Are you willing to spend $1.50 to raise $1? To lose money to make money? You should be. Most donor acquisition mailings never pay for themselves. They lose money. And rightly so.
Acquisition letters (letters designed to acquire new donors) should be a vital part of your development program. Current donors fall away. By a lot. Upwards of 40% of your mailing list will become stale within a year!
Some lose interest in your mission. Some lose their jobs. Other leave the country. Some die. You need to be mailing fundraising letters to people who have never supported your cause in order to replace the donors who fall away every year through no fault of yours.
But to be successful at acquiring new donors, you need to ignore one set of numbers and fix your eyes on another.
The numbers to “ignore” are the costs of getting your first donation. According to James Greenfield, in his excellent book, Fund Raising (second edition), you can expect to pay anywhere from $1.25 to $1.50 to raise $1 with an acquisition mailing. That doesn’t sound like a wise use of your resources, does it?
But with acquisition fundraising letters, you need to have your eyes fixed on the lifetime value of your donor, not the short-term value of their first gift. You need to remind yourself (along with your board members, key volunteers and inexperienced colleagues) that your goal with acquisition mailings is to acquire friends, not funds.
Let me illustrate:
Let’s say you mail a fundraising letter to a list of 10,000 strangers. These are people who have not supported your organization before but might.
Assume that your costs for writing, design, production and postage come to $0.60 a piece.
Your mailing costs are thus $6,000.
Let’s say you receive a 1 percent response rate. That’s 100 gifts.
Further assume that the average gift is $30
Your income is $30 x 100 donors, namely, $3,000.
Your costs are: $6,000
Your income is: $3,000
Your net loss for the campaign is: $3,000
Are you in trouble? No.
Here’s what you tell your executive director. “We gained 100 new donors. And up to 80 percent of them will give again, provided we follow up properly and solicit their gifts in the right way in the future.”
Each of these new donors effectively cost you $30 each (your net loss divided by total new donors).
Are you willing to spend $30 today to raise a friend who will likely give your organization hundreds of dollars in gifts in years to come?
You should be, provided you can remember that your goal with acquisition letters is to raise a donor, not a donation.
What’s been your experience with donor acquisition?
We welcome your comments about this post on the LAPA blog.