In 2020, nonprofits acquired a flood of new donors. As we move through 2021, nonprofits need to build on this rising tide of charitable giving to drive acquisition efforts. Acquisition is an important driver of growth and long-term sustainability, but it is also a costly endeavor that can burn through budgets in a flash. It’s estimated that the cost to acquire new donors can run 50% to 100% more than the gifts collected from them.1 In this blog, we will explore effective, modern techniques to reach and engage new donors. First things first, we start by diving into your donor acquisition cost (DAC)
Knowledge is power, and nonprofits need to know how much it costs to acquire a new donor. Being able to calculate your DAC is important for measuring the effectiveness of your programs and know how your organization tracks against its goals. Nonprofits can calculate DAC by taking their marketing or acquisition expenses over a specific timeframe, campaign, or channel and dividing them by the number of new donors they’ve acquired over the same period or from the same campaign/channel. Still, nonprofits need to keep long-term goals in mind as they measure their DAC. Acquisition campaigns frequently look like they are losing money based on short-term measurements but pay off over the long haul as donors become more familiar with the nonprofit and its mission with every touchpoint. M+R’s latest report found that, on average, the cost to acquire a new lead through digital advertising was $2.60.2 It’s a good idea to find out if your digital DAC is above or below the current industry average.
A smart targeting strategy is key to a successful acquisition program. Donor lifetime value (LTV) is the metric nonprofits need to pay attention to when it comes to audience targeting. The idea here is that nonprofits should be specifically targeting prospects who look like current donors with high LTV. These are the individuals most likely to become life-long supporters. Targeting this audience segment will also lower DAC since nonprofits would be only reaching out to those with the highest likelihood to become frequent or big-gift givers.
Building a custom audience is one of the most effective ways to target your best prospects because it enables nonprofits to model that segment after existing high LTV donors. Also, it’s worth noting that the simple act of identifying your best existing hig donors is valuable in and of itself. After all, by knowing your audience better, you can create stronger and more engaging marketing campaigns.
Direct mail remains a pillar when it comes to charitable giving. Our survey of 2020 donors found that 31% used direct mail to give – and it was the second most preferred channel for communication.
That said, direct mail programs represent a significant investment. Did you know that, on average, companies will waste $180,000 on undeliverable direct mail? That’s an unacceptable level of waste, particularly for nonprofits with tight budgets. It’s vital for these organizations to ensure their dollars go as far as possible.
The first step to an effective direct mail strategy is maintaining a clean file and good data hygiene. Processing lists through the National Change of Addresses (NCOA®) database is an effective and economical way to keep your customer file as clean as possible.
Nonprofits can get the most of their direct mail program by carefully cleansing and deduping their databases so they can get an accurate view of their donors as both individuals and as households. They can also enhance their mailing lists with additional data on their donors, such as email, phone, demographic and psychographic data. This approach enables nonprofits to reach their direct mail audience on more than one channel and allows them to use data points such as location, gender, income, age, and more to create different audience segments for their direct mail campaigns in order to maximize effectiveness through relevant messaging that speaks to each segment’s unique characteristics. For example, a nonprofit that provides assistance to schools might want to change the messaging of their mailers when targeting young parents versus older members of the community.
Data Axle has worked with a number of clients to improve the efficiency and effectiveness of their direct mail programs. For example, the Mount Vernon Ladies’ Association has been working with Data Axle since 2015. “The results we have seen in our direct mail response using Data Axle have been very strong,” says Alisdair Sewell, the manager of direct response at the association. “Our most recent direct mail campaigns exceeded all expectations. We surpassed our budget goals just three weeks after the mail date, and to date have exceeded budget by $60,000 for that campaign.”
Nurture campaigns establish progressive touchpoints with potential donors to motivate them to engage and eventually donate to your organization. Your CRM, when loaded with useful donor data, can help you nurture potential donors down the path to sustained giving. Automated emails or other touches can be sent to potential donors as they engage with your previous messaging. By understanding the kind of content that prompts your audience to respond, you can continue to deliver relevant messaging.
Donor acquisition is expensive, but it’s imperative to growth and instrumental in reaching your organization’s fundraising goals. Data-driven best practices, such as an in-depth knowledge of your donor base, targeting likely best donors, enhancing direct mailing lists and creating automated nurture campaigns will help nonprofits reduce the cost of new donor acquisition and free up funds that can be used elsewhere.
Jennifer Clark is an industry veteran, with 15+ years of experience in the nonprofit and data analytics space, specializing in data strategy for acquisition, retention, loyalty and intelligence. Clark is passionate about helping nonprofits exceed their fundraising goals. Before joining Data Axle, Clark applied her talents at Blackbaud, PMX and Epsilon. Clark currently resides in Bradenton, FL with her fiancé, Joe and their pup, Ernie.