Recently over lunch with a major donor of a local charity, whose board I serve upon, someone posed the question in the title of this post when the subject of donor retention arose. The discussion become so vigorous I immediately knew others would be curious. My hope in creating this blog post is to bring the vast differences, in not only the actual metrics of customer/donor retention, but also the mindset regarding them to light.
Commercial Sector Background
Over the last 25 years, I have had the opportunity and privilege to be a board member, investor, founder and consultant to a fairly large and diverse group of commercial businesses. In every single case there has been an immense focus and passion upon the measurement of, as well as the continued improvement of, customer retention metrics.
The following methods of figuring retention are utilized and regularly reviewed by commercial businesses:
Annual Customer Retention
Annual Customer Dollar Retention
Net Annual Customer Dollar Retention
Each of the three are part of every board packet, investor prospectus and financial statement review.
It’s simple. The difference of a percentage point or two can spell out profit versus loss or more importantly success versus failure!
Seldom is there a commercial business budget model created without a section factoring the incredible effect retention rates can play.
Retention rates are often a portion of employee, manager and executive bonus plan calculations. Thus paying direct homage to the age old adage of what gets measured and compensated for is what is improved most over time.
Nonprofit Sector Current Situation
Over the same 25 year period, I have had the opportunity and privilege to also serve on a wide variety of nonprofit boards as well as consult with several. The concept of donor retention is an afterthought as a key metric, at best, for most of them.
Case in point:
Not a single nonprofit budget or budget worksheet I have seen utilized donor retention as any sort of factor
Donor retention has only been measured and reported at a small handful of the charities I have been involved with as a board member or consultant
It has only been discussed at length at one board meeting I attended in the last 25 years
The slowness of the coming age of donor retention awareness is painfully puzzling since most nonprofit boards are comprised of mostly successful commercial sector business executives. For some reason connecting the dots to the importance and immense financial impact of donor retention has only recently been happening. (Perhaps Bloomerang with its supreme focus on donor retention has made a difference finally…)
Every single person reading this post, who is either directly or indirectly involved with a nonprofit funding it’s mission via fundraising, can help bring proper awareness of the impact of donor retention to light by doing one or more of the following:
Share this post with as many others involved with the nonprofit sector as possible
Insist that the next annual budget worksheet has a variable added for donor retention rate, then use it
Demand that donor retention is a key metric being measured and posted for all to see
Ask that strategies around donor retention be discussed in future board meetings, as well as fundraising committee meetings
The impact of raising the national donor retention average by 10% would be huge in the funding of nonprofit missions. In addition, the expanded relationships with donors would improve the recruitment of brand new donors to the sector. Let’s hope both happen in some manner.
A 30+ veteran of the nonprofit software industry, Jay Love co-founded Bloomerang in 2012. Prior to Bloomerang, he was the CEO and Co-Founder of eTapestry for 11 years, which at the time was the leading SaaS technology company serving the charity sector. Jay and his team grew the company to more than 10,000 nonprofit clients, charting a decade of record growth. Prior to starting eTapestry, Jay served 14 years as President and CEO of Master Software Corporation. MSC provided a widely used family of database products for the non-profit sector called Fund-Master. He currently serves on the board of the Center on Philanthropy at Indiana University and is the past AFP Ethics Committee Chairman. Jay is also the author of Stay Together: How to Encourage a Lifetime of Donor Loyalty.