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.
Why Donor Retention Matters More Than Ever
In recent years, the fundraising world has turned its focus from acquisition to retention, and with good reason. With a static or shrinking donor pool, new donors are more difficult and expensive to attract than ever. And if a new donor gives only once – as nearly 60% 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.
Where Things Stand Today
“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
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 donor retention rate is, but don’t think it’s anything to be worried about. Here’s what can happen to your donor database after five years:
Starting # of Donors In Database
Attrition Rate (Percentage Lost)
Donors Remaining After 1 Year
Donors Remaining After 3 Years
Donors Remaining After 5 Years
You can see how quickly your pool of donors can 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 can cost your organization thousands of dollars!
Calculating Your Donor Retention Rate
To calculate your donor retention rate, first ascertain the number of donors who gave to your organization in one 12-month timespan, and the number of donors from that same pool who made a donation in year two (the following year). Then, divide year two by year one.
In other words, if 1,000 gave to your organization in 2015, and only 400 of those 1,000 made a donation in 2016, your donor retention rate would be 40%. That makes your donor attrition rate 60%.
You can use a calendar year, your fiscal year, or any date range equaling one full year (Feb. 2015 – Feb. 2016).
The State of Donor Retention Today
In 2006 the Association of Fundraising Professionals (AFP) and the Center on Nonprofits and Philanthropy at the Urban Institute established the Fundraising Effectiveness Project (FEP) to conduct research on fundraising effectiveness and help nonprofit organizations increase their fundraising results at a faster pace.
The project goal is to help nonprofit organizations measure, compare, and maximize their annual growth in giving.
Each year, the Fundraising Effectiveness Project releases the findings of their annual survey.
The 2017 Fundraising Effectiveness Project report summarizes data from 10,829 survey respondents (more than double from last year) covering year-to-year fundraising results for 2016.