FOCUS ON AUDITS Don't Be Afraid of the A-wordUnlike the tax v
A file audit also tracks the donor's annual giving patterns (number of gifts, average gift, yearly worth) in both the first year and over the course of many years. Since very few organizations generate a profit "out of the gate," it is critical for nonprofits to understand how valuable new donors are and how long it will take to recoup the initial investment.
Long-term value for new donors will vary depending on the organization. Different organizations have different benchmarks for the recovery of their initial investment, but typically the goal is to break even within 12 to 18 months.
The critical first year
Tracking how many donors gave again the year after they were acquired is a key indicator of the health of a direct mail program. A file audit tracks this first-year renewal rate and shows the giving patterns that have been established year over year for each group of first-year renewers.
At best, about 40 percent of the donors acquired in one year will contribute again the next year. Organizations with a first-year renewal rate of less than 30 percent are getting minimal benefits from their acquisition efforts.
The key to maximizing first-year renewal is to increase giving
frequency of newly acquired donors. Donors who give a second gift within a 12-month period usually are 40 percent more likely to renew the following year. The sooner the donor gives that second gift, the more likely he or she will be to continue supporting the organization.
Strategies to improve or maintain a strong first-year renewal rate typically are centered around the treatment of new donors. Some positive ideas:
1 Develop a welcome package.
2 Implement a conversion series — or a group of one to three mailings that are targeted toward maximizing the response rate of new donors.