How to Cultivate Awe, Gratitude, Altruism and Meaning to Significantly Boost Nonprofit Fundraising
Where does retention fall within your priorities?
Recently Tom Belford of The Agitator penned a post entitled “Donor Retention … Why Is It So Hard?”
Great question!
I’d like to explore this a bit, and I hope you’ll join me.
First, are you finding it difficult?
If so, why do you think that’s the case?
If not, and you’re being successful getting repeat gifts, I’d love to hear why you think things are working well for you.
If you’re reading this article you probably already know how important donor retention is.
- You’ve probably read Dr. Adrian Sargeant’s research pointing to the fact that just a 10% increase in retention annually can increase the lifetime value of your current donor base by 200%.
- You may have read the excellent material made available by Zach Shefska on The Data-Driven Fundraiser’s Reference Guide, with similar data showing the impact of every 1% increase in retention on donor lifetime value.
- You may be familiar with the recent Rogare’s Relationship Fundraising Review about the need to make a conscious, concerted effort to make donors feel good if you want to keep them.
- Tom cited some excellent new books designed to help nonprofits improve the lifetime value of their donors, including Roger Craver’s Retention Fundraising: The New Art and Science of Keeping Your Donors for Life and Jay Love’s Stay Together: How to Encourage a Lifetime of Donor Loyalty.
- I offer my own Donor Retention and Gratitude Playbook where you’ll find dozens of actionable tips to help you retain and upgrade more donors.
There’s never been so much readily available general information about donor retention.
The resources suggested above are terrific, and there are many others. Truly, in the three decades plus I’ve been in fundraising there’s never been this much data and research accessible. So… with all this great information available, what gives?
Why does the most recent 2016 Fundraising Effectiveness Survey Report show a steady decline in donor retention over the past seven years?
We know donor retention is abysmal.
We also absolutely know from this research that if you can renew a first-time donor just once, you’ll increase their chances of giving again from 23% to 60%.
Let me put that another way.
If you prioritize getting a second gift, your donor is three times more likely to stay with you than if you don’t have a targeted second gift strategy.
This is HUGE.
How could it be that the more we know, the worse we do?
Tom Belford asks: Why aren’t we getting the job done?
I’ve thought about this, and I’m going to let you know what I think. Do with it what you will.
I think it’s not getting done because it’s not getting prioritized.
If you know something, but do nothing about it, then nothing changes.
Again, if you’re reading this I’m probably preaching to the choir. You know what needs to be done to move the needle on donor retention. You may even be doing it at your organization.
But… this information about how to improve donor retention isn’t rippling very far.
It’s as if we’ve dropped a pebble into a tar pit rather than a pond. The information, like the pebble, gets stuck before it moves very far.
Every time I give a presentation about improving donor retention, I’m astonished — not only by how many people don’t know their retention rates, but by how many wouldn’t even know how to find them!
So, if you’re at the ‘top’ (perhaps an executive or development director), what are you doing to pass along your knowledge to the rest of your team?
If you’re in middle management (perhaps an annual giving or donor relations coordinator), what are you doing to educate your bosses?
Change happens when people understand it must.
Sadly, this too often means hitting rock bottom before anything is done. Organizations continue to leak donors until they reach a crisis. At that point, they decide to bring in a development director (or even a new executive director) to “save the day.”
This doesn’t always work. Why? Because the new folks coming in inherit a bunch of fires that must be put out. And donor retention is a long-term game.
I don’t know, but I think this has something to do with leadership in the sector. Executive directors often get coaching, but development directors rarely do. And, sadly, due to extensive turnover in development positions, development staff often come into positions with no one to show them the ropes.
Executive staff and boards need seasoned development professionals to lead the way.
Development staff need mentors to show them the way forward, and help them to focus on both short- and long-term outcomes. I know I’m a coach, so this may sound self-serving, but I don’t care who you hire to help you. The truth is that coaches have time to read all the literature, stay updated on best practices and get folks up to speed. They have experience and can share analytic tools for measuring retention and focusing strategies according to results.
When people are working in the trenches, they often get so embroiled in putting out fires that they neglect to invest in prevention (so those fires don’t get started in the first place).
Donor retention is a prevention strategy.
It’s a way of safeguarding all your hard work.
You put your money in a bank and hire investment advisers to assure it yields a positive return.
Why wouldn’t you similarly safeguard your hard-won donors by hiring advisers (staff and/or coaches) to assure they also yield a long-term positive return?
If you were losing 46% of your bank account every year, alarms would be sounding at high decibels.
If your donor retention is average or below average (you can benchmark your results here), it’s time to sound the alarms and ask these most important questions:
- What can we do to prevent this?
- Why aren’t we doing this now?
- And, if not now, when?
How to get organizational priorities straight.
- If you’re a new nonprofit (less than five years old), then it makes sense to prioritize donor acquisition. This should be obvious; if you have no donors, you’ve nothing to retain. Of course, retention shouldn’t be ignored.
- If you’ve been in existence five years or more, you should be putting acquisition and retention on at least an equal footing. You’re still building your base, but you also need to solidify it. You can’t afford to see it erode.
- If you’re well established, you would do well to consider prioritizing retention — especially looking at new donors who give between $100 and $250. In my humble opinion, these folks are ‘gold.’ They’ve demonstrated an affinity for what you do, as well as a notable philanthropic bent (after all, a $100+ gift is different than a $10 gift). This makes these donors a much better target market than relative strangers who’ve never given to you.
The 2016 FEP Donor Retention Supplement shows mid-level donors are neglected, and renew at generally poor rates. If you can renew and upgrade them to higher levels of support, your odds of them continuing to stick with you increase significantly. There is a direct relationship between gift value and loyalty.
Donors giving less than $100 had an average retention of 52% over the last seven years, as compared with $250+ donors who had average renewal rates of 76%. Donors giving between $100 to $249 were right in the middle with an average of 64%.
Make return on investment and life-time donor value your complementary mantras.
When determining how to allocate limited resources, keep in mind that retention is a more cost-effective strategy than acquisition. Much more.
It costs money to make money. Donor acquisition is expensive. In fact, it can cost two to three times as much as a donor will give you with their first gift. In the short-term, especially when you’re getting your nonprofit up and running, you must invest capital that won’t yield an immediate return. It can take 12-18 months before a given donor relationship becomes profitable. So this is clearly a long-term proposition.
Acquiring a new donor for just a one-time transaction makes NO sense at all!
Do you know how much it cost you last year to acquire each new donor via a direct mail appeal or e-appeal? [Download the Ultimate Fundraising Donor Acquisition Cost Cheat Sheet if you want to figure it out.]. You’re likely not to break even your first year. The donors you acquire will only be worth it to you if you renew them over time — which is where the concept of ‘life-time donor value’ comes in.
Donor lifetime value is a prediction of how much you can expect to receive from a donor over the lifetime of their affiliation with your nonprofit [read a comprehensive article by Zach Shefska of the Fundraising Report Card on Measuring Fundraising ROI with Donor Lifetime Value].
What you do impacts donor lifetime value, either positively or negatively.
If you sit by passively, waiting for donors (especially first-timers) to renew without some significant, active stewardship on your part, your retention rates will be sub-par.
Summary: Why aren’t you retaining more donors?
Take a look at your priorities.
- How many resources (budget, staff and volunteers) are you investing in donor retention?
- Do you have an infrastructure (database and CRM) that facilitates evidence-based fundraising and donor retention?
- Do you have a written donor retention plan?
- Does your plan have goals, measurable objectives, specific strategies, timelines and assigned responsibilities.
- Or are you “doing retention” on a wing and a prayer — an acquire today, retain tomorrow, try to fit stuff in whenever you can — and pray that it all will work out in the end?
The data shows that, for the average nonprofit, it’s not working out so well.
So… ask yourself: “How can we take the donor retention bull by the horns?”
Make this the year you get your retention priorities straight!
Please share your thoughts in the COMMENTS below as to why nonprofit donor retention rates have been steadily decreasing, despite the fact that the data shows us the enormity of the problem?
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6 Comments
Claire, thank you for joining the growing chorus of folks who are reframing the donor-retention discussion. On Feb. 1, I wrote my own post: “What are the Obstacles to Improving Donor-Retention Rates?” (https://michaelrosensays.wordpress.com/2017/02/01/what-are-the-obstacles-to-improving-donor-retention-rates/). In my post, I invited discussion about why nonprofits are not doing what they know they should be doing regarding donor retention. Sadly, I was met with almost complete silence. It will be interesting to see what sort of responses you receive.
I’ve also reached out to some experts who I respect greatly to see if I could find some answers. The best I could come up with so far are vague mentions that organizations are not making donor retention a priority. Some have more specifically blamed boards and CEOs. Unfortunately, no one has yet told me why boards and CEOs are failing to make donor retention a priority.
Interestingly, one fundraising professional suggested the problem does not rest with nonprofit organizations but rather with fickle Millennial donors. So, we may not even be zeroing in on the problem, let alone clearly identifying it.
When problem solving, the first step is always to clearly define the problem. When it comes to donor retention, we still haven’t done that. So, it’s no surprise we’re no closer to actually solving the problem.
As you have mentioned, nonprofit professionals already know the importance of donor retention. Furthermore, there’s no shortage of simple, low-cost information about how to improve donor retention. Those two issues are NOT the problem. So, what is? Why won’t nonprofits do what they know they should do and know how to do? (Some nonprofits don’t even thank donors who give less than $250!!!)
By the way, you’ve touched on another problem that has been discussed for decades without any improvement: high employee turn-over rates. Nonprofits know that high turn over is costly. They know how to slow the turn-over rate. However, as with donor retention, nonprofits are failing to do what they know they should do. Why?
Until we figure out how to address the inertia problem, donor-retention rates will continue to suffer. Staff will continue to rapidly turnover. Of course, some charities will get it right. However, for the nonprofit sector, change will not happen until we get to the root problem. I’m afraid we’re still a long way off. We can’t even begin addressing the problem because we haven’t even clearly identified the problem.
Thank you for advancing the conversation!
All excellent points Michael.
I think some of the problem also lies in how budgets are allocated. It’s easy for things like “donor service” and “staff development” to get lumped into that nasty “overhead” category, which has caused a nonprofit “starvation cycle” for too many years. So it’s not something boards are naturally inclined to support — absent a strong case made in their favor by the executive leadership.
As long as investing in these things is considered a “luxury,” rather than essential, things are not likely to improve.
I’m now going to go read your article!
There are some very specific reason why all the expert advice has not had any impact in over a decade. As long as retention is defined as those who renewed from last year you have already lost. The short term metric is not the target. But most importantly donor retention is not a list of stuff you do. Never has never will be. Donor Retention is cultural. See Disney or Amazon. A top 7/4 or 10 things to do to improve retention is like planting seeds in soil where they will never grow. Perhaps it helps folks expand their brand but it will never improve retention. The proof is the last 10+ years of zero impact. We salute the folks bringing the topic forward, what is crystal clear is that we need new solutions.
If folks actually did all the “Top 10” things, it would move the needle. But, they seldom do because they’re not working within a culture that prioritizes donor service. When you’re good to people, they tend to stick around. For-profit businesses know this, and that’s why they retain an average of 9.4 for every 10 customers. While nonprofits retain 2.3. We need to walk the talk, not simply “talk” it.
Claire, great article. What we have found is that retention is directly related to the Donor Experience. DX can learn a lot from those who have got CX right in the corporate world. According to Jim Collins, good is the enemy of great. Out with good DX, in with great DX = Increased Donor Retention.