As a nonprofit board, your need to work smarter rather than harder, especially when it comes to maximizing the potential of your donations. After working hard on your fundraising campaigns, it’s rewarding to watch the donations stream in. Yet can your board count on the same donors sending gifts year after year?
If the answer to that question is no, or you’re not sure, you will be working just as hard on fundraising campaigns in the future, and your overall donation rate will remain largely the same.
Your donor retention rate matters if you want to grow your nonprofit. We’ll explain what a donor retention rate is, why you should be monitoring it, and what an excellent nonprofit donor retention rate should be. We’ll also give you clues as to why you could lose donors.
“The donor retention landscape is actually lousy at the moment and is going of all accounts, from bad to worse. The latest round of AFP data that came out was made for very depressing reading. We’re continuing to lose donors at a pretty alarming rate.
Over 70% of people that we recruit into organizations never come back and make another gift, so we’re caught on this treadmill where we have to spend lots of money on acquisition which most nonprofits lose money on anyway, just to stand still.”
– Professor Adrian Sargeant, Director of the Centre for Sustainable Philanthropy at Plymouth University
What Is Donor Retention Rate?
The donor retention rate is a hot topic among nonprofits, and with good reason. It costs more to acquire new donors than to retain existing donors. Every fundraising campaign requires a certain amount of overhead. The less you spend on overhead, the faster your nonprofit can grow.
Moreover, your donors are interested in knowing you are spending as little as possible to get donors. A high retention rate is something that will impress them.
Nonprofits commonly measure how many donors contribute each year and the total amount of donations. It makes sense to continue doing that. It also makes sense to measure how many donors make repeat contributions in consecutive years, and that’s where the donor retention rate can be a helpful calculation.
The formula for the donor retention rate is simple to calculate:
Take the number of returning donors in the most recent year and divide that number by the total number of donors for the previous year. Multiply the result by 100 to get the retention rate.
The donor retention rate is so essential the Association of Fundraising Professionals and the Center on Nonprofits and Philanthropy at the Urban Institute annually report on average donor retention rates. The report, called the Fundraising Effectiveness Project, allows nonprofit boards to see how they measure up against similar types of organizations.
Why Monitor Your Donor Retention Rate?
The goal of calculating your retention rate is to keep improving it. You can’t know where it is unless you actively monitor it.
If you overlook this critical metric, it will hurt your bottom line and make it difficult to fund your programs adequately.
What kind of donor retention rate should you be striving for? According to Qgiv, the average donation rate for nonprofits is 40%-45%. Considering those percentages, if 100 donors gave to your nonprofit last year, about 40-45 would donate again in the coming year.
A high donor retention rate means lots of donors continue to make donations yearly, while a low retention rate means you will need to step up your fundraising efforts to replace lost donors.
Why Do Nonprofits Lose Donors?
In light of losing donors, it’s fair to ask why donors don’t continue donating every year. This is called donor attrition. A high attrition rate unravels all the hard work your board puts into fundraising. Rather than build on your total annual donations, you’re always trying to get new donors to replace the ones you’ve lost. It can become an endless cycle that starts with fundraising, moves to attrition, and cycles around again.
Here are some of the reasons your nonprofit may have a high attrition rate:
- Focusing too much on bringing in new donors and not enough on nurturing existing donors
- Not personalizing your thank you messages and other interactions
- Failing to follow up to explain how their contributions helped
- Failing to listen and respond to donor feedback
- Making it difficult for donors to make donations (payment types, website user-ability, etc.)
- Not investing in fundraising, including overhead, software, digital tools, etc.
- Not having a distinct donor retention plan
Each reason we listed for losing donors has a solution. All you need to do is develop a plan for improving donor retention.
Recent Donor Retention Trends
Part of the board’s job is to analyze trends. The Blackbaud Institute offers good data on overall donor-giving trends.
- The average age of donors in the United States is 65 (compared with age 62 in 2016)
- The average overall monthly giving grew by 9% in 2021
- Fundraising has increased almost 20% over the past three years
- The average first-year offline retention rate is 29%
- The average multi-year offline retention rate is 60%
- The average donation amount is $813
- The average online donation amount is $204
- The median amount for donations under $1000 is $20
- The median amount for donations over $1000 is $2,500
Does the Pandemic Signal a Change in Donor Retention Strategies?
The pandemic provides a veritable example of why nonprofit boards should monitor the donor retention rate. As much as the global pandemic financially impacted households, most households continued their charitable giving. The number of households that gave donations to support the impact of COVID-19 rose by over 9%.
Something that changed once the pandemic started as many people shifted their donations to nonprofit organizations that provided basic needs or healthcare. About half of wealthy households gave donations primarily because of the pandemic, often making donations to support the communities they live in. Large donors also loosened up many of the restrictions they had on how nonprofits could utilize the funds.
This is the information nonprofit boards need to start their donor retention strategies. For example, your organization may want to highlight to donors how it’s helping communities to lessen the impact of the pandemic, as that is the focus of donor giving right now.
Donor trends inform your board who is giving donations, how much they’re giving, and which types of organizations they favor.
Final Thoughts on Donor Retention Rates
Donor retention rates change nearly every year. A donor retention strategy that worked last year could prove to be a major failure. By learning why your donors don’t make repeat donations and paying attention to donor giving trends, your board can shift its donor retention strategy to prevent donor attrition and boost annual giving yearly.