That’s the question that has fundraisers everywhere scratching their heads and crying in their beers.
Donor retention has continued to plummet every year for the past seven years. It’s really, truly an awful problem. For some unknown reason, all that hard work you put into acquiring new donors is, seemingly, being wasted. Why?
Let’s take a look at the data. The 2013 Fundraising Effectiveness Project Survey (which tracked 2,840 American nonprofits) released on September 16, 2013 revealed that charities are losing donors faster than they can find them. A Bloomerang Infographic displays the ugly picture. And the fellows at the Agitator added to the imagery with their blog post titled Lemmings with Suicide Vests (it’s quite an image, isn’t it?)
Here’s the deal:
Every 100 donors gained in 2012 was offset by 105 in lost donors through attrition — a net gain of negative -5. (for organizations raising less than $100,000/year it was negative -13.5%)!
More than 7 out of 10 new donors were lost.
From all donors, total attrition was 61%.
Holey moley! Why is this happening?
It’s hard to know what’s going on without lots of research and many tests, but here are three (hopefully intelligent) experience-based guesses:
1. You’re mostly paying lip service to retention when it comes to about 80% of your donors.
Sadly, most of you aren’t really trying to retain donors who aren’t major donors. The truth is that many leaders (executive directors and board presidents) don’t care much about the ‘little folk’ who give them only 3 – 20% of their goal. They’d rather put energy into acquiring one more major donor than into retaining 10% more of their smaller donors. And there’s merit in this philosophy. Quality generally beats quantity (but not always — especially if you’re a multi-national emergency relief organization).
The fact that this could lead to a 200% increase in the lifetime value of these donors means very little to most people TODAY. Yet the future will be here before you know it. And losing those non-major donors is horrible for another reason too — one that too few nonprofits consider in their focus on the day-to-day — these are the folks who tend to leave bequests!
Yes, it’s true. Being a non-major donor doesn’t mean you don’t have capacity to give more (especially if you own a house and die without heirs). Many, many bequests come from folks who shock the heck out of their beneficiaries. One charity I worked for got one to the tune of $4.2 million. So put that in your ‘these-donors-are not –worth-stewarding’ pipe and smoke it!
2. Bottom-of-the pyramid donors are becoming top-of-the-pyramid donors – elsewhere.
The trend is for donors to give larger gifts to fewer charities. That means all the ‘bridesmaids’ (the charities to which your donor is not engaged –the ones that don’t make your donor’s “Top 5 – 10” list) are going to be bleeding. So the fact that your competition is doing a super-duper job with stewardship is going to hurt you more than it did in the past (when almost no one bothered with stewardship). In other words, the fact that many nonprofits today are actually paying attention to retention could be resulting in more attrition for their competitors. Weird, no?
3. The digital revolution ended business as you knew it.
You’ve got the same number of hours in the day, and a lot more things to do with that time. You can’t ignore digital. It’s a fabulous relationship-building tool. And, more and more, it’s becoming the number one way a lot of people find you and communicate with you. But… is there a lost opportunity cost there? You bet! The solution is probably to allocate more resources to fundraising and marketing. Which is why, as Dan Palotta has been preaching, nonprofits need to get more comfortable with higher overheads.
Solution? The last thing I said. Spend more on fundraising. Put enough boots on the ground to become effective at building relationships. Thank your donors more. Cultivate an attitude of gratitude organization-wide. Don’t fall for the canard that over-solicitation is the problem. The problem is only-solicitation.
Do unto your donors as you would have them do unto you. Get to know them. Become friends. Give them something of value. Not just once a year, but regularly. Stay in touch. Become a part of the family. Then, and only then, will they decide to become part of yours.
If you know you could do a better job of keeping and upgrading your supporters then the Attitude of Gratitude Donor Guide is for you! Tons of tips, templates, samples and resources – plus you get a free 15-minute consult. And it’s pennies. Why? I really can’t stand that you’re losing all your donors. Stop just doing things right… do the right things!
P.S. Another way to keep your donors is with a killer year-end appeal strategy. Now’s your last chance to get the Power of Appealing Year-End Appeals E-Course – at the EARLY BIRD discount – which ends October 14th. Again, it’s pennies for all the great stuff you’ll get – and 100% Guaranteed. Check it out here.
Photo: Flickr, Jehane
Great post. I couldn’t agree more. Time spent on engaging now is time not spent on replacing later.
Thanks for the opportunity,
Thanks Dani. I love it when people agree with me. 🙂
all good, but….(do you like people who disagree with you???) – i think dan p is wrong, and i would be careful about advocating it. very few non-profits know how to use “high” overhead properly. most just waste it and that is what donors fear. big non-profits will use it to justify their big overheads, and small non-profits will spend more and not get the desired results.
so, i advocate keeping your overhead to <15% of your expenses – no matter what you are spending it on. need more digital/social media/new-fangled whatchamacallits? fine, then reduce your printed matter and take a few less business class flights for fund raising…..
I love folks who disagree with me. 🙂 I think Dan is right, and wrong. How’s that for bet hedging? Waste is waste. And I certainly don’t advocate profligate spending. But 15%, 20%… these are arbitrary figures. A younger nonprofit may need to spend more than a mature nonprofit, just due to the lifecycle of the organization. The ROI for fundraising, generally, is over the moon high compared with for-profit margins. So… if net/net you can end up with more $$ than you spend — and use that to fulfill your mission — why is that not a good thing? It’s not a zero sum game.
whew. anyway….there are many reasons why a non-profit might need to spend more – for a short period, or long-term. those might be the exceptions. i understand the argument “but if we have more money at the end of day, isn’t that a good thing?” – i just don’t agree with it. i think the means and the ends must be correct. the 15%-20% is not arbitrary. it is a well proven range. and let me ask the question a different way….. if non-profit X is feeding hungry people at 17% admin/overhead/fr, etc. and non-profit Y is feeding hungry people for 12% admin/overhead/fr, etc. – which would you prefer your hard-earned charitable shekels go to?
Proven by who? It’s become accepted because of sites like Charity Navigator that promoted this myth. And nothing is every equal. Nonprofit X and Y may be offering different quality of service. If Y feeds hungry people with healthier, more nutritious food, for example, I might choose them. Focusing on overhead is a bit like focusing on the bathtub ring. It’s a red herring that distracts us from looking at what the nonprofit is really accomplishing.
If you do not have a written, systematic cultivation plan, then yes you will los donors. And you should care even if they are the small under $5000 donors. I am a huge advocate of plans that address attention to maintaining and losing constituents. You would be amazed at what attention and contact can do, especially when you consider part of the cultivation is upgrades
Absolutely right Sherri. It’s more often than not the under $5K donors who end up leaving you the surprisingly generous bequests. 🙂