3 Reasons Why Donor Retention Trumps New Donor Acquisition

You would not even think this was even a question to ponder if you attended most small nonprofit board meetings or even worse the fundraising committee meetings.

Time after time, the agenda and the discussion of those meetings mentioned above focuses on what the organization can do to acquire new donors rather than even considering strategies to retain them. Perhaps, very few of the people present have any idea of what the “numbers” reveal in relation to what part of fundraising should we focus upon.

The Hidden Numbers of Fundraising

Unfortunately, it is usually the larger nonprofit organizations, as well as the more experienced consultants, who completely understand the various hidden numbers of fundraising listed below. Perhaps, if these concepts are shared by those of you encountering or embracing these concepts for the first time the strategies listed below will become the norm!

1. Most Major Gifts are Made after 5 Years of Giving

Hopefully, the axiom listed above makes sense since very few major gifts are made as the first, second or even the third gift to any nonprofit organization. 4-5 years also seems to be the time required to have 18-24 personalized touch points as noted in this recent major gift study to be able to successfully ask for a major gift.

So if it takes 4-5 years or longer for the majority of major gifts to happen with your donors, does it not make sense for donor retention to rise in importance? It is only through the retention of those donors for multiple years that major gifts can occur.

Now add to the hidden numbers, the fact that a single major gift, especially a truly significant one of six figures or more can be more than all of the gifts from newly acquired donors for the entire year!

2. Lifetime Value Rules Over All

Once an understanding of lifetime value of a donor is understood by the entire team at any nonprofit engaged in fundraising the importance of retaining as many donors as possible emerges.

For a quick refresher, lifetime value is the total amount contributed over a donor’s lifetime. This can literally be thousands of dollars even for smaller direct mail donors.

Therefore, the extra effort or perhaps even an additional staff member utilized to make even smaller donors very special and as such retained over the course of numerous years can pay huge dividends. The lifetime value numbers add up quickly.

3. Higher Costs to Acquire Donors Versus Retaining Them

The third concept might truly ring home with any CFO of your charity because the cost savings happen in the short term whereas the major gift and lifetime value concepts take years to illustrate the return on investment.

The cost to continually acquire new donors can easily run 50% to 100% more than the dollars collected from them. In fact, it can be several years before any charity breaks even on dollars raised compared dollars spent.

For most charities investing that same amount spent acquiring new donors on creating meaningful touches with existing donors can result in the higher rates of return spelled out in the first two concepts presented.

Summary

Like so many concepts in life it is often the hidden numbers, which are not readily apparent that make major differences come to light. Many of you reading this blog post have experience with all of the hidden concepts mentioned above and might be able to shed even more light upon them via a comment or two below.

Please put the above concepts to use as you plan for the coming year. You and your team should cherish the difference it can make in funding your mission in the New Year and for many years into the future.

Stay Together - How to Encourage a Lifetime of Donor Loyalty

Jay Love

Jay Love

A 30+ veteran of the nonprofit software industry, Jay Love co-founded Bloomerang in 2012. He currently serves on the board of the Center on Philanthropy at Indiana University and is the past AFP Ethics Committee Chairman.
Jay Love
By | 2017-11-28T08:31:53+00:00 November 28th, 2017|Donor Retention|

5 Comments

  1. Tom Hooper December 12, 2017 at 10:03 am - Reply

    Thanks for the great reminder, Jay. While it is easy to understand these concepts as you’ve presented them, it takes experienced and mature leadership to make long-term donor value (LTDV) their chief KPI. I left direct fundraising and now focus exclusively injecting real and timely gratitude into my clients’ donor relationships. I get asked, “what is the biggest challege to selling?” The biggest challenge has been finding leadership that understands the power that a timely thank-you call brings to their LTDV.

  2. jay goulart December 17, 2017 at 2:30 pm - Reply

    Not sure why either trumps the other. Each are a very different elements of the lifeblood of any nonprofit. What is true, with a decade of data behind us we can without a doubt say the original research on donor retention was just wrong. How we have looked at new donors and how we have measured retention has had little to no impact on the issue. I predict in 2018 we’ll see published research that points us in a new and better direction. I suspect this will excite you, a champion of retention, because of the little impact the old research has had in over ten years. Happy Holidays

    • Steven Shattuck
      Steven Shattuck December 18, 2017 at 8:50 am - Reply

      One trumps the other because one is monumentally expensive, ineffective by comparison and arguably the largest contributing factor to the sector’s high turnover rate.

      What makes you think the research has had little to no impact on the issue? In my experience, more fundraisers are focusing on retention today than they were five years ago.

      Why is it the research’s responsibility? People have to act on it, which can be difficult when there are so many opposing voices who benefit from organizations staying on an acquisition treadmill.

  3. jay goulart December 19, 2017 at 11:35 am - Reply

    Steven new donors fuel the need for retention. You make a great case if every nonprofit wishes to go out of business. You are well aware that the national retention rate is about 46%. Do the math, that means that without new donors, on average, no donors are left after 2.17 years. I appreciate the point but it really isn’t logical. We need to do a highly effective job with both. The roi is of course better for renewals, more time investing means higher average gifts. Your argument is equal to suggesting that having a heart trumps having lungs. The outcome of not having either one doesn’t play out so well, to suggest otherwise perhaps makes a metaphorical point but is meaningless in reality.

    After recently completing a study of over 250,000 donor transactions what has become clear is the way we have traditionally measured retention and lifetime value is at the root of why there has been negligible impact on national numbers since your study hit the web in 2004. Heck, there was a time when people were positive the world was flat. We know how that turned out. So it is possible for what we believe to be true to end up not being true. In the past decade our traditional thinking has had next to zero impact on national retention numbers. It is possible that the donor retention research and conclusions are the equivalent to a flat world.

    • Steven Shattuck
      Steven Shattuck December 20, 2017 at 9:02 am - Reply

      Retain the donors you have, and you can get off the acquisition treadmill. Thanks for commenting, Jay!

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