Part III in .NET

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With renewal rates as low as 3 percent per e-mail solicitation to past online donors, the overall yearly retention rate is perilously low. This may change it may not. These renewal rates are certainly lower than standard response rates for most direct mail programs. Let s conduct a quick test for a hypothetical online renewal program. The makebelieve animal rights group, Protecting Puppies and Kitties (or PPK), has found 1,000 online single gift donors in 2002. In 2003, it decides to send out 10 e-mail appeals throughout the year to try and renew those past online donors. Based on the average rate of renewal found in the study mentioned earlier, those 10 appeals multiplied by 4 percent (the average rate) would give the organization a simplified 40 percent renewal rate. Of course, multiple gifts by a small percentage of very loyal donors would lower that overall renewal rate, but let s keep this simple for now. So, a 40 percent renewal rate would leave 600 of those 1,000 online donors in a newly lapsed category. The author believes that even that 40 percent is anecdotally an optimistic projection in comparison to the renewal rates rumored to be associated with other organizations. With a 40 percent renewal rate for past online donors, what would the lifetime value be for those donors A study conducted by the Canadian Direct Marketing Association in 2002 looked at the life expectancy of a new donor who appears on a nonprofit organization s database, based on the average renewal rate for all donors. Please refer to Exhibit 14.5, taken from that study. To calculate the lifetime value of online donors at a renewal rate of 40 percent, you would calculate the average gift to be $75. If Protecting Puppies and Kitties found 1,000 new online donors and can renew 40 percent of them, then the lifetime value of the donor s gift would be $112.50, or the $75 gift multiplied by their time spent on the database (1.5 years). Now, let s compare the lifetime value of a single gift online donor with a monthly deduction via Electronic Funds Transfer from a bank account or via a credit card. For Amnesty International Canada s Andrew Bales, Internet fundraising director, the value of his online monthly donors is many, many times higher than his single gift donors. A comparative review of online single gifts and monthly donors from January 2000 to February 2004 shows a renewal rate of 82 percent for monthly deduction donors versus a renewal rate of 40 percent for single gift donors. If the life expectancy chart in Exhibit 14.5 is used to calculate the lifetime value of each online donor group, it shows: The single gift donors have an average gift value of $75 over four years and a renewal rate average of 40 percent meaning the $75 is multiplied by 1.5 for a lifetime value of approximately $112.50. The monthly gift donors have an average gift value of $20 a month, with an annualized value of $240 and a renewal rate of 82 percent meaning the $240 is multiplied by 9.5 for a lifetime value of approximately $2,280. The difference in the lifetime value is staggering, but there s a catch it s incredibly difficult growing your committed monthly online donor. Is it worth it A
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