Want to Grow your Annual Fund? Improving Your Donor Retention Rate is the key for most organizations. Here’s why and how.
You may be struggling with a long-running decline in donor retention.
Reporting by the Association of Fundraising Professionals - Fundraising Effectiveness Project (AFP-FEP) shows that non-profits are losing more donors than they are gaining most years.
For many organizations acquiring new donors isn’t where the problem lies. It’s their donor retention rate.
AFP-FEP reports that, for the 8,000 plus organizations in the AFP-FEB database for 2023, new donors are, on average, 40% or more of total donors for each year. That’s a lot of new donors.
Such a high percentage of new donors each year is a result of under-performing donor retention. It means the donor base isn’t growing.
Retained donors are more valuable than new donors. Their gifts grow over time. They may make legacy gifts. They will influence others. They think of themselves as investors and act as advocates for your organization. Every business and non-profit knows that acquiring a new customer/donor is more expensive than keeping one.
I’m stating the obvious when I say that, to grow your program, you need to acquire more new donors than you lose every year. But new donors are hard to get so, once you get them, keeping them is vital. Understanding your donor retention and recovery rates can help to guide your planning for stewardship actions, donor communications and solicitations that will improve your donor retention rate.
As shown in the above AFP-FEP metrics, there are three donor renewal and recovery measurements that matter:
1) New Retained Donors: renewal of last year’s first-time donors,
2) Repeat Retained Donors: renewal of last year’s multi-year donors; that is, donors who gave last year and at least one other time in the past, and
3) Recaptured Donors, who gave some time in the past—but not last year—and who gave again this year.
These measurements don’t exactly correspond to the usual three-part terminology:
Current Donors—“those who already gave this year,
LYBUNTS—"last year but not this year”
and SYBUNTS—"some year but not this year”.
The term LYBUNTS includes both last year’s first-time donors and last year’s multi-year donors. It’s a handy term, but for measuring renewal rates it’s a mistake to bucket first-time donors and multi-year donors into the same metric. It obscures the difference in renewal rates between new donors and repeat donors—important because it is urgent to address the low renewal rates of new donors.
Losing 80% of new donors every year—4 out of 5 being the national average—makes the growth of any program a struggle.
Renewal of first-time donors is low, but once a new donor is renewed, retention more than doubles, as shown by these average donor retention numbers from the AFP-FEP.
Your annual fund communications plan is the key to improving donor retention results.
“Meaninful information on their gifts at work is the key to donors’ repeated and increased giving. Fundraising under-performance, therefore, is actually a failure to communicate.”
Per AFP-FEP, 4 in 5 (83%) donors are small (under $500). You can’t communicate with every one of these donors individually, like you do with major givers. They require a well-planned annual fund communications plan of thanking, donor impact reporting and solicitations. The best way to improve donor retention is to improve your donor relationship, and for most donors that is done through these frequent donor communications.
Want to Retain New Donors?
In The Essential Guide to Improving New Donor Retention we share steps you can take to improve your first-time donor renewal rate to 25%, 30% or even 35%. Key takeaway: thank you phone calls (or voice messages) really influence how donors feel about making another gift.
Want to Retain Multi-Year and Lapsed Donors? Use these Donor Retention Strategies.
Keep communicating with them, even if they have lapsed deeply.
Continue to send donor impact and stewardship emails to lapsed donors, no matter how far back they have lapsed. If they don’t want them, they can unsubscribe. If they don’t unsubscribe, there is still a chance you’ll recover them.
Send printed donor impact reports and postcards by direct mail to donors lapsed up to three years. Direct mail donor impact reports and postcards improve the response to solicitations. And, per our analysis of client mailings, donor impact reports sent in an envelope that includes a reply envelope are often profitable in and of themselves, raising on average $1.40 per dollar spent.
Schedule mailed donor impact reports (sometimes a newsletter, sometimes a postcard) in between each solicitation campaign. Open rates for emails run 25-35%; for fundraising direct mail it is close to 80%, so both are needed.
Schedule donor impact emails (stories, infographics, thanks, accomplishments) every month or, better, every two weeks.
Solicit lapsed donors by both direct mail and email.
Schedule 4 to 5 solicitation campaigns per year (direct mail plus email): early spring, late spring, early fall and end of calendar year.
Go back further.
How far back you go is primarily a money decision. You should go back as far as the point where the future value of these recovered donors no longer exceeds the cost to recover them.
For most fundraising programs, that means going back five or six years. If you go back less, you are leaving money on the table.
Test going back further for an end of calendar year mailing when many donors are most charitable.
These blogs will help you write and design donor impact communications that motivate donors to stay around and keep helping.
You will struggle to get it all done. Consider working with us, your expert partner in managing projects with an experienced team specializing in fundraising segmentation, copywriting, design, list management and production.
Written by
Gary Henricksen
