The recently released Fundraising Effectiveness Project Report summarizing the fourth quarter of 2018 provides numerous insights, that not only put the full year of 2018 into perspective, but also sheds insight into what 2019 should bring for the fundraising profession.
The Fundraising Effectiveness Project continues to be the most reliable source of true fundraising data stemming from its unique perspective of combining data from multiple highly respected and large scale nonprofit database vendors. Those key contributors are listed at the bottom of the report, which can be found here.
The fourth quarter report confirmed numerous trends we had seen in the previous quarters of 2018 and literally ratifies several of the “must know” items being included below.
Overall Fundraising Revenue Up 1.6% Due To Larger Donors
This key takeaway must be mentioned first because it runs the risk of hiding numerous alarming trends for all organizations not moving to or already engaging in Major Gift Fundraising.
Why not just celebrate the slight increase in overall giving?
It’s simple. All donor retention rates as well as giving from small and mid-level donors are all down with several of them moving downward significantly. We will highlight most of these in the next four takeaways.
Tied to the the above takeaway are these three key groupings and results:
Donors Under $250 are down 4.4% year over year (This is the group relied upon heavily by small to midsize charities!)
Mid-Level Donors $250-$999 are down 4% year over year (This group is the mainstay for many charities and even comprise “major gifts” for many small charities.)
Major Donors $1,000 & Up are up 2.6% year over year (This group, which provides nearly 88% of all dollars raised, literally salvaged the year over year totals!)
This first takeaway is truly a wake up call.
EVERY charity, large or small, must begin developing or enhancing their major gift program or risk funding their mission at lower levels in future years!
Overall Donor Retention Fell 6.3% Year Over Year to 44.5%
This is quite a year over year change, and should be cause for alarm. Rather than just creating additional donor acquisition strategies, which is often the answer offered up by fundraising departments, perhaps a focus on retention is the answer.
Falling donor retention cannot be outraced by larger acquisition efforts except in rare and somewhat special situations.
Fundraising professionals and, just as importantly, their boards must truly begin to fully understand Lifetime Value principles and start refining donor retention strategies. A properly outlined and implemented donor retention plan can literally change the mission funding for any charity relying heavily upon philanthropy for the lion’s share of their revenue for decades into the future!
New Donor Retention Fell 4.2% to 20.2%
Yes, that means 8 out of every 10 donors leave in just a single year!
Unless any donor acquisition strategy can replace nearly 80% of those first time donors you are losing ground every single year going forward.
On a positive note, implementing retention strategies for first-time donors can be relatively easy and make great strides in improving this metric. One of the reasons for the ease is the fact that so many other charities are doing such a poor job in this area so you can differentiate and delight your donors with moderate effort. Just think what impact a single thank you phone call, handwritten note, or quick personal video can make.
Repeat Donor Retention Fell 2% to 61%
Even the steady, hardly ever changing repeat donor rate dropped in 2018.
Please note, however, just how much better the repeat donor retention rate is than the new donor retention rate.
Repeat donors renew at more than 3 times the rate of new donors!
This is why obtaining the second gift is not just important, but is actually critical to your fundraising success in the future. Here is a link to a few strategies to assist in obtaining the second gift from as many new donors as possible.
The Recapture Rate Reached an All-Time Low of Just 4%
If you thought a way around establishing high donor retention rates might be creating and implementing some exciting lapsed donor strategy, think again. Even if you find a magical way to double the sector average of donor recapture to a lofty 8% you are still losing 72% of your new donors every year!
Please keep in mind, the overall cost to retain both new and existing donors is far more economical than costs associated with trying to recapture them after a year or two. Recapture costs are often nearly the same as the high costs of acquiring donors.
I hope you agree that the five takeaways listed above carry immense impact for your future fundraising outcomes. Each of them builds upon the others in presenting a compelling case for understanding Donor Lifetime Value as well as the strategies to elevate that value.
All of the team at Bloomerang is proud that we have been instrumental in making the Fundraising Effectiveness Project and its insightful reporting come to life since its very inception!