Donor Lifetime Value
As for-profit firms need to focus on maximizing value for each of its varied relationships – with customers, employees, salespeople, etc. – so should non-profit firms do the same. In the non-profit context, nurturing relationships with potential donors is of paramount importance. And to nurture these relationships, the concept of Donor Lifetime Value (DLV) is essential.
DLV is a forward-looking metric that computes the sum of future donations discounted to the present value, over the course of the donor’s lifetime with the firm. In other words, it applies the basic concept of Customer Lifetime Value (CLV) to the donor/non-profit relationship. This future value is determined by using past donation behavior and other marketing information to then predict: the likelihood of donation, the value of the prospective donation, and the marketing costs incurred by the firm in soliciting donations (Kumar, V., and J. Andrew Petersen (2017)). As with CLV, Salesperson Future Value (SFV), and Employee Engagement Value (EEV), the donor base can then be segmented according to value, such that firm resources can be channeled toward those in the uppermost ranks.