A Guide to Donor Retention for Nonprofits
Donor retention, and its flipside, donor churn are key issues for nonprofits.
Why does this matter? Most nonprofits invest considerable time and funds into fundraising campaigns for new donors. If you’re losing your current donors quickly, you’re in a never-ending cycle of having to attract new donors. This is costly and wastes the opportunity to build long-term, recurring donor relationships. Various analyses put the cost of acquiring a new donor at five times that of retaining a current donor.
What keeps donors coming back? This guide dives into donor retention and some best practices for nonprofit leaders:
What is donor retention?
Donor retention is a measure of how many donors continue to contribute to your organization after making their first donation.
If you have a “high donor retention rate”, this means that you tend to keep your donors year after year.
On the other hand, a nonprofit with a low donor retention rate must keep working hard to acquire new donors in order to keep the doors open.
As we’ve already indicated, retaining your donors is a more cost-effective way to raise funds than constantly needing to recruit new donors. This is becoming more and more critical during a time when donor retention is down overall. The Fundraising Effectiveness Project releases regular reports with key data for the nonprofit sector. Recent reports indicate that new retained donors are down almost 28% overall, while repeat retained donors are down almost 3%.
Donor Retention Statistics
According to Q3 2023 Fundraising Effectiveness Report, overall donor count dropped by 7.6% where as total donation amount also decreased by 1.3%
2023 marks as the third consecutive year where donor count has been on the downside which is alarming in itself.
Source: https://data.givingtuesday.org/fep-report/
The average donor retention rate across the nonprofit sector hovers between 40% and 45%. This means for every 100 donors who give to your organization in a year, only around 40 will return to do the same next year. In fact, around 23% of donors churn just six months after their first donation, which means almost 70% of donors give only once to an organization.
Donor Retention by Donor Types
Donor retention rates for various donor types have also shown a similar downtrend as compared to last year.
- Donor retention rates for new donors has dropped by 16.9% as compared to 2021.
- Repeat donor retention has decreased by 5.2%, thus recording the lowest decrease. This has helped in stabilizing the overall falling retention rates.
- Retention rates for recapture donors aka. lapsed donors (donors who did not give last year to the organization, but had given in the past) also dropped by 15.2%.
Donor retention rates by Donor Size
Donor retention by donor size is dominantly determined by micro (under $100), small ($101 – $500) and midsize ($500 – $5K) donors. In 2022,
- Donor retention for micro donors has dropped by 5.3%
- Donor retention for small donors has dropped by 2.4%
- Donor retention for midsize donors has dropped by 3.3%
- Donor retention for major donors ($5K – $50K) has dropped by 2.9%
- Donor retention for supersize donors ($50K+) has dropped by 4.7%
Considering supersize donors constitute to a large chunk of amount when we look at donations by size, such a high drop has also reflected in donation amounts across multiple organizations.
How to calculate donor retention rate
The donor retention rate is calculated with the following simple formula:
Retention rate = (donors that gave this year ÷ donors that gave last year) x 100 (expressed as a percentage)
Donor retention rate typically varies across types of nonprofits. It can be helpful to dig into the existing reports out there and understand these trends so that you know where your nonprofit stands relative to the average retention rate of your organization type.
Another key thing for nonprofits to do is to go beyond the face value of their donor retention rate.
By digging deeper into the data, you can figure out who you are retaining and who is churning.
Are there common factors at play?
Can you learn anything about who your ideal donor is so that you can be more targeted with your campaigns?
Donor retention Strategies
Donor retention comes down to a number of factors, including that you’re targeting the right people in the first place. Here are some best practices to help improve donor retention rates:
Clear and direct communication
One of the first things is that donors must feel connected with your organization. Getting to know your donors on a more personal level and ensuring that you communicate clearly, and directly, can go a long way toward improving your retention rates.
This can mean following any of several strategies, depending on what makes sense for your organization. For example, regular email updates can inform donors about your activities and specifically how their contribution is helping.
Calling donors can be a great way to build relationships, especially with your high-value donors. Let them know about upcoming events, and congratulate them on a recent milestone as these are gestures that create a personal touch.
You should also look at how you communicate more broadly. For example, if you use social media channels, are you regularly posting content that keeps donors informed? Can they get a peek into your organization by following you? Are you being clear about what you’re doing, for who or what, and why? Donors can feel reassured when you maintain a public image and communicate effectively through social channels.
Acknowledging your donors
Donors should be thanked early and often. In fact, not being thanked is a known cause of donor churn. Most people want to be acknowledged when they’ve made a contribution to something, otherwise, it feels a bit like being taken for granted. Thanking donors is part of the best practices for donor stewardship.
What else can you do? A new donor welcome email series can help to give your new donors insights into the organization and make them feel part of something special. This helps to build trust in your organization and even gives you the opportunity to make another request for donations.
Donor stewardship events can be another way to acknowledge your donors and help to make them feel valued. For example, you could offer donors exclusive tours, a donor’s lunch, or access to seminars or speakers.
There are many possible ways to acknowledge donors, including offering them gifts or swag. A key to successful stewardship is to understand what will resonate with your particular donors. What are their preferences? What will really stand out to them as an excellent donor experience?
Stay on top of recurring donation plans
Churn from recurring donations can happen for all sorts of reasons, including when the credit card on file is due to expire. In the software world, dunning is an automated process that allows companies to take action whenever there is a failed payment or the possibility of a failed payment. Nonprofits can use this too by being proactive about reaching out ahead of time. Request new credit card details before the current one expires and payment fails.
Another aspect to stay on top of is knowing when to look out for potential churn. For example, it’s typical for more monthly donors to churn in January than in any other month. You might also find within your own organization that your monthly donors tend to churn after a certain period of time. If you understand this data, you can take measures to reach out ahead, perhaps with campaigns that highlight to the donor how their gifts are helping.
Gather data and feedback
To borrow from the for-profit sector again, there’s a huge movement around “customer success.” The gist of this is that the organization is proactive about initiating communication with the customer so that they can understand the customer experience.
In the nonprofit world, we can use this concept to dig into the donor experience with any organization. When you proactively reach out for feedback, it demonstrates that you care about the donor experience and are willing to listen.
Gathering and analyzing data on your donor’s behaviors, affinities, connections, and preferences can also give you some great insights. While this is less proactive than reaching out directly, understanding this data can help you to form proactive donor retention strategies. We recommend keeping your donor databases updated for existing donors to track their actions better.
Donor intelligence software such as iWave can help by providing you with predictive modeling and analytics.
Personalize your donor follow-up
One key to successful retention is to acknowledge that not all donors are the same. They’ve connected with you in different ways, have different levels of giving, and have different interests or preferences. This can massively help with situations where you are experience donor attrition across the board.
Personalized, contextual follow-up can help donors to feel that you’re paying attention to them as a person. For example, you can segment donors into key groups and design communications that make sense to those groups. It’s about keeping things relevant to the donor.
Some suggestions for segments include:
- Donation amount: Focus on recurring donors with the donation amount sizes that form the largest share of your total donation amounts.
- Event attendance: Predict donor retention by judging their involvement and interest in your fundraising efforts. If a donor has consistently shown lowering engagement, it is time to follow up and rebuild that relationship.
- Donation frequency: Any sudden or unprecedented changes in donation frequency should also result in a follow up action.
- Acquisition channel: Keep a close look on your acquisition channel to identify which channels are resulting in higher donor retention. This is where you should focus whenever you want to get back to a healthy donor retention rate.
Fundraising intelligence software can help with donor retention
Fundraising intelligence software helps nonprofits to get a 360-degree perspective of their donors so that they can take better action to retain them. It helps you to answer key questions such as “who exactly are our donors?”
Learn about where your donors have come from, their capacity to give, key events in their lives, and their affinity for your organization. This helps you to personalize your outreach and take more effective steps toward retaining donors.
iWave offers in-depth donor intelligence data for nonprofits. Request your free demo here.
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