Attrition. Churn. Renewal.
Odds are you’ve heard these buzzwords. They all apply to one of the most talked about issues in modern fundraising – donor retention.
Donor retention rates compare how many donors your organization renews each year versus the number of donors who lapse and take their charitable dollars elsewhere. The percentage of lapsed donors is often called the “donor attrition” or “donor churn” rate.
Low donor retention rates are one of the most significant problems facing nonprofits today. AFP’s 2016 Fundraising Effectiveness Project (FEP) – probably the deepest dive into national donor retention trends – finds that the average American nonprofit has retention and attrition rates of 46% and 54%, respectively. And the prognosis for small nonprofits is even grimmer.
Low donor retention rates cause inordinately high cost-per-dollar-raised rates and directly affect an organization’s bottom line. Thus, while national growth-in-giving rates continue to climb, the growth is really driven by a select number of large nonprofit organizations.
Meanwhile the little guys struggle. In 2015, organizations with revenue under $100k experienced a growth rate of -11.7% and those with revenue of $100k – $500k barely broke even with a 0.6% growth rate.
These statistics point to obvious differences between small and large nonprofits in overall budget, economies of scale, and maturity of fundraising programs.
Still think about retention and attrition rates in other fields. Would an HR professional be happy if they turned over more than half of their staff in a given year? How about a college returning only 50% of freshman for their sophomore year? Or an auto garage whose customers rarely returned for other services?
Undoubtedly, you’d view these scenarios as symptomatic of a larger problem. Fundraising should be treated no differently. Luckily, there are plenty of proven strategies for organizations of all types and sizes to improve their donor retention rates.
You’re only as good as your data so measure, measure, measure.
First, take a deep dive into your development database and look at the patterns of your donors. Depending on your technical abilities and whether your development database has pre-built donor retention reports, you may have an easier or more difficult time analyzing the data.
There are plenty of resources if you’re starting from square one. The FEP allows nonprofits to utilize their free fundraising fitness test and growth-in-giving report. Both of these resources load in pre-made spreadsheets and come with detailed instructions, meaning all that’s required is inputting your own donor information.
Hubbub also has a free donor churn calculator, which is particularly useful for understanding the impact of donor churn on overall revenue and donor numbers.
Data will help you realistically evaluate whether you need an overhaul in donor retention strategy or whether your current activities will suffice.
Figure 1: This chart, generated with the Hubbub Donor Churn Calculator, shows the relative impact of donor retention rates. Organization 1 has a retention rate of 46% (the national average) and Organization 2 has a retention rate of 90%. Assuming both start with 1,000 donors and acquire 250 new donors each year, Organization 1 will lose 786 donors and Organization 2 will gain 766 new donors over a 10-year span.
Once you have some metrics to work from it is time to scrutinize your existing activities.
The easiest and most profound place to start is the donation acknowledgement. Two things matter here – the amount of time it takes to send an acknowledgement and the content of the letter itself.
Most organizations know they should send out thank you letters between 24 and 72 hours after receiving a gift. What isn’t established as an industry standard is the content of these letters. Too often nonprofits treat these letters as a receipt instead of an opportunity to meaningfully engage with their donors.
Penelope Burk, a leading expert on donor relations, thinks we can do better. In her popular “Burk’s Blog,” she identifies 20 things nonprofits can do to write a superior thank you letter. Not surprisingly almost all of them are about personally connecting with the donor.
Burk suggests acknowledgement letters be concise, speak directly to the donor, have a real signature, and invite further conversation by including staff contact information. Above all else they need to be genuine. Show donors why their investment means something your organization and to the cause you represent.
Acknowledgement can and should also take place by telephone. Burk’s company, Cygnus Applied Research, conducted experiments suggesting donors who receive a call or voicemail are significantly more likely to make that all-important second gift and to increase their gift amount.
Whatever you do to say thank you, turn authentic gratitude into a routine for your development staff, leadership, and board. They’ll probably have fun with it!
Engage Before and After Soliciting
“I only hear from you when you want money.”
Sound like something your donors might say? If so, your organization might want to pivot towards relationship fundraising.
In his book Relationship Fundraising, Ken Burnett defines relationship fundraising as “an approach to the marketing of a cause which centres not around raising money but on developing to its full potential the unique and special relationship between a charity and its supporter.”
You’ll want to start building this relationship early through traditional and digital marketing, social media, facility tours, events, and other opportunities unique to your organization.
And once someone makes a gift – make him or her feel like they’ve joined the tribe. Send welcome packets letting them know what it means to be a supporter of your organization, fill them in on volunteer opportunities, and let them know who to speak with should they have a question.
With new donors balance is key. You will want them to receive your direct mail and e-solicitations, but you should also be including pieces that are strictly informative. Whether it is newsletters or pure stewardship pieces, you should break up your solicitations. Not only will this educate your donors, which is critically important, but it will also let them know that their gift had meaning.
You’ll need to decide the best way to implement these ideas, but if you’re looking for inspiration I recommend reaching out to other nonprofits in your market – particularly those with a strong reputation for annual giving. Odds are they’ve tapped into many of these donor retention strategies.
Another fabulous resource for inspiration is SOFII.org – the Showcase of Fundraising Innovation and Ideas. Here you will find examples of great pieces from all over the globe.
Summary – how to improve donor retention
Nonprofits are agents of social change in their communities, but they can’t be as impactful if they’re spending all their fundraising efforts on donor acquisition. Therefore, a concrete donor retention strategy is critical to both the mission and the bottom line.
Simone Joyaux writes in Strategic Fund Development that donors want 7 key things to feel engaged: to be heard, to tell their stories, to realize their dreams through your organization, to join a fight, to be part of a tribe, to be flattered, and to matter.
Whether you take the simple advice laid out in this blog post, or create a more elaborate donor retention strategy, showing your donors extra love will pay off in the end. Your organization will raise more money and build a more engaged base of donors.