channel. To do this, simply divide the total acquisition costs by the number of donors acquired via that channel. This gives you the cost per donor. Divide this number by the average monthly gift size to get the repayment period in months.
Next, calculate the average number of months your donors will typically give for before churning. You can do this yourself, or use an analytics tool like Dataro’s Fundraising Intelligence.
Regular giving data from Dataro shows that, on average, regular givers make 16-17 gifts before they churn (find out more about benchmarking). You might also want to break this down by acquisition channel, age, or first gift amount – this can easily be done with Dataro’s Fundraising Intelligence tool.
Title: The average regular giver makes 16-17 gifts before churning, according to Dataro’s regular giving data benchmarks.
Once you know your repayment period, there are two ways to tackle this problem:
1 – Improve donor retention
If your donors give for longer and you reduce your churn rate, you will pay off your acquisition costs more regularly and more money will go to your cause. Retaining your regular givers really is far cheaper than acquiring new donors.
2 – Reduce the cost of acquisition
By reducing your acquisition costs, you lower the threshold of repayment – paying off your investment faster and more often.
Tip #2: Improve donor retention using predictive modelling
Every donor ‘lost’ from your regular giving program before the end of their acquisition repayment period actually represents a loss to the charity. That’s because you spent more acquiring the donor than the donations received. This is bad for the charity and it’s bad for the donor!
So how can we make sure donors are engaged and are likely to give for longer? Good stewardship of regular givers is key.
An essential yet often overlooked part of good donor stewardship is thanking your donors often enough. Talking to your most at risk donors and thanking them for their support and reminding them of their impact is the easiest way to improve donor retention. Using machine learning, charities and nonprofits are able to identify which of their regular givers are most likely to cancel their gifts. By predicting who is likely to churn from your regular giving program, fundraisers and donor care teams can proactively engage donors via phone or email to thank them for their support. This strategy is called Engage & Retain and it has been pioneered by Dataro in partnership with charities around the world with incredible results (read our case studies), saving hundreds of regular givers from churning each year.
Dataro’s Fundraising Intelligence data shows that, on average, charities lose just under 50% of their new regular giving cohorts in the first year. So by proactively identifying the at risk donors and engaging with empathy and sharing stories of impact, charities can significantly improve their retention rates.
Read more about improving donor retention here.
Title: Nearly 50% of newly acquired regular donors churn after the first year of giving.
Tip #3: Reduce cost per acquisition with conversions and reactivations
Reducing your cost per acquisition is a big challenge, especially as costs rise due to inflation. This makes the need to retain donors even more urgent. By understanding your cost per acquisition for each channel (and your expected lifetime value for donors via each channel), you can direct your resources to the channels that have the best repayment period and yield the strongest return. So make sure you do the maths!
Dataro has found that charities often miss an obvious source of potential new regular givers – their own existing one-off donors. Conversion to regular giving programs can yield a very high return with a much lower acquisition cost and often a higher Lifetime Value (LTV) because the donor is already engaged with your cause. Of course, you’re unlikely to match the volume of donors you can get through new-to-file acquisition, but cash donor conversion to regular giving should be a part of the mix for charities and nonprofits that want to grow their monthly giving programs in the most cost-effective way.
Using machine learning, it is possible to reduce these costs even further by targeting the donors most likely to say yes, leading to a higher ROI. Reactivating lapsed regular givers is another powerful strategy maintaining a robust regular giving program. Again, simply trying to contact all of your lapsed donors is extremely inefficient and expensive. But by targeting the donors most likely to reactivate (using machine learning to identify them), charities can bring previous donors back into the fold in a more efficient way.
The good news: regular givers acquired through reactivation and conversion to RG actually churn at a much lower rate than new-to-file acquired donors! Meaning these donors typically have a lower acquisition cost AND they give for longer and as such have a higher LTV. That’s a win both for the charity and the donor!