Written by Jessica Browning, Principal and Executive Vice President
The nonprofit sector is facing a crisis: dangerously low donor retention rates. Today, less than half of the average organization’s donors (43.6 percent in 2020) will give again the following year (AFP Global, 2021).
Over time, the impact of this statistic is devastating. Consider a nonprofit with 1,000 donors. Even if the organization beats the national average and maintains a 60% retention rate, its donor base would fall to 600 in year two. After five years, the organization would have only 78 of its original 1,000 donors left.
As professional fundraisers, we are spinning our wheels. In 2017, $6.008 billion in gifts were generated from new, upgraded current and previously lapsed donors, but about the same amount ($5.762 billion) was lost through reduced gifts and lapsed donors. This means that of every $100 gained, $96 was lost through gift attrition (Levis, Miller, & Williams, 2018).
The cause of low donor and donation retention rates is speculative. Perhaps it’s because, as a culture, we’re obsessed with the new and the shiny. Or maybe our boards equate new donors with more awareness and energy for our cause.
Hopefully the events of the past 18 months will force us to return to fundamentals. Record giving in 2020. Record numbers of new donors. We, as fundraisers, must put proper donor stewardship at the top of our priority list so we do not alienate our supporters.
Consider the Potential
The Fundraising Effectiveness Project estimates that if an organization (one that raises at least $1 million per year) raises its donor retention rate by just 1%, it will add $19,692 to its bottom line the following year. If they raise their retention rate by 10%, that’s $196,920 in new revenue the next year. And if retention rates rise year after year, these results are compounded for even greater growth.
Donor retention is critical for the long-term health of any institution or organization. Every organization that attracted new donors during the pandemic must have in place or be ready to implement effective stewardship practices. Otherwise, we are turning our backs on opportunity.
The average major donor doesn’t become a major donor until after they’ve given five gifts. At current retention rates, half of all major gift prospects walk out the door each year. These are donors who have already expressed an interest in your mission. You’ve already accomplished the difficult task of donor identification and acquisition; keeping them should be equally as important.
If your organization is considering a capital campaign in the coming years, you’ll need a strong and committed donor pool—one that has been carefully cultivated and engaged. A revolving door of donors fails to create that base of supporters you need for visionary projects that will transform your organization or institution. Similarly, that same committed base of supporters is the one you can turn to in a crisis like COVID-19.
Don’t assume that once a donor leaves, it’s easy to reengage them. The recapture rate of a donor who has left is about 5%. Your chances of getting those SYBUNTS back are slim, so do everything you can to keep them in the first place.
Keeping New COVID-19 Donors
Retention rates for new donors hover around an abysmal 20%; the challenge over the coming year will be keeping the new donors acquired during the pandemic.
Let the past be a cautionary tale. Remember when Hurricanes Maria, Irma, and Harvey ravaged Texas, Florida, and Puerto Rico. At the same time, wildfires raged in California and a devastating earthquake hit Mexico City. Donors responded in force to these disasters; the value of gifts from new donors grew by 24% (Giving USA, 2018).
The next year, however, new donor retention rates dropped significantly as organizations did little to retain their interest. Imagine the revenue those organizations would have today if they had focused on retaining those new donors.
Reversing donor attrition isn’t hard, but it will take some intentionality. We suggest:
- Thanking your donors in meaningful ways. Actively show them what their gift means to the students, animals, sick, homeless you serve.
- Treating your donors as investors. Engage them in your organization through surveys, special donor meetings, or non-fundraising insider events.
- Educating your board around the importance of retention and its potential ROI. Encourage them to see beyond acquisition.
- Welcoming new donors with open arms. Carefully segment them and show them some special love. When it’s time to renew their gift next year, thank them for their first-year investment and ask them to give again.
See Your Donors as More than Money and They Will Continue to Invest
We saw so many organizations and institutions transform the way they operate during the pandemic. It’s one of the main reasons donors stepped forward and gave in record rates. Continue to engage them and they will stay loyal. And consider taking the engagement a step further…
If you are struggling with a strategic plan that worked well before the pandemic—but today is out of date—or if you are muddling through without a plan, start creating one as soon as possible. The strategic planning process is an ideal way to engage your new donors. By getting their input on the front end and encouraging them to play a role in your future, they will be far more likely to make a financial investment in that future.
If you have identified new facility, programmatic, or endowment needs, there has never been a better time to launch a campaign. A good campaign or feasibility study will seek your new donors’ opinions. They’ll dream with you… and together, you’ll advance your mission in new ways.
Download a printable version of this whitepaper…
Watch the Webinar!
Long before COVID-19, the nonprofit sector faced a crisis: embarrassingly low donor retention rates. 80% of new donors will not make a second gift. Marco Corona, Chief Development Officer at One80 Place in Charleston, South Carolina, will be our co-presenter. Over the last five years, One80 Place’s total donations from individuals has risen from $529,000 to $1.2 million because of an intentional retention plan. Learn how to implement donor retention strategies that grow your revenue.
About the Author
Jessica Browning, MBA is Principal and EVP of the Winkler Group, a capital campaign and strategic planning firm headquartered in Charleston, South Carolina. A former member of the Giving USA Editorial Review Board, Ms. Browning has a B.A. from Duke University and an M.B.A. and M.A. from the College of William & Mary.
References
AFP Global. (2021, March 15). Fundraising Effectiveness Project: Giving Increases Significantly in 2020, Even as Donor Retention Rates Shrink. https://afpglobal.org/fundraising-effectiveness-project-giving-increases-significantly-2020-even-donor-retention-rates
Giving USA. (2018, June 13). Giving USA 2018: Americans Gave $410.02 Billion to Charity in 2017, Crossing the $400 Billion Mark for the First Time. https://givingusa.org/giving-usa-2018-americans-gave-410-02-billion-to-charity-in-2017-crossing-the-400-billion-mark-for-the-first-time
Levis, B., Miller, B., & Williams, C. (2018, April 12). 2018 Fundraising Effectiveness Survey Report. Fundraising Effectiveness Project. http://afpfep.org/wp-content/uploads/2018/04/2018-Fundraising-Effectiveness-Survey-Report.pdf.
