In the nonprofit world, acquiring new donors is just one part of a much larger equation. The pivotal, often overlooked, component is retaining these donors over time. Donor retention plays a vital, yet often overlooked, role in ensuring the longevity and sustainability of a nonprofit organization. For your nonprofit to be successful, you need to be using effective donor retention strategies in addition to getting new donors.
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 fourteen years of the research project, the donor retention number has slowly declined. At the close of 2019, the average donor retention rate for nonprofit organizations was 45.1%.
The good news is that the future isn’t written in stone, and an organization can make a significant positive impact on their donor retention number if they have clarity on their own donor retention number and put strategies in place to improve it. Having a donor retention number surpassing 70% is entirely possible and will result in a long-term funding stream for the organization.
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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 and divide it by the total number of donors who gave in the first year. Multiply the result by 100, and, voila, you have the donor retention 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, and answers the question; Is the organization keeping its donors?
When calculating donor retention, only use individual donors. Because individual donors 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.
One of the main reasons why organizations strive to retain donors is that 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; therefore, nonprofits need to implement effective donor acquisition activities. However, if the organization focuses on its donor retention strategies, then the nonprofit will lose fewer donors and its donor list will steadily grow.
This growth will enable the nonprofit to provide stellar services and programs, fulfill its mission, and impact the community.
Developing a successful donor retention strategy begins with a thorough understanding of donor psychology. Their motivations, factors influencing their decisions to continue supporting, and their emotional connections to the cause all form the foundation of effective donor retention.
Trust, transparency, and evidence of impact are three crucial elements in this equation. Donors tend to stick with organizations that demonstrate honesty about their operations and show tangible outcomes of their work. Moreover, those that foster personal connections with donors, allowing them to become emotionally invested in the mission, stand a higher chance of retaining their support.
Creating a personal connection with donors is a critical factor that drives donor retention. By fostering a deeper relationship that goes beyond the transactional nature of giving, donors feel a greater sense of attachment to the cause they are supporting.
Nonprofit organizations should aim to create meaningful interactions that stir emotions and inspire donors. Storytelling is a potent tool in this aspect. By sharing personal stories of those who benefited from their work, organizations can offer donors a window into the lives they are positively impacting.
Engagement opportunities such as volunteer programs, donor appreciation events, and regular updates about ongoing projects also contribute to creating emotional bonds. By involving donors in the mission, nonprofits can foster a sense of belonging and cultivate an emotional investment that encourages donors to stay connected over the long term.
Trust is the cornerstone of any relationship, and the bond between nonprofits and their donors is no exception. Donors need to feel confident that their donations are being used responsibly and effectively. Transparency is key to building this trust.
Regularly sharing detailed information about financials, project progress, and organizational operations is a good way to demonstrate transparency. Additionally, being open and honest when challenges arise can also strengthen donor trust. It shows that the organization values its donors as true partners in its mission, not just as sources of funding.
In essence, when donors trust an organization and perceive it as transparent, they are more likely to continue their support and become long-term partners in the cause.
Another significant factor influencing donor retention is the perceived impact of their contribution. Donors want to see the results of their generosity. They want to know that their donation is making a real, measurable difference.
To address this, organizations should regularly communicate the outcomes and impact of their work. This could be through impact nonprofit annual reports, success stories, or updates that link specific achievements directly to donor contributions.
Show donors how their contribution has helped a single individual or a community. Use data and compelling narratives to highlight the impact. The more donors can see the tangible results of their generosity, the more likely they are to stay committed.
Understanding and mapping out the donor journey is another crucial step. Segmenting donors based on their preferences and behaviors allows for a more personalized approach. Tailoring communication and engagement strategies to match each segment's unique needs can significantly enhance their experience, thus improving retention.
Here’s an example of what a small donor retention strategy journey could look like for your organization:
Compelling, clear, and personalized communication plays a crucial role in donor retention strategies. With a diverse range of communication channels at our disposal, it's essential to use them effectively to connect with donors. Customizing your messaging to align with the donor's interests and preferred communication channels can further strengthen this bond. Here are some best practices for communicating effectively to improve your donor retention:
Personalization goes beyond just addressing the donor by their name. It's about making the message relevant to them. This could mean acknowledging their previous contributions, aligning the communication with their interests, or speaking to the specific causes they care about most.
Your communication should be clear, concise, and compelling. Avoid industry jargon and keep the language simple and accessible. Your message should inspire action and paint a vivid picture of your mission and the impact of their donations.
Donors have different preferences when it comes to communication. Some may prefer email updates, while others might respond better to social media posts, direct mail, or phone calls. Identify your donors' preferred communication channels in whatever donor management software your organization uses and stick to them.
Regularly update your donors on your projects, achievements, and impact. Sharing success stories and tangible outcomes helps donors see the difference their donations are making, increasing the likelihood of continued support.
Express your gratitude promptly after every donation. A quick, personalized thank you can make a donor feel appreciated and valued. Also, don’t forget to show appreciation outside of donation periods. A simple message of thanks for their ongoing support can mean a lot to a donor.
Think about when and how often you're communicating. Don't overwhelm donors with too many messages, but also don't let them forget about you. Find a balanced schedule that keeps your organization at the forefront of their minds without being intrusive.
Recognizing loyal and recurring donors and providing them with opportunities to engage in events and volunteer activities, can further strengthen their relationship with the organization. Here are several ways your organization can show your gratitude to donors:
Key donor retention metrics can provide invaluable insights into donor engagement and retention. These data-driven insights can guide strategy refinement, ensuring your retention efforts are effective and targeted. Here are some key fundraising KPIs you should be using to measure donor engagement and retention:
We mentioned this at the beginning of this article and it’s your core KPI. This is the percentage of donors who continue to donate from one period to the next. A higher retention rate indicates that your organization is effective at maintaining relationships with its donors.
For example, imagine your organization had 500 donors at the start of the year. Over the course of the year, you acquired an additional 200 new donors, taking your total number of donors to 700. However, by the end of the year, only 350 of the original 500 donors have donated again. Your Donor Retention Rate would be calculated as follows:
Donor Retention Rate = (Number of donors at the start of the year who have donated again / Total number of donors at the start of the year) x 100
(350 / 500) x 100 = 70%
This refers to the percentage of donors who have made more than one donation. It's calculated by taking the number of donors who have made more than one donation within a given period and dividing it by the total number of donors in that period. If this rate is high, it suggests that donors are happy with their giving experience and the impact they're making.
For example, let's say your organization had 1000 donors last year and out of these, 300 donors gave more than once. The formula to calculate the repeat donation rate would be:
Repeat Donation Rate = (Number of repeat donors / Total number of donors) x 100
(300 / 1000) x 100 = 30%
This measures how much the size of a donor's gift increases over time and is essentially a growth rate calculation. Gift growth indicates that a donor is becoming more invested in your organization and your cause. Here’s an example:
Imagine you have a donor that started by donating $50 to your organization last year. This year, they increased their donation to $75. The formula to calculate this donor’s gift growth is:
Gift Growth = ((Current donation - Original donation) / Original donation) x 100
Gift Growth = (($75 - $50) / $50) x 100 = 50%
This metric measures the average amount donated each time a gift is made. Like gift growth rate, if the average gift size increases over time, it suggests that your donors are becoming more generous and committed. Calculating this donor retention KPI is fairly straightforward. It's calculated by taking the total amount of money raised within a given period and dividing it by the total number of donations received in that same period.
Suppose your organization received 500 donations last year, and the total amount raised from these donations was $25,000. The Average Gift Size would be calculated as follows:
Average Gift Size = Total amount raised / Total number of donations
Average Gift Size = $25,000 / 500 = $50
While this is not a numerical metric, donor surveys can provide invaluable qualitative insights into how engaged and satisfied your donors are. Regularly survey your donors to gauge their feelings towards your organization and their giving experience and can help guide your donor retention strategies.
Technology, such as donor management software, CRM software, and online fundraising platforms, can streamline the process of donor retention. They can automate personalized communication, reminders, and offer better engagement opportunities. Here are just a few ways that donor management systems like Arreva’s ExceedFurther help your organization work smarter, not harder when it comes to donor retention.
A donor management system keeps all donor information in one place, making it easy to access and manage. This includes contact details, donation history, preferences, interactions with your organization, and more. Centralized data allows you to understand your donors better and tailor your engagement strategies to their specific needs and preferences.
Many fundraising and donor management platforms offer automation features that can simplify your communication efforts. For instance, you can set up automated thank you emails to be sent immediately after a donation is received, ensuring donors feel appreciated right away. Regular newsletters, updates on your work, and personalized birthday or holiday greetings can also be automated.
A donor management system can help you segment your donors based on various factors like donation size, frequency of giving, engagement level, and interests. This allows for more personalized communication and targeted fundraising appeals, increasing the likelihood of continued support.
With donor management software, you can easily track key metrics related to donor behavior and engagement, such as the number of donations, gift sizes, response to different communication channels, event attendance, and more. This data can help you understand what's working and what's not in your retention strategies.
From processing donations to managing events and volunteers, a donor management system can help automate and streamline many administrative tasks. This allows your staff to focus more on building relationships with donors and less on managing data.
Donor management systems can generate reports that allow you to analyze trends, measure the effectiveness of different strategies, and forecast future giving. This information is crucial for strategic planning and decision-making.
Successful donor retention strategies hinge on building lasting connections. This involves understanding donor behavior, creating a donor-centric culture, effective communication, and continuous improvement. Implementing these strategies can significantly enhance donor retention, thereby contributing to the long-term sustainability of the organization.
The key to sustainable growth in the nonprofit sector lies in the power of donor retention. The tools and strategies outlined above serve as stepping stones toward building strong, enduring bonds with donors—relationships that serve not only to sustain but also to propel your organization forward. By focusing on donor retention, nonprofits can ensure they have the resources and support needed to continue making a difference.