In the past 3 years, one of our clients went from raising $2 million from their direct mail fundraising program to raising $5 million.
Their donor retention rates also dropped, from 60% to 40%.
That’s because 2 years ago, they had 5,000 donors and today they have 30,000 donors.
So let’s do the math…
5,000 donors with a 60% retention rate leaves you with 3,000 donors.
30,000 donors with a 40% retention rate leaves you with 12,000 donors.
By dropping the retention rate, they acquired 4 times more donors.
And in terms of lifetime value, that fell as well.
Take $2 million and divide it by the more loyal 5,000 donors they started with. Each donor donated $400 on average.
Then take the $5 million and divide it by the less loyal 30,000 donors. Their average value was only $166.
The retention rate and lifetime value both dropped by over 50% or more. But the charity’s net income increased from $2 million to $5 million.
There is no such thing as 100% donor retention. And a higher retention rate does not raise more money. It often raises less.
A high retention rate and high lifetime value often means you are raising less total net income than you are actually capable of raising.
Whenever you are looking at retention rates and lifetime value, always remember to multiply that against the total number of donors you have under any given scenario.
If my retention rate is 90% but I only have 10 donors, I’m going to have 9 donors in the end. So what.
Don’t fall into the trap of focusing solely on retention rates and lifetime value. They do not automatically — or just magically — increase how much money you raise.
More often than not, a high retention rate and high lifetime value leaves you smaller — and poorer — than you need to be.