“You were right about Maddie and Sam,” Ponos said to Malcolm Triestodowell, president of PRoGI.
“Over the years, the Gottrocks have been incredibly generous donors.”
This conversation between Ponos, the VP for Development, and Malcolm reflects a key insight that many nonprofits might overlook—the importance of donor lifetime value. It’s not just about the first donation; it’s about the cumulative impact over time.
Ponos continued, “Their first gift was $2,500 back in 2008, and there were a few years where they gave only $1,000. But since then, the Gottrocks have contributed a total of $71,500 to PRoGI.”
This scenario plays out every day in nonprofits across the country. Organizations often look at one-time gifts, but they miss the long-term potential of those donors. Understanding and leveraging donor lifetime value can change everything.
What is Donor Lifetime Value (LTV)?
Donor lifetime value measures the total contributions a donor is expected to make over their engagement with your organization. It’s a crucial metric for guiding strategy, determining how much to invest in donor acquisition, and fostering long-term relationships.
In the case of PRoGI, Maddie Gottrocks’ initial gift was just the beginning. Ponos explained how Maddie’s outreach to 65 friends in 2016 yielded only seven donations, totaling $3,100. It seemed insignificant at first glance.
But fast forward, and those seven donors have now given a combined $51,250. And the ripple effect continues—one of Maddie’s friends, Mrs. Dineros, endorsed PRoGI for a $25,000 grant from the Scrooge McDuck Foundation.
This is the true power of understanding and maximizing donor lifetime value.
The Key to Long-Term Growth: Invest Now, Reap Later
Malcolm, the CEO, initially saw Maddie’s appeal and other fundraising efforts as short-term disappointments. He couldn’t understand why some campaigns seemed like “losses.” But as Ponos pointed out, the return on investment is not immediate—it’s exponential over time.
For example, PRoGI once ran a direct mail campaign that cost $75,000 but generated only $28,000 in initial donations. At first glance, this looks like a $50,000 loss. But those initial donors have gone on to contribute $145,000 over the years, more than covering the initial shortfall.
This is why understanding LTV is so important. It helps you see the bigger picture and make informed decisions on where to invest for long-term growth.
How to Apply LTV to Your Strategy
- Focus on Retention: The first gift is just the beginning. How you thank, engage, and steward your donors afterward determines whether they become long-term supporters.
- Think Long-Term: Immediate returns are great, but the real value lies in building relationships that grow over time, just as PRoGI saw with their direct mail donors.
- Segment and Prioritize: Identify your high-value donors and focus on cultivating those relationships. Look for ways to move them from one-time givers to major supporters and even legacy donors.
Start Building Donor Loyalty Today
If PRoGI had ignored Maddie’s seemingly small appeal or abandoned their direct mail efforts, they would have missed out on significant long-term donations. Understanding and applying donor lifetime value enables your organization to Go Big by maximizing the potential of every donor relationship.
