6 Reasons Why Most Fundraisers Don’t Know Their Donor Retention Rate

Over the last six years I have had the privilege of speaking to large gatherings of nonprofit professional fundraisers on an average of 2.5 times per month. At the beginning of each presentation, I typically ask the audience by a show of hands how many in the room know their donor retention rate.

Each time, very few hands go in the air.

I keep thinking that the percentage of people raising their hands will go up by at least a small percent each year, yet it remains a very dismal small percentage.

However, if I ask them any of the following questions, the answers are readily known:

• What is your fundraising dollar goal for this year?
• How much did you raise last year?
• How many donors do you have?
• How many new donors do you have in the last year?
• What is your best campaign or appeal?

Why isn’t donor retention on this list?

Donor Retention is Not the Only Metric Ignored

Before we jump into the reasons for not being aware of the donor retention rate, let’s first expose the fact that many other even slightly more detailed metrics are not known or even worried about in most cases…

Understanding this fact will serve as a proper introduction into the reasons for lack of usage of such metrics.

Here are a few of the other metrics often ignored:

• Average gift amount
• % of funds provided by the top 10% of donors
• Average lifetime value of your donors
• % of names in the database who have not donated in 2 years
• Average number of outgoing communications to each current donor
• Average number of outgoing communications to each lapsed donor

There are only a few commercial marketing professionals who would not the answers to all six of the metrics mentioned for their customers.

Why?

Their success is quite dependent upon such knowledge and the ensuing actions taken due to that knowledge. Hence, the importance of eliminating as many of the reasons below, as possible, for nonprofit leaders in order to improve the funding of their mission in the future by the use of such metrics.

Recently, we surveyed 775 nonprofit organizations (mostly in the U.S. and Canada) to find out how many orgs were measuring donor retention, what kind of goals they have, and what kinds of changes they’ve seen in their rate.

We also found out that of those who aren’t tracking their donor retention rate:

• 16% stated they don’t know how
• 20% stated they don’t have the tools
• 1% stated they  don’t care about the metric
• 14% stated they  aren’t sure what they would do differently if they knew their rate
• 13% stated they  cited the fact that no one has ever asked to see it

Using that data as a guide, let’s dig into six root reasons why most fundraisers don’t know or don’t care about their donor retention rate:

1. Not Being Taught in Most Professional Fundraising Training

Focus on an insightful metric of measurement that could be used to track progress in such a key area was never deemed important.

My hypothesis is this is due to the fact that training began before the proliferation of decent donor databases. So, if such training had proven to be better than no training, even without such key metrics, then the tradition of using the same course outlines would continue.

This is especially true in the nonprofit sector where seldom is innovation funded and/or rewarded due to the mindset of immense frugality and low overhead.

2. Few Professional Marketers Switch to Fundraising as a Career

If this could happen more often the impact could and would be huge! People used to achieving results by the use of metrics and tools would inevitably continue using such tools and therefore impose them onto the fundraising world.

My question is even if such professionals are not becoming fundraisers, are there not increasing numbers of them becoming board members of nonprofits? Their impact could be felt by sharing their knowledge and leadership on this key subject.

3. CEOs and Board Members Are Not Aware

This reason ties directly to the final point in #2 above. Lack of awareness and therefore lack of questioning about the use of donor retention metrics by the NPO leadership will certainly not cause the use of such metrics to increase!

If such metrics were not part of the KPI’s used to measure the success of the nonprofit, especially in raising funds for it’s mission then why would the fundraising staff be inclined to use them?

Perhaps the fundraising staff thinks the number of new donors or total donors is the key indicator of total dollars raised for the mission since that is still being asked by leadership the most often…

4. Fundraising Consultants are Seldom Using Donor Retention Data

So many nonprofits engaged in fundraising use a fundraising consultant regularly or in some sporadic manner. If these “experts” are not asking about and using donor retention rates to provide insights and to guide actions, then the fundraising staff will probably never be aware of their importance.

Ironically, members of the fundraising consulting community lead much of the training mentioned in #1. No wonder this cycle of ignorance regarding the difference such metrics can make continues…

5. Most Database Vendors Make it Difficult to Utilize Donor Retention Metrics

Tradition and lack of pressure to innovate in this area plagues all but a few of the technology vendors serving fundraisers.

Some popular systems are still using 90% of the programming code created 15-20 years ago. This makes it inherently tough to innovate or to even emulate what is going on in the commercial marketing world.

Add to this fact, that not only current customers, but also prospects are not asking for such innovation, and you see why such tools and insights are not making it to current product road maps!

6. If Few Know Their Rate, Then Few Success Stories Emerge

Lastly, if so few are using donor retention rates as a key metric and the ones that are may not know how to measure the full impact of improving it, then the stories of success as few and far between.

Change is usually best driven by stories of success especially the well-documented ones!

This is where those of you who are aware of the power of improved donor retention rates can be vital change agents for other 80%. Please do document your results and the underlying metrics leading to them.

Conclusion

Perhaps there are more than six key underlying reasons for not knowing one’s organization’s donor retention rate. The six above are ones I notice the most often. How about you? Are there other reasons we should be aware of?

Hopefully, knowing the six reasons above can lead to better awareness of donor retention rates and what effectively improving those rates can mean to any nonprofit mission.