Do you ever feel like you are spending all of your time raising money for your nonprofit, but you never seem to get ahead? Your development program may have sprung a leak. Many years ago, someone compared nonprofit fundraising to a leaky bucket; the more money you pour in, the more you seem to lose.
You are not alone. Low donor retention is one of the most persistent challenges facing the nonprofit sector. We are only keeping about four out of every ten donors, and the number has been dropping for years.
That’s the overall average retention rate. If you look at first time donors, those new supporters we all want so badly, nonprofits keep less than 20 percent.
Costs Of New Vs. Existing Donors If you think about what it costs you to bring in new donors, retention takes on a critical importance. Every nonprofit and every development model is different, so it is hard to come up with precise figures. However, here’s one number that puts things into perspective; according to Bloomerang, “While the cost of direct mail acquisition may range from $1.00 to $1.25 per dollar raised, once new donors have been identified, a second mailing to that group may cost only $0.20 per dollar raised.” That means you can lose money trying to bring in new donors and watch 80 percent of them leave without making a second donation.
Be In It For The Long Haul Let’s also talk about donor life cycles. Here are two options:
One & Done Donor: He buys a ticket to your gala for $150. The cost of the event is $75 so you net $75. He never gives again, meaning the total value of that donor relationship was $75.
Tried & True Donor: He buys a ticket for $150 and gives a second donation later in the year of $100. The next year he becomes a monthly donor for $25 a month, goes to the gala again and gives $200 at the end of the year. The following year, his company matches his donations, he continues his monthly donation, goes to the gala, and responds to your capital campaign with $500. The value of that relationship over three years is $2600.
Problem? What Problem? Unfortunately, a lot of nonprofits get so used to only chasing new donors that they think it is normal. It’s not. Their development programs can look like a dog chasing its tail. There are a couple of reasons why this happens.
When nonprofits are getting started or are in a growth mode, they need an influx of cash, and they don’t have a lot of existing donors to turn to. Donor acquisition is everything. However, as they grow their pool of donors, many nonprofits don’t make the strategic shift to balance donor acquisition and retention. They over-emphasize new donors and they don’t have the processes in place to steward their existing donors.
We need to accept that one reason we chase new donors is that it’s more fun. Acquiring new donors means meeting new people, having a lot of lunches and coffees, and getting to dress up and go to events. Sure, it gets exhausting, but maybe we are just a little too addicted to the thrill of the hunt.
That’s why nonprofits can look a little like Alice and the Red Queen in Through The Looking Glass, running faster and faster just to stay in one place.
The Communications Piece You will always have a certain level of churn in your donor lists, so you can never stop acquiring donors. The key is to balance your recruitment with retention. That starts with identifying the communications tools and the messaging that will resonate with donors at every step of the process. Email us at email@example.com if you would like to talk about your communications.