Are Your Donor Retention Numbers Up to Speed?
This morning I received a solicitation email from an organization that I have previously made charitable contributions to. The email thanked me for my previous donations and attached the solicitation letter. The email was not personalized to me. The salutation was “Greetings from …” The letter noted what the organization had accomplished the past year; good information. However, this is the first time I have heard from then since I mailed the last check. They never asked for a specific amount, but discussed a specific giving program in my state. The letter was also not signed, but instead read “ The Board and Staff of …” Also one of my greatest annoyances, the letter stated they are a 501c3, rather than a 501(c)(3). I know that is petty. But if you are one, you should know how to write it. I will not be making another donation to the organization.
Donor retention in the United States has been losing ground over the past fifteen years. We know this because in 2006, the Urban Institute and the Association of Fundraising Professionals began a research project to determine the donor retention rate of nonprofit organizations in the United States. Over the fifteen years of the research project the donor retention number has slowly declined from about 60% to 45%.
Organizations need to realize the implication of that number. It means that if the organization gained 100 new donors in 2020 it will only keep 45 of them in 2021. Another startling research statistic is that of first-time donors only 23%, that is less than 1 in 4, will make a second gift to the organization.
The future is not bleak if an organization understands its own donor retention number and puts strategies in place to shift the number in a positive direction. Having a donor retention number upwards of 75% is possible and will result in a long-term funding stream for the organization.
What is Donor Retention?
Donor retention is the percentage of donors that give to a nonprofit organization year after year. To calculate donor retention, take the number of donors who gave in each of two consecutive years divided by the total number of donors who gave in the first year. Multiply the result by 100 and you have the percentage. An organization’s donor retention rate provides a good benchmark. Calculating this number year over year enables an organization to measure how successful its fundraising strategies are. Is the organization keeping its donors?
In calculating donor retention, only use individual donors. Because individuals should account for 70% or more of an organization’s charitable income, they are a key benchmark in determining the success of an organization’s fundraising program. Individual donors, unlike corporations, foundations, or other giving entities, such as a Rotary Club, do not have an application process and they do not need to ask someone else for permission to give. The nonprofit can also approach them directly and build a long-term relationship. Building those long-term relationships is key to donor retention.
Why is Donor Retention Important?
One of the main reasons why organizations strive to retain donors is because it is much less expensive than donor acquisition. There have been estimates that the cost to acquire a new donor is five times more than the cost to maintain the donor relationship. Donor acquisition is one of the most expensive business decisions a nonprofit makes. An organization through no fault of its own will always lose donors; and therefore, nonprofits need to implement some donor acquisition activities. However, if the emphasis is on retaining donors, then an organization will lose fewer donors and its donor list will steadily grow. This growth is what will enable the nonprofit to provide stellar services and programs, fulfill its mission, and impact the community.
As soon as all the 2021 donations are logged into the organization’s fundraising software (CRM), the staff needs to run the donor retention numbers comparing 2020 to 2021. Also compare 2019 to 2020. Is your most current retention number higher or lower than the previous year’s number? Having this information will help the organization determine if its 2022 fundraising strategies will help improved the donor retention number when 2022 fundraising activities end next year.
Check back in two weeks for 5 tips to improve donor retention in 2022.