What's The Impact of Improving First-Time Donor Retention?

Where Will Your Largest Fundraising Impact NEXT Year Come From?

This question was being debated among several of my Bloomerang colleagues last week. This is a common occurrence at Bloomerang, since our entire existence is based upon bringing best practices to life for professional fundraisers.

Among the breakthroughs that are now in use by thousands of customers are the following:

• Donor Retention Dashboard
• First-Time Donor Communication Prompts
• Donor Communications Audits
• Donor Engagement Score
• Built-In Wealth Screening
• Automatic NCOA and Deceased Suppression Processing
• Duplicate Checker
• …and so many others

Addressing the issue of First-Time Donor Retention

Why is this so important?

According to the Fundraising Effectiveness Project the average retention of first-time donors by charities across America is a mere 18%!

Yes, that means for ever 100 new donors only 18 of them give again the next year and 82 of them do not renew their giving at any level!

Sadly, most of those donors not giving again would probably be inclined to do if even a small amount of proper attention is paid to them.

There are so many ways to do this, however if your fundraising team can just apply a few basic principles the 18% retention level can be improved immensely. My personal three favorite principles are:

1. Ensure at least three “touches” occur in the first 90 days after the gift is made, especially phone calls
2. Make the touches as personalized as possible
3. Be different than most of your competition

Those seem so commonsense that every charity engaged in fundraising would comply, but time and time again, we see only a boilerplate non-personalized letter being the only response or touch used with the donor. No wonder they soon forget your charity’s mission.

The Impact

When we look forward to next year and think about where we can most move the needle in funding our mission the math behind First-Time Donor Retention is compelling.

If you are like most charities fundraising, a large amount of your focus is attracting new donors each year. I know from my experience attending both board meetings and fundraising committee meetings, the conversation seldom shifts away from this topic of finding new donors. Vast sums of dollars and manpower are spent creating new special events, expanding existing events, designing new mailings or calling campaigns. 

This is exactly where the math should begin. 

First, we often spend more than a dollar to raise a dollar from a brand new donor. This is not a sustainable strategy, especially if there are not large amounts of outside capital coming from grants or the government.

Second, and even more importantly, the first-time donor rate of 18% may be one of the easiest fundraising metrics to move in positive direction. Just retaining 10 more out of 100 new donors improves the retention percentage by more than 50%! Properly communication with and retaining just 20 more out of every 100 more than DOUBLES first-time donor retention rate!!

So let’s now carry this out with a real world simple example with these details:

1. A charity has 500 existing donors with an average gift of $250 and adds 500 new donors with an average gift of $200 thereby raising $225,000 in year one
2. Each year 500 new donors are added and their average gift remains at $200
3. Their existing donor retention rate is a solid 60%
4. The existing donors continue to donate an average of $250 each year
5. Their current first-time donor retention rate is 20% (right at the national average)
6. Their first-time donor retention rate improves 10% to 30% in the second example
7. Their first-time donor retention rate improves 10% to 40% in the third example

Here is a chart illustrating the differences those retention rates can make:

Here is a link to the Excel spreadsheet so you can put in your own numbers and see what even a little improvement can do.

Notice the immense impact, even just a 10% improvement from 20% to 30% can bring in a database of 1,000 donors. There is a difference of nearly $235,000 after just 10 years. That averages nearly $24,000 per year!

The next chart illustrates what a 20% improvement in first-time donor retention can do. In this example the financial impact is nearly a half a million dollars!

My personal favorite portion of the impact is the number of retained donors gained. Both example are dramatic, however the second example brings to life the fact that the number of existing donors STOPS declining! Just imagine what that means to the potential pool of major gift and legacy gift prospects. We all know that the best prospects for either have been giving five years or longer so keeping that pool of people steady or even increasing is such an asset for the future.

Summary

Whether you love statistics, or prefer a good novel, the evidence is overwhelming of just where you might find your biggest fundraising impact area in 2024.

If you and your team can establish the goal of improving first-time donor retention this year the impact on next year’s fundraising results could be monumental. We suggest you shoot for at least 10% and see what happens. 

Here’s another link to the Excel spreadsheet we used. Try adding your own fundraising metrics and watch its impact.
May next year be your best fundraising year ever!