The real value of donor retention over a three year period for nonprofits

So much of what we’ve written over recent months focuses on using social media and web content to expand your reach and audience for your nonprofit fundraising campaigns online in tandem with the effective management of offline fundraising methods. While there is great importance in building awareness for a cause and essentially creating a brand for a charity online, perhaps the single most important task for organizations is donor retention.

I’ve researched a number of studies and articles recently that examine donor retention rates and the methodology employed to achieving higher rates. As you’re most likely aware the greatest expense for most nonprofits is attracting donors in the first instance as opposed to retaining them and yet donor retention has a huge impact on mid to long-term fundraising success. However, according to Blackbaud nonprofits typically spend six times more on donor acquisition than they do on donor retention. I’d very much like to know exactly how that figure is arrived upon but it shows that attracting first time donors is, as you would expect, a very costly endeavour.

In general terms, the emphasis tends to be on new donor acquisition with almost every article you read and study that is published. I understand that dynamic fully and I too tend to write primarily about building awareness to create stronger foundations to acquire new first-time donors. This is in no small part due to my experience with social media and blogging and the ability of both to help spread awareness whilst building strong and lasting traffic to a website, but the reality is that there is more tangible value in retaining an existing donor than winning a donor for the first time.

The reason for this is as simple as it is staggering. depending on which study you refer to for supporting data somewhere between 54% and 79% of donors in a given year do not support the same charity the following year. While they might return to supporting that organization in future years that year-to-year loss is remarkable. To flip those numbers upside down it means that for a typical nonprofit annual donor retention rates are somewhere between 21% and 46%, thus if you take an aggregate figure from these results it means that of those who supported you in 2014 only about one third can be expected to support you again in 2015.

I was surprised by these donor retention rates and there are of course a number of variables that impact them but some of the sources for the data are below;

• 27% donor retention rate | Blackbaud study 2013 | Australia
• 41% donor retention rate | Bloomerang study 2012 | USA
• 25% donor retention rate | Fundraisingsuccessmag.com 2013 | USA
• 27% donor retention rate | NPEngage.com 2014 | USA

In all I found ten different reports and the composite average for retention rates sits at 32% for the ten reports, close enough to being exactly a third that it provides us with an excellent starting point. Considering how much effort goes in to attracting donors in the first place imagine what sort of a difference it can make to improve that retention rate by five, ten or even twenty percentage points. How plausible is it to target donor retention rates of 50-55% and just how much of a difference would that make to the fundraising success of your organization?

To help examine that please refer to the chart above which begins with donor retention rates of 27% and then scales them up at five point intervals all the way to 52%. The chart shows the approximate number of donors that would be retained from the initial starting point over a three year time frame and the final contribution in 2017 from the initial donor base. The final column shows the value of donations based on the formula if the retention rate is improved as shown.

While I appreciate that a number that high might not be possible what is clear is the tremendous impact that moving retention rates up by five or ten points can have. For the example graph we’re working with a starting donor audience of 2,500 people who make an average donation of $100 each per year and then extending out the retention rates for year one, two and three.

If you take the data for your own organization and extend the same formula to your results, just how large of an impact could a five or ten point improvement have to your final results? Having seen that number in black and white it speaks volumes about the profound importance of donor retention.

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Miratel Solutions is a Toronto call centre, eBusiness, and letter shop mail house specializing in professional fundraising services including PCI compliant inbound telephone fundraising, outbound telephone fundraising, online fundraising, lottery fundraising services, donation processing and receipting and direct mail fundraising services. We are committed to our CSR business values in all our business decisions  and advancing the missions of the nonprofits we proudly serve.