Wed, January 09 2013

The great donor exodus – and what to do about it

Katya Andresen's avatar

Author, Robin Hood Marketing

Filed under:   Fundraising essentials •

This is a really important guest post.  If you are in the business of fundraising in any way, it’s recommended reading.  Please also share it, because our sector needs to see this data and act accordingly.  Thanks to the author, Jay Love, for putting this together in such a compelling way.  Jay is the former CEO of eTapestry.  He is currently CEO of Bloomerang and SVP of Avectra while serving on numerous local and national nonprofit boards.  He’s very smart about this topic. 

By Jay Love

Ever since the Urban Institute and the Association of Fundraising Professionals created the Fundraising Effectiveness Project a few years ago, I have been tracking the results religiously.  They provide a near real-time scorecard on what is driving the bulk of charitable giving in our country.  The headline of the results is this: Repeat donors matter most.  But we are terrible at keeping them.  The good news is we could double the fundraising results of most nonprofits by doing a better job keeping our donors.  Just imagine what impact such an increase could have on virtually all charity missions!

What’s wrong

Here’s my team at Bloomerang’s visual analysis of just how badly we’re doing – and why I’m an advocate for doing better. 

bloomerang graphic

What jumps out at you here is the comparison of the commercial sector customer retention average result of 94% versus the charity sector donor retention result of 41%.  That is a drastic difference by any means of comparison. I do not believe the donor retention percentage will ever be the same as those derived from customers paying for a service they use daily, and in most cases where they spent decent sums of money implementing.  However, as the bottom right corner block of information states, there are nonprofits who achieve a rate of 70% or higher.  Every organization should establish a goal for what their donor retention should be.  Unfortunately, many organizations are not aware of their current rate or if they know it do not share it with either their staff or board. 

What to do about it

To fix this problem at your nonprofit, you need to start with your own data.  Track the various retention rates below, comparing those rates with the ones I share here.  As the old adage goes, what is measured is what improves.  Some key retention rates to track are:

1. First Year Donor Retention Rate by Dollars
2. First Year Donor Retention Rate by Number of Donors
3. Repeat Donor Retention Rate by Dollars
4. Repeat Donor Retention Rate by Number of Donors
5. Overall Donor Retention Rate by Dollars
6. Overall Donor Retention Rate by Number of Donors

Coupled with the above, are the added measures of tracking “upgrades” and “downgrades”.  Together these metrics provide solid data to use for establishing individual key objectives and goals.  Next, read the recommendations of Professor Adrian Sargeant.  His website will give you an MBA in Donor Retention principles and practices here

My hope is each of you reading this post garners an insight or a concept that allows you to improve your organization’s retention levels enough to truly double the lifetime value of your donor database. 

  • Comment: (10)   

Comments

Katya, good post. Could Jay please give the source of the 90%+ retention for commercial customers? What verticals does that represent? Financial, CPG, travel?

It seems a bit high.

Cheers

Dennis

Posted by .(JavaScript must be enabled to view this email address)  on  01/09  at  06:05 AM

Hi Dennis.  Yes - Jay had that in this post originally but I edited it out for brevity (my bad).  He said this:
“The research team at Bloomerang added the comparison data taken from corporate 10K filings from a number of large publicly held technology firms.”

Posted by Katya Andresen  on  01/09  at  06:22 AM

Just wondering…Jay mentions “Next, read the recommendations of Professor Adrian Sargeant.  His website will give you an MBA in Donor Retention principles and practices here.” Is he referring to “http://www.studyfundraising.info” or some other website for Sargeant that I have not found yet?

Posted by .(JavaScript must be enabled to view this email address)  on  01/09  at  09:31 AM

Katya,  Excellent KPIs.  I believe the number one thing non-profts can do is follow process excellence/process improvement strategies to improve both operational excellence as well as revenue optimization through better understanding of KPIs like this.  I just published an article on this very subject at EPMChannel.com http://www.epmchannel.com/2012/12/21/actionable-metrics-for-non-profits/

It’s import to measure, experiment and measure again to know if your non-profit is going in the right direction

Posted by Robert  on  01/09  at  10:23 AM

Really provocative post. Although (without denying the relevance of the challenge this post presents):

1. Many first-time donations (particularly small ones) are based on impulse, events (i.e., Haiti earthquake) or social requests (i.e., “Will you donate $25 to my charity ride?”). Those kind of donors are really hard to retain.

2. The Internet makes it WAY easier for folks to make the above types of donations…although, true enough, the internet also makes it WAY easier for charities to follow up and attempt to retain donors.

3. What is the metric for “commercial business retention”?

4. Is it really relevant to compare business retention (assuming that metric includes a lot of retail businesses where “I have to buy food and clothes somewhere and I do it near where I live”) to charity retention (“I may choose to give or not depending on a huge variety of factors unrelated to whatever the charity does to retain my interest”)?

Good provocation, though.

Posted by Ken  on  01/09  at  12:34 PM

As I consider the key metrics above, could you please define retention, whether first year or repeat donor?  Do we consider a donor as having been retained once they give a second gift?  What if they give another gift, but not for 18 months?  2 years?  At what point do I consider a donor lapsed?

If I have a donor who gives about once every 2 years, over several years, do I consider them retained every other year, and lapsed on the “off” years?  Thanks.

Posted by Kit Jenkins  on  01/19  at  12:04 AM

Kit - please go to the link at the end of the post with Adrian Sargeant’s work.  He answers those questions.

Posted by Katya Andresen  on  01/20  at  11:06 AM

Posted this back on 9 Jan, but did not see a reply. Can you help?

Just wondering…Jay mentions “Next, read the recommendations of Professor Adrian Sargeant.  His website will give you an MBA in Donor Retention principles and practices here.” Is he referring to “http://www.studyfundraising.info” or some other website for Sargeant that I have not found yet?

Posted by .(JavaScript must be enabled to view this email address)  on  01/20  at  03:15 PM

Yes, Tink, that is the site to which Jay is referring.  I’ll ask Jay to post more resources!

Posted by Katya Andresen  on  01/20  at  05:05 PM

Yes, the web site is the one you mentioned, http://www.studyfundraising.info I would also suggest any of his books on Donor Loyalty too

Posted by .(JavaScript must be enabled to view this email address)  on  01/20  at  11:43 PM

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