Boosting Donor Retention Yields Big Returns

Is your organization spending too much on donor acquisition in order to combat high donor attrition? According to experts, this is a costly mistake! If your organization concentrated instead on targeted, personal communications with existing donors, many more donors would stick around and move up the donor pyramid. This shift would not only increase the organization’s revenue, but save resources that otherwise would be spent on donor acquisition.

The problem: Donor Attrition and the Cost of Acquisition

According to Adrian Sargeant, a professor of fundraising at Indiana University’s Center on Philanthropy, a typical nonprofit will lose 50% of its donors between the first and second donation and up to 30% per year thereafter.[3] With these rates, organizations must continually scramble to bring in new donors. But donor acquisition is very costly.

According to Penelope Burk, president of Cygnus Applied Research, “new donors are expensive to get and rarely give much the first time.”[1] In the end, “acquisition is more expensive than retention and often runs at a loss.”[2] If non-profits focused instead on boosting donor retention, therefore, the payoff could be huge.[1]

Boosting Donor Retention

Likewise, Sargeant argues that even a small improvement in retention can yield a windfall over time. Even boosting the retention rate by as little as 10 percent, he says, can increase the lifetime value of a nonprofit’s donor base by up to 200%.[3]

So, how do you boost donor retention? You give donors what they want. Thanks to Burk’s national research studies on the key motivators of donor loyalty, we know exactly what that is. In that research, 93% of donors indicated three things that would influence them to stay loyal and give increasingly generous gifts over time:

  • Prompt and personalized gift acknowledgement
  • Confirmation that funds will be used as originally indicated in the solicitation
  • Measurable results on donors’ last gift before they are asked for another one.[1]

All three of these things, Burk points out, are tied to donor communication and are within the control of charities and fundraisers to change.[1] So, why don’t non-profits focus their attention on changing communications to meet donors needs?

What’s Stopping Non-Profits?

While most non-profits realize that targeted, personalized communication with existing donors is important, they don’t think that they have the resources to do it, so their efforts remain focused on donor acquisition.

Maybe your data is in several places and you don’t have time to segment contacts to create targeted, personalized communications. Hiring a marketing company to do the work for you would be nice, but it’s simply too expensive. So you send generic communications and hope that your donors will understand, but they don’t. Donors continue to leave and your organization continues to spend too much acquiring new ones.

The Solution: An Integrated Database

If you had a proper software solution, you could consolidate all of your data into one powerful, fully integrated database that would allow you to easily segment your contacts and create highly targeted, personalized communications.

This kind of database used to be something that only larger organizations could afford (running upwards of $20,000 a year for some), but there are now systems available for about a tenth the price. So, there is no excuse; If even a small improvement in donor retention translates into big saving for your organization, it’s time to drop the generic “thank you” and get personal!

Just imagine the difference when a donor receives a thank you letter that says: “Dear Miss Jones, thank you for your very generous donation! Your contribution will be used to … Thank you also for showing your support by attending the annual auction last night. It was such a pleasure to have you there …” as opposed to: “Dear supporter, thank you for your contribution”

You could also send a targeted, personalized follow up letter to each of your segmented groups to let them know how their donation was used. Along with a personal “thank you” and confirmation that the funds will be used as intended, Burk’s research shows that providing timely updates is critical in establishing trust and transforming one-time donors into loyal supporters who will stay with you for years to come.

Notes

[1] Burk, Penelope. Donor-Centered Fundraising, 2003.

[2] Burk, Penelope. “Why Are Charities Losing So Many Donors?” The Chronicle of Philanthropy – Live Discussion, 2006. Available at: http://philanthropy.com/article/Why-Are-Charities-Losing-So/62612/

[3] Sargeant, Adrian and Jay, Elaine ‘Reasons For Lapse: The Case of Face-To-Face Donors’ International Journal of Nonprofit and Voluntary Sector Marketing, 2004. 9(2), pp171-182.

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