Are You Spending Too Much on Low-Dollar Donors?
Low-dollar donor acquisition typically occupies a large share of the fundraising budgets for nonprofits, and a similarly large share of their time and energy in terms of staff resources.
But is all this money and time being well spent?
Yes, every donor is important, and every donor should be commended for giving generously to causes they care about. And yes, there are future mid-level and major donors to be found among your low-dollar donors. So the point here isn’t to abandon low-dollar donor outreach altogether.
But let’s take a look at some statistics from the Fundraising Report Card, which surveyed over 8000 nonprofit organizations and educational institutions.
Statistics Comparing High and Low Dollar Donors
These statistics compare high and low-dollar donors on a variety of metrics. We’ll take them one at a time.
Fundraising Revenue Percentage Comparison
According to the Report Card, 76.38% of nonprofit revenue comes from just 0.74% of their donors. In contrast, just 4.96% of revenue comes from 77.16% of your donors.
This means low-dollar donors, who comprise about three-fourths of your donor base, are giving just 5% of the revenue.
You’ve heard of the Pareto Principle most likely, with the 80/20 rule. But this is Pareto in the extreme. It's 80/1 – about 1% of donors are giving about 80% of the revenue.
While these numbers won’t be the same for every organization, remember that this data comes from 8000 organizations. So it’s not a small set of data.
Here’s the question:
How much money are you investing in low-dollar donor acquisition? And is that money being well-spent? How many of your low-dollar donors eventually become mid-level or major donors? Do you have an effective method for identifying them that does not cost tons of money or time?
Many organizations do not. They do have major donors hiding in the wings, but they don’t have effective ways of identifying, qualifying, and cultivating them, so many slip through the cracks.
Donor Retention Comparison
The Fundraising Report Card also found that low-dollar donors have a 16.35% retention rate, compared to a 35.73% retention rate for high-dollar donors.
Those 16% of low-dollar donors are important, because it’s from that group you’ll find some new mid-level and major donors down the road.
But here’s the thing that often gets overlooked – many low-dollar donors choose to give to organizations they already know about and want to support. In other words, many of those donors would have given anyway with minimal, if any, marketing outreach.
For example, a college graduate who feels a bond with their alma mater may only need to be reached once or twice before they decide to give because they were predisposed to do so already. But how many graduates who don’t give the first few times they get asked, after enduring year after year of solicitations, mailings, and calls, end up giving 15 or 20 years later? Very, very few.
There is a law of diminishing returns here, and it diminishes very fast after that first group of positive responses.
MarketSmart believes much of that low-dollar acquisition money and time would be better spent investing in nurturing the donors you already have, identifying and qualifying the potential major donors, and making stronger and more personalized outreach to them.
And we don’t believe this just because it sounds good. We have a LOT of data that supports our approach to fundraising automation, which is built to identify, qualify, cultivate, and steward major donors and potential major donors.
That higher retention rate for major donors is more than just a percentage because as you’ll see next when a high-dollar donor gives again, they give far more than a low-dollar donor will ever come close to.
Let’s take a look:
Lifetime Donation Comparison
Low-dollar donors have an average gift size of $25.57, and they give $44.75 on average over their lifetime.
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High-dollar donors have an average gift size of $40,827.65, with a lifetime average of $75,468.11.
Stop and ponder the vast and unfathomable chasm between these numbers. That’s not a misprint. High-dollar donors give an average of $40k per gift. This is how you arrive at the numbers you saw at the start, with just a few donors providing about 75% of your revenue.
How much money should you invest in finding donors who have a lifetime giving average that is under $100? Around $10 or $20 investment – total over their lifetime – is about all you can justify.
Plus, consider the rising costs of making outreach to low-dollar donors:
Finding low-dollar donors isn’t getting less costly. It’s getting more. And, it’s getting harder. The Lilly Family School of Fundraising found that the share of Americans donating to charity declined from about two-thirds in 2000 to half in 2018.
So, over an 18-year period – a generation – people giving anything at all to charity plummeted around 24%. Fewer people are giving anything at all.
In this light, is it wise to keep spending the same amount of money – or more – trying to acquire new low-dollar donors from a shrinking pool?
Good Fundraising Statistics from the Fundraising Report Card
The report did reveal other findings that point the way for how you can more smartly use the majority of your fundraising marketing budgets and personnel resources.
First, donors who gave over $5000 as their first gift were twice as likely to give a second gift compared to first-time low-dollar donors who gave under $100.
This suggests that, while you should most certainly thank every donor and follow up to give them the opportunity to give again, realize that first-time mid-level donors are twice as likely to give again, and they give far more money.
So, not only are they supplying a large share of revenue, but they are twice as likely to provide that large share more than once.
Second, 82% of legacy giving dollars are coming from that tiny pool of high-dollar donors.
This means you don’t have to reach out to very many people to win the vast majority of planned gifts that are within your reach. You can spend far more time nurturing and deepening your relationship with this small pool of major donors to secure their planned gifts because that’s where nearly all of them are going to come from.
How to Respond to These Fundraising Statistics
What you’ve just read is what we refer to as Fundraising Climate Change. We call it this because the trend of extracting more donations from fewer donors is ultimately unsustainable, and you need a new strategy for finding and keeping more major donors. Fundraising Climate Change is so real that we wrote a special report about it, which you can get for free here.
The greatest value of your low-dollar donors comes when you find the small subset of major donors who reside within that group. But how do you find these people without exhausting your budget and limited staff resources?
The most effective and efficient approach, by far, is to use fundraising automation. As it happens, we have a special report about this too.
Fundraising automation enables you to conduct the critical processes of identification, qualification, and cultivation of new and potential major donors, as well as stewardship of your existing ones – with most of the work happening in the background.
MarketSmart’s engagement fundraising software uses responsive AI to interact with donors and supporters over email, and it scores their level of engagement over time while keeping track of certain high-value information they provide in their answers to surveys.
With this information, your gift officers can focus their efforts on the supporters who are ready and interested in hearing from you. The rest of your supporters continue to experience connection and relationship with your organization, but it requires minimal time from your limited staff resources.
Fundraising automation enables you to communicate in five ways that benefit both the donor and the organization:
You can learn more about these five critical elements of effective fundraising communication.