In fundraising, we often talk about cost-per-new-donor and acquisition ROIs. While those metrics are important, they don’t tell the whole story. The real question is: What is this donor worth to your organization over time?
That’s where Donor Long-Term Value (LTV) comes in.
What Is LTV?
At its simplest, LTV is the total revenue a donor gives from the time they are acquired through their first five years on file. It’s a measure of the entire financial relationship, not just the first transaction.
LTV gives you a clearer picture of your fundraising performance. It answers questions like:
- Which acquisition activities bring in the most valuable donors?
- Where should I invest my acquisition dollars for growth?
- Which channels produce the strongest long-term ROI?
- How are my donors growing over time?
Why It’s Important
Acquiring donors is often a net-loss endeavor. The investment is significant, not just in dollars, but also in opportunity cost. If you base decisions only on the volume of donors acquired or the acquisition ROI, you might cut programs that actually deliver stronger net revenue over time.
LTV shifts the focus to long-term performance. Instead of asking, “What did this donor give?” you can ask, “What will they likely give over the next five years?” That’s the metric that should drive acquisition budgets.
How We Use LTV at Masterworks
We run LTV calculations by acquisition channel and offer, first gift amount, donor type—even by age—so we can compare strategies and focus on the ones that yield the highest value over time.
Here’s what we see:
Direct Mail LTV
Direct mail is still a reliable workhorse for acquisition, especially for older demographics, but it generally produces lower first gifts and slower upgrade potential compared to digital.
Digital LTV
Digital donors tend to give two to three times higher first gifts than direct mail donors and deliver a higher LTV. They also tend to be less expensive to steward over time as they require less direct mail to retain.
Sustainer (Monthly) LTV
Monthly donors are the ultimate LTV driver! Although their first gifts are generally lower, they have retention rates five times higher than single-gift donors, which results in higher total giving over time. And they also give results in a more predictable cash flow.
Want to learn exactly how to calculate LTV, and use it to plan your next campaign? We’ve put together a free LTV Workbook with step-by-step instructions, worksheets, and real-world examples.
