Why You Should Focus More on Meeting Donor Retention Goals
At the core of many nonprofits’ fundraising strategy is the goal of acquiring new donors.
Why? Because it looks glamorous. It feels good to share in your annual report that you’ve spread the word about your cause to X number of new people and have driven them to donate.
However, while donor acquisition is important, nonprofits should never stop there.
Instead, nonprofits should focus heavily on retaining the donors they worked so hard to acquire.
We recommend working with a fundraising consultant to help you learn more about how to improve your retention rates and what part those improved rates can play in your overall strategy. Check out Aly Sterling Philanthropy’s list of top firms to find the perfect consultant for your nonprofit.
Fundraising consultants understand the importance of donor retention rates for better budgeting, improved engagement and larger donations. While consultants have an abundance of experience to backup this idea, you need to ensure you also understand how donor retention can impact your nonprofit.
Why Is Donor Retention So Important?
Donor retention is important because higher retention rates lead to better use of your resources and improved fundraising totals
Bloomerang does a great job explaining the importance of donor retention through examples:
Let’s just say your organization acquires 1,000 new donors in one year. If the donor retention rate is 40%, as is about average, only 400 of those donors will donate again the following year. By year five, only 10 of your original 1,000 donors will remain and continue to give.
Acquiring more and more donors to fill in these gaps and keep your fundraising where it needs to be year after year requires a lot of resources such as time, energy and money from your nonprofit.
Now for the other example. Let’s say your donor retention rate is 41%. In a single year, you have 5,000 individual donations of $200. At this retention rate, after 10 years, your nonprofit will have received $820,859. However, if you increase the retention rate by just 10%, to 51%, the final amount after 10 years jumps to $1,277,208.
A simple 10% increase in your donor retention rate will earn you thousands more in cost savings and gifts!
How Can My Nonprofit Improve Its Donor Retention Rate?
The first thing to understand about donor retention is there are two very important ways to consider it: as your annual retention rate and your monthly retention rate.
This article will simply scrape the surface of each. If your team decides to hire a fundraising consultant, you’ll learn more about how these rates impact your strategy and how to improve both of them.
Your nonprofit will first need to decide which rate is most valuable to improve upon as well as how the two rates work together, then determine actionable goals to make it happen.
Let’s dive in to learn more about annual versus monthly donor retention.
Annual Donor Retention Rate
Your annual donor retention rate is defined just as you would imagine: It’s the measurement of donors who continue to support your organization year after year.
Measuring and improving your annual donor retention rate is an integral part of your nonprofit’s long-term strategy.
The higher your annual donor retention rate, the more prospects you’ll have for planning major campaigns and stewarding major gifts.
Before you embark on the journey of a capital or other kind of campaign, your nonprofit will conduct a feasibility study. This study will help determine if your nonprofit has the fundraising capability, donor base and community support to succeed with the major campaign.
Organizations with higher retention rates tend to have stronger donor bases, which are validated through feasibility studies as positive indications for campaign success.
When you dive into planning for the campaign itself, you’ll create a gift range chart to call upon reliable donors for gifts. The first place you’ll look for those donors in your CRM will be from the list of those who give regularly.
A higher donor retention rate ultimately leads to broader lists of people to choose from when it comes to hitting the important numbers on your gift range chart.
Nonprofits should never launch a major campaign alone. Capital campaign consultants will help walk you through a feasibility study and the entire planning process. Click here to learn more about how to hire a capital campaign consultant.
Steward Major Gifts
Whether it’s a part of your campaign or your annual strategy, major gifts are an important part of the fundraising process for nonprofits.
However, these gifts don’t come out of thin air! It’s rare that a generous stranger will swoop in and provide a major gift for their first donation. That’s why your nonprofit needs to focus on stewarding major gifts from the engaged prospects already in your database.
When your nonprofit has actively engaged supporters and an improved your donor retention rate, you’ll find a wider pool of major prospects in your CRM.
Additionally, when you focus on retaining more donors, you will be engaging in stewardship activities to retain them. This puts you ahead of the game when it comes to major gift stewardship. Your supporters who give regularly should already:
- Have a contact at your organization. By the time you identify a major gift prospect from your retained donor pool, they should already know the name of the contact person at your organization. When your major gift officer or other communications representative reaches out, the prospect will be familiar with the name.
- Have interacted with your nonprofit in various ways. Multiple methods of engagement are a key sign of major gifts stewardship. Make sure your donor feels appreciated for any time they’ve spent volunteering, in-kind donations and other engagement metrics.
Because major prospect cultivation and donor retention require similar stewardship strategies, after stewarding for retention you’ll be well on your way to a strong case for supporters to become major donors.
Monthly Donor Retention Rate
The approach your nonprofit takes to monthly donor retention is very different from that of annual donor retention. Annual retention rates are important for your nonprofit’s long-term strategy, or the strategy spanning multiple years.
Monthly donor retention affects your short-term and lays the groundwork for your annual retention rate.
Your monthly donor retention rate essentially acts as a short-term goal that will lead to better long-term planning in the future.
The monthly donor retention rate is primarily maintained by automated recurring gifts. When donors sign up to give a recurring gift, it’s often because they can’t afford to give one major gift. Instead, they make it easier on their wallets by splitting that large amount into smaller, more easily digested chunks.
When you consider your monthly donor retention rate, you’ll need to consider what part it will play in your annual budget and how you can keep other engagement metrics high among recurring donors.
Plan Your Annual Budget
Recurring donations are incredibly valuable for nonprofits because they provide a steady source of revenue.
As an organization that relies on donations from charitable individuals, it can be difficult to predict regular revenue amounts.
However, when supporters sign up to automatically give a small amount each and every month, it makes it easier to predict at least part of your revenue stream.
Make sure you track the recurring donation amounts in your nonprofit accounting software. This way, you can ensure your budget accounts for steady revenue versus that which may vary month to month.
Because this revenue is steady, try to allocate these funds to the integral parts of your budget to ensure you have the money to pay for the most important things each year. The higher your monthly retention rate through recurring donors, the more reliable your income for these important elements.
Be sure to also factor whether or not these gifts can be matched by the donor’s employer. Your recurring donors can submit a matching gift request annually or monthly if they’re eligible with their employers, which can drastically increase your revenue from these supporters.
If you’re interested in learning about matching gifts or how you can incorporate them into your plan and budget, check out this 360MatchPro matching gift guide.
Keep Engagement Metrics High
When your nonprofit’s goal is to encourage recurring donors, you’ll likely be working hard to send frequent communications and otherwise engage with these supporters. This will absolutely improve your monthly donor retention rate.
However, one of the mistakes commonly made by nonprofits is to cease the push for engagement after a supporter signs up for these recurring gifts.
As you watch your monthly retention rate rise, don’t stop encouraging other metrics of engagement from your monthly supporters.
The last thing you want is for these supporters to take an “out of sight, out of mind” approach to your organization. Sure, they don’t need to worry about typing in their credit card information every time they want to engage. However, there should be other ways for them to stay actively involved.
For instance, tell these supporters about upcoming events, volunteer opportunities and in-kind donation needs.
You want to keep them apprised of your impact and encourage more ways to connect so their commitment to your mission—both personal and financial—continues to grow.
Donor retention rate is key to effective planning for your nonprofit. It creates predictability that’s necessary for accurate budgeting and campaign planning. Plus, continued engagement and stewardship of regular donors (whether monthly or annual) can further benefit your organization through future major giving or other helpful activities.