Donor Retention and an Oprah Winfrey Moment
Hold on to your seat — you are in for a big surprise. Come with me as we explore new insight into donor retention. And there’s a free prize inside, too.
Right now, I am going to give your organization 100 brand new donors. And you get 100 new donors! And you get 100 new donors! And you get 100 new donors! This is my Oprah moment — don’t spoil it.
Now, what are you going to do with those 100 new donors? And more importantly, how many are you going to have one year from today? Let’s explore the link between donor choices and donor retention.
First, let’s assume that all of those 100 new donors gave a gift to your organization using traditional offline channels. That means they gave through the mail, on the phone, at in-person events or through any interaction that did not involve using the Internet. For what it’s worth, in 2020, that is how 87% of donations were given according to the Blackbaud Institute “Charitable Giving Report.”
And based on benchmarking research from Blackbaud Target Analytics, the industry retention rate for those first-year, offline-acquired donors is 29%. Meaning that of those 100 new donors that I gave to your organization, there are only 29 left one year later. Not good.
Second, let’s assume that all of those 100 new donors gave a gift to your organization online, through a website or on a mobile device. Sadly, the first-year, online-acquired retention rate for these donors is even worse. A year later, you would only have 22 of the 100 new donors that you were given. Really not good.
Now, regardless if those donors gave offline or online, we know that their multi-year retention rate significantly improves. Multi-year offline donors retain at 60% and online multi-year donors retain at 64%. The better, faster and easier we can make it for donors to contribute their second gift makes a bigger difference than channels or envelope colors or email emojis.
I have spent the better part of the past 15 years trying to understand why retention rates between online and offline donors are different, and there are certainly a lot of reasons for why this happens and what to do about it. We could explore the organizational factors and tactical steps to close the retention gap, but nothing would move the needle as much as what I am about to tell you.
What if online versus offline is not the most important thing? What if there was a more systemic challenge that predates Al Gore inventing the Internet? (Yes, I know that’s not what really happened.) What if a different approach to donor engagement would produce significantly better outcomes – and it has nothing to do with email or mail or telegrams?
Let’s go back in time. Remember those 100 new donors that I gave your organization? Let’s forget about whether they were acquired offline or online. I’m sure you’d like to forget about how many of those donors were gone one year later. I am going to give you 100 new donors again, but we’re going to change one very important variable in the donor retention equation.
The first group of 100 brand new donors give a single gift to your organization. Most likely because that’s what you asked or forced them to do. A year later, you will only have 24 of those first-year, single-gift donors left. Wait a minute! That’s not much better than offline or online. What is going on here?
The second group of 100 brand new donors gave monthly recurring gifts to your organization. And a year later you will still have 73 of them. Wow! Huh? How? What sorcery is this? Yes, the retention rate for recurring-gift donors is significantly better than that of single-gift donors.
Now you might be thinking that we’ve somehow cheated or pulled a fast one on them. And other readers might point out that it’s pretty obvious that if donors give more frequently, then they probably retain better. Yeah. That’s the point.
As it turns out, after years and years of research — based on actual data and not opinions — we know that one of the biggest effects on retention rate is how soon a donor makes a second gift. It’s not about the channel or multiverse.
Shifting our strategy and tactics to lead with recurring giving for donors giving less than $1,000 is a perfect place to start. This will be a change in mindset more than skill set. But the improved outcome is absolutely worth making a change today.
Editor's Note: This “TechTalk” column was originally published in the May/June 2021 print edition of NonProfit PRO. Click here to subscribe.
Steve MacLaughlin is the vice president of data and analytics at Blackbaud and best-selling author of “Data Driven Nonprofits.” Steve has spent 20-plus years driving innovation with a broad range of companies, government institutions and nonprofit organizations. He serves on the board of the Nonprofit Technology Network and is a frequent speaker at conferences and events. Steve earned both his undergraduate degree and a Master of Science degree in interactive media from Indiana University.