If you are a fundraiser or an executive of any sort in the nonprofit world, you have likely heard a lot about donor retention. It was truly one of the most talked about subjects last year on social media, the blogosphere and at numerous events and conferences.
2013 Was the Year of Donor Retention – and for Good Reason
There are many reasons for the increased focus on donor retention. The findings of the Fundraising Effectiveness Project report led the charge in shining a light on the losing battle of donor acquisition costs, over-reliance on major gifts and the financial impact of higher retention rates. Thankfully, this new awareness is starting to make a difference.
Please allow me to sharpen the focus even more by pointing out there are two major ways to measure retention. If 2013 was the year of donor retention, then 2014 should assuredly be the year of gift retention.
Donor retention measures number of donors retained from year-to-year:
Number of donors who gave both last year and this year
Number of donors who gave last year
For example, if 1,000 constituents gave in 2012 and then 450 of those same constituents gave in 2013, then your donor retention rate is 45%. While donor retention is an excellent barometer for overall organizational fundraising health, gift retention allows you to dig deeper into the economic impact.
Gift Retention = Dollar Retention
Gift retention is based upon gift amounts or dollars from those donors. Here is the formula:
Dollar amount given this year by donors who gave both last year and this year
Dollar amount given last year by donors
For example, if 1,000 donors gave $1 million in 2012, and 450 of those original 1,000 gave $650,000 in 2013, your gift retention rate is 65%!
This method can be far more insightful because there is a vast difference in losing a $50 donor from one year to the next compared to losing a $10,000 donor. In this case alone retaining the $10,000 donor is the same as keeping 200 $50 donors!
All Retention is NOT Created Equal
We all know in our mind that keeping a major donor of $10,000 annually is extremely important, but our actions do not always reflect this mindset.
For example, does it make sense to exert 200x more effort thanking and building a relationship with the $10,000 donor than the $50 donor? If not 200x, would perhaps 10x more effort seem worthwhile?
If you answered yes, do your policies, procedures and actions reflect this mindset toward major donors?
One way to further show the importance of this is to divide your database into 5 groups and calculate the retention rate for each group. The groups based upon donation size are:
- Under $25
- $25 – $100
- $100 – $1,000
- $1,000 – $10,000
- Above $10,000
Just think about the difference there is in dollars raised by improving the above $10,000 group’s donor retention rate by 10% versus the first or second group. It is not trivial!
Focused Efforts Pay Huge Results in Retention
Since there are only so many hours in every work week, even if you count the endless extra hours on those weeks with special events scheduled, we need to focus on game changing activities. For example, would calling or visiting 10 major donors be more important than a social media post? Yes, I know that is a stark example. However, such choices are made every day in nearly every fundraising office.
Please keep the dollar retention reporting in mind as you share your fundraising results with your management and board. The awareness and enlightenment such reports and analysis can provide will make a huge difference in your future actions and results!