Donor retention is a complicated topic to get into and get right for your organization. Which is why we have compiled the most important questions you should ask (along with answers) before starting your donor retention campaign.

What is donor retention?

The methodology adopted by nonprofits to convince donors to make repeat gifts to their organization is called donor retention. The term also refers to the measure of your donors who have made repeat donations to your nonprofit. Higher donor retention means you have more loyal donors for your nonprofit.

What is donor acquisition?

When a nonprofit makes an effort to gain new donors every year they are engaged in Donor acquisition. Bigger nonprofits are able to balance donor acquisition and donor retention, but smaller nonprofits may not have the capacity to do so.

donor-acquisiton-vs-retention

The graph above shows how the gap between donor retention and donor acquisition is close for organizations with more significant budgets.

How to calculate donor acquisition costs?

To determine the cost your nonprofits incurs to acquire a donor (your DAC),

  1. Find the sum of the cost of your appeals and marketing to potential donors over your given time period.
  2. Find the number of donors you acquired over that period.
  3. Divide the Sum by the number of new donors.
donor-acquisition-cost-formula

You will find that donor acquisition costs more than donor retention. By finding your DAC and your Donor Lifetime Value, you can find out if your fundraising department is viable financially.

How do you calculate lifetime donor value?

Here’s how you can find you lifetime donor value:

  1. Calculate your average annual donation. If you received $1000 from 10 people in 2018, your average annual donation is 1000/10, which is $100.
  2. Calculate your attrition rate. e.g. The average attrition rate is .55
  3. Your average lifetime value: 100/.55 = ~$181
donor-lifetime-value-fomula

If your lifetime donor value is high, it indicates that you are not only raising substantial gifts, you are also bringing back your donors to your organization for repeat gifts. A low lifetime donor value indicates problems like too many small gift donations and infrequent engagement with donors.

Donor retention vs acquisition

Donor retentionDonor acquisition
Bringing back donors to give year after year.Acquiring new donors every year.
Donors are aware and care about your cause.Potential donors are not aware of your cause.
Costs less.Costs more.

Why is donor retention important?

If you can get your old donors to continue to donate to your nonprofit year after year, it will cost less than acquiring new donors every year. This is because maintaining relationships with old donors needs less time and effort than forming new relationships.

The Chronicle of Philanthropy showed that for every 100 donors gained in 2014, 103 donors were lost. This shows how important it is to invest in donor retention, especially for nonprofits who receive most of their funds from individual donors.

What is donor attrition?

Donor attrition is the measure of donors that your organization has lost over a period of time.

A high donor attrition rate indicates that your organization needs to focus on improving its donor retention strategies.

Since donor attrition is the inverse of donor retention, you can calculate your donor attrition rate by subtracting your donor retention rate percentage from 100.

donor-attrition-rate

What is a good attrition rate?

It’s important to keep your donor attrition rate as low as possible. The average donor attrition rate for nonprofits in 2017 was 55.5%, which is pretty high. That means more than half your donors are probably leaving your organization every year. Implement the right donor retention strategies to address your attrition rate.

What is donor retention rate?

Your donor retention rate indicates how many past donors went on to make additional donations to your organization. A high donor retention rate (the average retention rate in 2017 was 45.5%) means you are able to meet your donor’s expectations (by thanking them, showing impact, etc.)

There are three main segments for which you can calculate the donor retention rate:

  • Overall retention rate: The percentage of total donors from last year who gave again this year.
  • First time donor retention rate: The percentage of donors who gave for the first time last year donated again this year.
  • Repeat donor retention rate: The percentage of retained donors from last year gave again this year.

What is a good donor retention rate?

A good donor retention rate depends largely on where your organization’s funds come from. If the majority of your donations from individual donors, you will want to have a higher donor retention rate. (The average donor retention rate is 45.5%).

What is the average donor retention rate?

In 2017, the average donor retention rate was 45.5%, according to a report by the Fundraising Effectiveness Project. Donor retention rates have been weak over the past ten years, averaging under 50%.

The repeat donor retention rate (retention rate of repeat donors from the previous year who also gave that year) was 61% and the new donor retention rate (first-time donors from last year who gave again in the current year) was 20.2%.

How to calculate donor retention

In order to Calculate your Overall Donor Retention rate, simply:

  1. Pull up a report of the total number of donors who gave in 2017.
  2. Find the number of returning donors from 2017 who gave in 2018.
  3. Divide (2) by (1) and multiply by 100 to get the rate in percentage.
donor-retention-rate

With your donor retention rate, you can:

  • Determine how much of a problem donor retention actually is for your organization, so that you can allocate resources accordingly.
  • Compare it with your future donor retention rate to measure the effectiveness of the strategies you implement.

Implementing a donor stewardship plan is the best way to improve your donor retention rate.

What do donors want?

Ultimately, donors want to know that their donation makes a difference. You can show them it does, with a strong appeal and by sending them timely communications—such as a thank you letter and impact reports.

The Centre for Charitable Giving and Philanthropy, in their report “How donors choose charities,” concludes that:

why-donors-donate

The aim of your organization is to make sure that your donors are satisfied by giving to your charity.

Why donors leave

The most common reasons donors stop giving to a charity are:

  • They think the charity didn’t need them
  • They don’t feel appreciated for their donation
  • They received no information on how their contribution created impact
  • They don’t remember giving to your charity
  • They can no longer afford to donate

By finding the reasons donors churn for your nonprofit, you can implement strategies to improve donor retention. Here is an example of a donor journey that lead to donor churn:

donor-churn-funnel

How to improve donor retention

If you find that your donor retention strategies aren’t up to the mark, here’s what you need to do:

  1. Set realistic expectations for your donors.
  2. Listen to your donors – Collect feedback.
  3. Go out of your way to thank them.
  4. Give them alternatives to monetary contributions.
  5. Share impact stories

Set realistic expectations for your donors

At the end of the day, most of your donors want to feel good about their donations. If you can’t provide that feeling, you lower the chances of them coming back for a repeat donation.

A good way to keep your donors happy is to set the right expectations right at the acquisition stage. For example, if you have the ability to track where your donor’s funds are being used and can relay that to your donors, let them know. If you are going to communicate with them through text, email, or a call, tell them, and even let them choose their preferred communication method. There are plenty of ways you can set expectations for your donors.

By meeting the expectations you set, you can reinforce the decision your donors made to give to your charity.

Listen to your donors – Collect feedback

Prevention is better than cure, and that saying holds true for reducing donor attrition. The best way to do that is by having proactive communications with your donors. By asking your donors about their experience with your organization, whether it be with your donation process, or their satisfaction with the followup communications they receive, you can identify and rectify the reasons donors stop giving to your organization.

You can do this in the form of feedback surveys, sent to different segments of your donors, such as:

  • First-time donors
  • Repeat donors
  • Lapsed donors

Surveys show donors that you are listening and care about their opinions.

Go out of your way to thank them

It’s easy to send an automated thank you message to donors, in the form of an email or a text message. It’s also a good idea to have those systems in place.

But for donors to really feel your gratitude, you will need to go a step further.

There are ways to show gratitude in a way that’s genuine for donors, and they all involve human to human interactions. Have volunteers or staff talk to your donors through:

  • Phone calls
  • Face-to-face meetings
  • Peer-to-peer texting

Give them alternatives

Figure out how your donors can contribute in ways that are not monetary. This will let them feel more valued by your organization.

Look for opportunities where supporters can volunteer for your cause:

  • At events
  • Interacting directly with your beneficiaries
  • Peer-to-peer fundraising

Share impact stories

Above all, donors want to know the impact of their contributions to your cause. Your organization can do this by tracking where your funds are being spent in order to provide honest impact reports to your donors.

Send your donors reports through their preferred communication channel so you can be sure that they see it.

What is donor stewardship?

A good Donor Stewardship plan is key to increasing your organization’s donor retention rate.

Donor Stewardship involves the entire process of engaging your donors once they have made a donation. By building a stronger relationship with donors through stewardship, you have a better chance of keeping their support.

It is easy to forget that donors are people too. They are already invested and believe in the importance of your cause. But it is always important to remind them of the work your organization and the issues your campaigns are trying to resolve. That is why communicating with your donors in the form of donor stewardship is so important.

What is a major donor?

Your organization’s major donors are the ones making the most substantial contributions to your nonprofit. You will find that the majority of your organization’s contributions come from your major donors, which is why it is so important to retain them, year on year.

pareto-principle-donations

What is considered a large donation?

The amount that can be considered a “Major” gift varies from organization to organization.

“An appropriate level for a major gift is an amount where approximately five percent of your donors can (and will) give at that level. It should be high enough that when you receive one, it’s cause for celebration at your office. But, it shouldn’t be so high that you never receive one.”

Amy Eisenstein

What are lapsed donors?

Lapsed donors are the donors who have previously given to your organization, but have stopped giving. Proper donor stewardship can be implemented to decrease the chances of your donors lapsing.

Nonprofits commonly refer to lapsed donors using the terms LYBUNT and SYBUNT:

LYBUNT refers to the donors who have given Last Year But Unfortunately Not This. These are the donors who gave in the preceding year but not in the current calendar year.
SYBUNT refers to the donors who have given Some Year But Unfortunately Not This. These are the donors who gave in any preceding year but not in the current year.

How do you ask donors to give again?

It’s easier to retain existing donors than to bring back churned donors. However, that doesn’t mean you should just let them go. You already know that these donors actually care about your cause. So you know that they will be willing to donate again if you can address the reasons they left.

To start bringing back lapsed donors, you need to understand why these have stopped giving, and that involves asking them directly and making a commitment to each of them. Communicate by setting up personal interactions, through face-to-face meetings or phone calls.

This effort is worth it if you want to bring back your major lapsed donors.

Tags: ,