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It's a question we all have to reckon with: Should I prioritize new or existing donors? In this post, we're going to help you break it down so you can decide what's best for your organization.
Now, we can't (and won't) tell you WHAT to do, but we can tell you WHY we strongly suggest prioritizing existing donors. Even though we know that acquiring new donors is a necessary and valuable part of any fundraising strategy.
One great way to answer this question of prioritization for YOUR organization is by measuring your donor acquisition cost and comparing it with how much is they are currently bringing in.
What happens when you prioritize new donors?
Before we begin, we must understand Donor Acquisition Cost.
Donor acquisition cost (DAC) is the price you pay to convince a potential donor to make a gift to your organization. This can include things like the cost of marketing and advertising and donor incentives and rewards expenses, as well as the cost of staff and other overhead expenses. What exactly you include depends on your organization.
Therefore an important metric to consider when evaluating or establishing your fundraising budget each year. It can include things like the cost of marketing/advertising your appeals, donor incentives & rewards expenses, include the cost of staff salaries and other overhead expenses, etc.
Two big things to consider when looking at donor acquisition cost
There are three big things we need to know when it comes to looks at your DAC.
- How much are you spending in total?
- How many donors do you have in your database?
With those numbers known you can divide A by B to identify your DAC.
Feel free to use the tools below to help calculate your DAC.
The Best Free Online Calculator - Calculator-1.com
When we break these metrics down, it becomes a lot easier to see where we stand and where we should head next. Once you've calculated your DAC, take the time to ask yourself what insights you can glean from it. Perhaps you've realized that you're spending too much to acquire new donors while you have a database of untouched donors that are likely to donate if you asked?
Now, let's consider the other side of the coin.
Why prioritizing existing donors is important
A standard benchmark for nonprofit donations programs is a 20%–30% donor retention rate — anything above that shows increased loyalty and better engagement than most organizations achieve over time.
It’s important to note that retaining donors who give once does not mean you retain them for life. Generally speaking, there is no way to know how often someone gives each year until they give again UNLESS you offer them a monthly recurring giving program.
Here's what that could look like.
Let's say you were previously spending $50 to acquire a donor (DAC = $50) for a $100 donation. Let's say you spent the same amount to get a recurring donor giving $15 a month, who sticks around for, at least, a year.
Even though they're giving just under the price of a standard plan for Netflix each month, at the end of the year you'll have received $180. And if they stay subscribed, they'll keep giving more. You'll only have to pay the DAC once.
You can see how offering donors a monthly recurring giving program can unlock previously untapped streams of donations.
Get started with Subscription Philanthropy
Harness Giving lives and breathes the subscription economy to make the entire donation process easier for donors and nonprofits alike. Whether you are a major player in your local philanthropy scene or just starting out, we can help make your organization a recurring donation powerhouse.
Ready to launch your Subscription program? If yes, consider speaking with the Harness Giving team to see how we can help you get results.