A Guide to Donor Retention2020-04-29T17:05:08-04:00

A Guide to Donor Retention

What is Donor Retention?

If you’re a fundraiser or nonprofit development professional, you’ve likely heard the term “donor retention.” It’s one of the hottest topics of discussion in the nonprofit sector. But what is donor retention? And why is it important?

Quite simply, donor retention is a measure of how many donors continue to donate to your organization. Nonprofits with a high donor retention rate have long-term supporters who come back year after year. Nonprofits with a low donor retention rate need to continually acquire new donors or larger gifts to keep up.

The Current State of Donor Retention

The Association of Fundraising Professionals (AFP) and the Center on Nonprofits and Philanthropy at the Urban Institute worked together to establish and maintain the Fundraising Effectiveness Project. The Fundraising Effectiveness Project provides a platform for these organizations to conduct research that helps nonprofits increase their fundraising results at a faster pace. 

Each year, FEP releases the findings of its annual survey. One aspect of this survey is about average donor retention rates over the years. Bloomerang saw a consistent opportunity for nonprofits to improve their fundraising based on these average donor retention rates. As you can see below, the average rate for nonprofits stays right around 45%.

Over the years, donor retention has stayed right around 45% according to FEP.

The Golden Rule of Donations

The FEP reports also drill into donor frequency; specifically new and repeat donors. New donor retention rates are even lower than the national average for all donors. However, if you can get a second donation (or golden donation), your retention rates increase dramatically because repeat donor retention is much higher. 

Nonprofits who focus on receiving that golden donation naturally increase their average donor retention rate (about threefold!) because of this higher repeat retention rate.

 

In a comparison between new donor retention rates and repeat donor retention rates, we see a significant increase in retention after the golden donation has been given.

 

In a comparison between new donor retention rates and repeat donor retention rates, we see a significant increase in retention after the golden donation has been given.

 

“The donor retention landscape is actually lousy at the moment and is going of all accounts, from bad to worse. The latest round of AFP data that came out was made for very depressing reading. We’re continuing to lose donors at a pretty alarming rate.

Over 70% of people that we recruit into organizations never come back and make another gift, so we’re caught on this treadmill where we have to spend lots of money on acquisition which most nonprofits lose money on anyway, just to stand still.”

– Professor Adrian Sargeant, Director of the Centre for Sustainable Philanthropy at Plymouth University

 

How to Calculate Donor Retention

 

Calculate donor retention by dividing all donors returning in year two by all donors in year one.

 

You can calculate your nonprofit’s donor retention rate by dividing the number of repeat donors  this year by those that donated last year. For example, if you have 159 donors who gave again this year, but had 300 who gave last year, your donor retention rate would be 53%. 

It can become tiresome to always calculate this equation by hand. We recommend investing in software that will help you track this retention rate each and every year so that you not only get today’s retention rate, but also an overview of how well your retention rate is improving over time.

 

So What?

Maybe this is the first time you’ve ever thought about your donor retention rate, or maybe you’ve had a pretty good idea what your rate is, but don’t think it’s anything to be worried about.

If you don’t worry about donor retention, you’ll risk a higher attrition rate (the rate at which donors are lost). This can make a huge impact on the number of donors in your donor database from year to year. Here’s what effect donor attrition can have on your donor database after five years:

Starting # of Donors In Database

  • 1,000
  • 1,000
  • 1,000

Attrition Rate (Percentage Lost)

  • 20%
  • 40%
  • 60%

Donors Remaining After 1 Year

  • 800
  • 600
  • 400

Donors Remaining After 3 Years

  • 512
  • 216
  • 64

Donors Remaining After 5 Years

  • 328
  • 78
  • 10

 

You can see how quickly your pool of donors could evaporate. If you think those numbers are scary, wait until you see what that equates to in dollars and cents. Just a small change in your donor retention rate (for instance, 10%), can cost your organization thousands of dollars!

By simply increasing your donor retention by 10%, your organization could save thousands.

Once They’re Gone, They’re (Almost All) Gone

If you don’t prioritize donor retention, you risk losing your nonprofit’s supporters for good because the recapture rate is so low for lapsed donors.

Maybe you’re thinking, “Okay, so what if donors don’t give in consecutive years. They might come back someday.” 

Think again. 

According to FEP, the recapture rate for lapsed donors is an astonishing 4% and has been on the decline for the last five years. If donors stop giving, there is a very small chance that they will ever give again. 

This small recapture rate cannot be relied on to make up for low donor retention. If you have a 40% retention rate and a 60% attrition rate, you’ll only recapture about 4% of those donors that you lost. This is why it’s so important to retain donors from the beginning of their relationship with your organization. 

Why Donor Retention Matters More Than Ever

If a new donor gives only once – as nearly 70% do – then you’re often left with a loss on your initial investment to gain that new donor. The true benefit of acquiring a donor can only come when that donor is retained over the long term.

While acquisition will always be important, to survive today nonprofits need to focus on ways to keep both new and existing donors coming back year after year.

Watch Bloomerang Co-Founder Jay Love discuss the donor retention issue with Amy Eisenstein, ACFRE on her video series for the Association of Fundraising Professionals.

 

Why Donors Stop Giving

In his study, “Managing Donor Defection,” Dr. Adrian Sargeant surveyed the lapsed donors of 10 national nonprofits to ask them one simple question: “Why did you stop giving?”

Aside from death and financial difficulties, the reasons for lapsing are almost entirely preventable. 

Donors tended to lapse due to poor communication from the nonprofit. Some supporters believed the nonprofit no longer needed their help while others never felt appreciated by the organization. 

Quite simply, we have a bad habit of not treating our donors very well. We focus so heavily on new donor acquisition that we forget to communicate effectively with those who have already shown interest in our mission.

  • 5% – thought charity did not need them
  • 8% – no info on how monies were used
  • 9% – no memory of supporting
  • 13% – never got thanked for donating
  • 16% – death
  • 18% – poor service or communication
  • 36% – others more deserving
  • 54% – could no longer afford

 

Why Donors Keep Giving

  • Donor perceives organization to be effective
  • Donor knows what to expect with each interaction
  • Donor receives a timely thank you
  • Donor receives opportunities to make views known
  • Donor feels like they’re part of an important cause
  • Donor feels his or her involvement is appreciated
  • Donor receives info showing who is being helped

In 2011, the DonorVoice collaborated with around 250 nonprofits to find out what they had done well to keep about 1,200 donors loyal for many years.

A survey was sent to those loyal donors with a list of 32 things that nonprofits do well for their donors. The survey asked recipients to rank them by order of importance; which items mattered most to them.

You can see that the top seven reasons almost directly correlate to the findings of Dr. Sargeant’s survey. They’re also just as controllable.

 

Strategies to Increase Donor Retention

Donor retention strategies are simple, but that’s not to say they’re easy. Oftentimes, it takes a large shift in the mindset of a nonprofit organization to begin focusing on retaining donors rather than just simply acquiring them. 

As you consider the best donor retention strategies, think of the ways you can engage donors with the resources you already have, as well as with tools you’ll likely invest in. How can you easily offer additional ways to give or open up more engagement channels? Some top ones that come to mind are recurring gifts to encourage long term engagements and using peer-to-peer campaigns to turn donors into fundraisers. Both of these strategies can be done easily with just your software toolkit.

Besides leveraging your tools, remember that donors want to know the impact of their dollars. They want to know that your organization appreciates them and values their opinions. Make sure you not only thank your donors after the gift is made but also when your campaign is over too! That’s the perfect time to inform your supporters of the specific impacts this effort had on your mission. Overall, your donors are the real change-agents for your mission and should be treated well with personalized communications, recognition, and gratitude.

  • Reporting on outcomes

  • Thanking donors quickly

  • Segmenting communications

  • Donor-centric content

  • Surveying donors

  • Sharing impact stories

  • Offering recurring gift options

  • Hosting peer-to-peer campaigns

 

How to Build Donor Relations

As nonprofits focus on improving their donor retention, it’s important that they have the best tools to keep records of their retention rate and track communications with supporters. What better place to do this than a donor database? 

Bloomerang’s donor database is designed specifically with donor retention in mind. Nonprofit experts Adrian Sargeant, Jay Love, Tom Ahern, and Kivi Leroux Miller worked together to develop this solution that’s specifically focused on creating and maintaining healthy relationships with your donors.

 

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