5 Steps to Increase Your Donor Lifetime Value (LTV)

March 11, 2024
5 minutes

NGO, 501(c)3, and even LYBUNTY. And today, for your spelling pleasure, we've got a delicious acronym: LTV. We're gonna go over what it is (obviously), how to calculate donor LTV, and, most excitingly, 5 logical steps to increase donor LTV.

What is Donor Lifetime Value?

Donor Lifetime Value (LTV) is a fundraising metric used to estimate the monetary value a donor is expected to contribute over their lifetime relationship with a nonprofit. LTV is typically calculated as an average for all donors or a specific segment of donors, resulting in varying values for individual donors. Increasing your LTV is one of the best donor retention strategies that nonprofits forget about.

How to Calculate the Lifetime Value of a Donor (Donor LTV)

Average donor lifetime value calculation is crucial to understanding the impact of your team's efforts and developing fundraising strategies that will increase donor retention and engagement. Here are the pieces of the donor lifetime value puzzle you need in order to get to the LTV nitty-gritty; multiply them for a baseline LTV.

1. Donor Lifespan

On average, how long do donors support your organization? Financially, of course. Obviously, you'll have some supporters who volunteer when they're not donating, or board members who host donor stewardship events and write it off as a donation (that's not our business—you get to decide if that constitutes an in-kind donation.)

Get that average donor lifetime and get ready to calculate!

2. Average Donation

This should be an easy one: If you don't know your org's average donation size, you need to get that, pronto. And not just for this task; average donation size is one of those core deets you should have at hand at all times! 

Whether you've got a spreadsheet formula or your fundraising software offers it in big, bold font on a dashboard somewhere, grab that stat!

3. Donor Frequency

How many donations do your donors give per year? Maybe once to your spring campaign and once in response to a year-end ask. Or maybe you're big on birthday fundraisers and you do a heavy push for one event a year—a fun run or gala. 

Calculate how often your donors give to your org per year and bring that number to the table.

5 Logical Steps to Increasing your Nonprofit's LTV

These steps are so logical that you're probably gonna roll your eyes and shake your head. But sometimes, sometimes, we get caught up in all the ins and outs of doing something the exact. perfect. way. And we forget that it can be as easy as looking at a little list and taking it one step at a time. Fundraising success can be that way. 

Take it from a fundraising expert who's got the chops to make it through crises: Amber Christoferson, VP, DickersonBakker. Her advice on the Nonstop Nonprofit podcast echoes across time and causes. 

"What I'm seeing in nonprofit organizations is if you're not bold, you're not moving. We have to be bold in how we tackle the challenges of today."

So just keep that nugget in mind, bear with us, and maybe you'll walk away with a tip or two to try. Trust. 

Here are the 5 steps to increase the donor LTV:

  1. Use fundraising intelligence to calculate and track donor LTV
  2. Segment donors using donor LTV
  3. Increase donor lifespan through donor engagement
  4. Employ power ups to increase gift size
  5. Prioritize recurring giving to improve donation frequency

1. Use Fundraising Intelligence to calculate and track donor LTV

Fundraising reporting is your unsung hero in the crusade to raise your donor LTV (and achieving lots of other fundraising goals)—and Funraise makes all of that data easy to gather, simple to share, and, ultimately extremely digestible. And when you grasp your nonprofit's data as instinctively as a baby grabbing a finger, executing on those meaningful insights feels natural and obvious.

As noted, donor LTV relies on the three data points noted above: average lifetime of the donor with your org, average gift size, and average frequency of donations per year. Tracking the individual contributors as well as the overall stat is key to growth of any kind. 

Bonus! Fundraising Intelligence is a lot more than just reporting. It's a whole suite of data intelligence products backed by AI, including AI forecasting, data explanations, and natural language queries. 

2. Segment Donors using Donor LTV

Once you've put together the reports and identified each piece of the LTV for your entire donor database, it's time to rip it apart (insert ⚡ metal headbanging ⚡.) Each of these donor segments will have its own unique donor LTV; it's your goal to increase that by reducing donor acquisition costs and donor attrition rate, increasing donor retention rate, and establishing more transformative donor relationships.

1. Lifetime Value + Giving Level

If you haven't already, break your donors into giving levels. It only benefits your donors, who aren't going to be asked for $20 when they're $500 givers, and vice versa. And obviously it benefits your nonprofit as you're trying to come to each donor with the exact right ask. 

2. Lifetime Value + Demographics

Choose the demographics that are most important to your org: location, education level, age, gender identity... or choose your own. For extra insights, cross-reference demographic markers. 

The key is that you'll find that donor lifecycle for one generation or gender is higher than the rest. At that point, look at your donor base for easter eggs or actions that you can apply across your entire donor audience.

3. Lifetime Value + Channel

How or where a donor came to support your org is their channel. This is a tricky one because donors can be in more than one channel—for example, the first donation could come in through a P2P fundraiser, the second through their desktop computer, and the third as a result of a direct mail campaign. 

How you address each segment—and the timing of your ask—will be different for each, as will your strategies to increase donor LTV. For P2P fundraiser donors, you may want to focus on increasing gift size, whereas your focus for direct mail donors may be on extending donor lifecycle.

3. Focus on donor engagement

Speaking of extending the donor cycle... now we're into step 3 of our plan to increase the lifetime value of your donors. Donor engagement is one of the best ways to turn first-time donors into current donors, one-time donors into monthly donors, and potential donors into high-value donors. 

Membership programs

Who doesn't want to be part of something awesome?! No one, that's who. We all want to feel special, which is why a membership program is perfect for donor engagement. And donor engagement is exactly what will keep donors around for years.

Many membership programs offer exclusive swag or content, tapping into one of today's most compelling reasons to join the jam: donor FOMO. Today's donors don't want to miss a second of something special, so make your membership program so juicy they can't say no. 

Pledges from major donors

If your nonprofit deals with pledges or multi-year donation commitments (usually from major donors), when do you reach out to renew or re-establish the pledge? Do you wait until crunch time to get the ball rolling? 

Pledges keep donors engaged for longer, increasing your donor lifespan.

Sometimes nonprofits try to leave their major donors alone for fear that they'll annoy them (with their world-changing impact), but that's not engagement. Take our advice: don't let the pledge timeframe run out without a new commitment. Make the ask.

Make a tradition

Yearly birthday/anniversary/year-end P2P fundraising is one way to thoroughly engage donors so that you extend your donor lifespan—and not just any donors, but donors that do more than just hit the donate button (although that's still totally appreciated.)

And our favorite way to get people super stoked to be a fundraiser is to celebrate their efforts like whoa, but not just, like, "You're so awesome!" Celebrate it as a part of the tradition you've built with them, and enjoy engagement year after year. 

4. Increase that average gift amount

The fun part is looking back and seeing the gift amount line go up on your reporting. We're getting all excited for you already!

Here are a few of our favorite ways to increase your average gift amount. Please, please try them and tell us how it goes! (Can you tell we're all atwitter?!)

Corporate matching 

Double the Donation has all the information about how company matching leads to increased gift sizes. Rumor has it that 1 in 3 donors indicate they'd give a larger gift if matching is applied to their donation.

Donors Cover Fees

Funraise's donor-covered fees model works similarly to corporate matching. When people know that the full amount of their intended donation is going toward impact, donors are inclined to 

If your nonprofit is unable to implement a donor-covered fees model, at least expand transparency around how donations are broken down. Understanding how much of their donation goes to programs is something that a lot of donors are very interested in.

Impact cards

Here's a tricky one (oooh, so exciting!) 

Often, your donors are swayed to give when they look at your impact cards. The $25 that buys 5 meals can be right in their budget and hard to resist (which is why you have impact cards in the first place!)

So, if you know your average gift amount, let's stick with $25, and you start your impact cards at $30, just a few dollars above the most common donation amount... voila! Increased average gift amount. 

Machine Learning personalized asks

This is a Fundraising Intelligence special and the perfect use case for machine learning to increase your average donation size. Personalize the giving experience by tailoring your ask amounts to increase donation form conversion. Funraise uses machine learning and signals like time of day, device type, and giving history.

5. Prioritize recurring giving

What's the best way to increase gift frequency? Get donors to give every month. Another one of our favorite donor programs is recurring giving. It provides a predictable revenue stream, gives you a reason to interact with donors more frequently, and increases yearly donation amounts from most donors. (Would you prefer $50 now or $10 a month indefinitely?)

(Also, why are we so excited to increase donor lifetime value? Also also, who cares? It's so fun!)

Recurring giving upgrade

Funraise's user-friendly donation forms have this supercool power-up feature that suggests a monthly donation option to one-time donors giving less than $100. Especially with inflation being such a killjoy these days, the option to break down a donation into smaller chunks is often irresistible. Try it!

Connect a bank account

Do you wanna hear a secret? Your intrepid editor here has been giving $5 to the local public radio station every month since 2007. While there are no plans or desire to kill that recurring gift, the reason it hasn't expired or run out of steam or fallen through the cracks is because that public radio station made donating easy by connecting directly to a bank account. 

Now, $5 each month may seem like a small amount, but that relationship has gone on longer than your editor's marriage, with 12 donations each year. 

Things to consider when calculating your donor LTV

Here we go, the pitfalls to avoid. Just as we get our kicks from increasing historical donor lifetime values, we also love digging into what could go wrong. Here's the skinny.

Remove outliers

Take out those tiny one-time donations (that could easily be fraudsters) as well as your major donors. Or at least segment those big donors into their own list. 

Consider campaigns

Another segment that could skew your LTV is the campaigns associated with your donors. For example, let's look at donors that enter your sphere based on peer-to-peer fundraising: unless they've given more than once, they may just have dropped in thanks to their fundraiser friend. 

Take out corporate matches

One of our earlier suggestions was to increase average gift size through company matching. But don't forget to take out the matching gift!

Donor Lifetime Value (LTV) FAQ (answered by AI and a human)

How can I increase my donor lifetime value?

Increase your donor lifetime value by focusing your fundraising efforts on the three lifetime value metrics necessary to calculate it: gift frequency, gift size, and donor lifespan. If you work on raising each individually, your overall donor LTV will naturally rise.

How do you calculate donor value?

Here are some key steps to calculate donor value: calculate the average donation, estimate donor lifespan, and factor in donor frequency: Consider how often a donor makes contributions to your organization

What is a good lifetime value?

A good donor lifetime value is one that keeps increasing.

Spoiler alert: AI couldn't answer this. And neither can we! Despite all the reports out there with stats about generosity, there's a dearth of data about donor LTV. Double the Donation has the most recent average gift size ($121) and the average number of donations per year (2). But we couldn't find an average donor lifespan—which means we can't calculate an average donor LTV for you. If you're able to help us out, please send us an email!

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