Nonprofit organizations must do more than attract donors. They must focus on donor retention. Retaining donors lowers donor acquisition costs, increases donor lifetime value, promotes more reliable support and leads to larger donations.
Organizations must focus on donor retention strategies to see optimal returns on their fundraising efforts. A combination of personalized engagement, communication, donor programs, events, recognition and appreciation support nonprofit donor retention. The same also holds true for event sponsors when you host fundraising events. With the right approach, you’ll spend less time marketing and more time earning.
Table of Contents
- Why Donor Retention Matters for Nonprofits
- Top Strategies for Improving Donor Retention
- Tracking Nonprofit Donor Retention Rates: Metrics and Tools
- Make Donor Retention Easier with 100+ Free Tools for Nonprofits!
- FAQs
Why Donor Retention Matters for Nonprofits
Indiana University research reveals a 10-percent increase in donor retention can boost revenue by up to 200 percent. A Slideshare report reveals it can cost 6-7 times as much to acquire new donors than retain existing donors. A focus on donor retention means less spending and more profitability.
Consider this: according to RAIN Group Sales Training, it takes an average of eight touchpoints to get a sale. Fundraising requires a similar process:
- You must continue sending marketing materials to individuals before they donate, a process that requires considerable time and resources.
- Then you must continue to devote time and effort to the onboarding process – welcoming them, thanking them and providing information so they become committed to your cause.
But existing donors already have the information they need. Fundraising can be as simple as sending an email.
Donor retention also provides more lifetime value. Once you form a donor relationship, they will likely continue making donations each year. Often, they will outdo themselves by giving a little more each year to help your organization thrive.
Falling Donor Retention Rates
Despite worthy causes and an increasingly socially conscious environment, the Fundraising Effectiveness Project Q1 2024 report shows that donor retention rates are down 3% year over year. The report also shows that 23% of donors churn within six months of their first donation, meaning more than 70% of donors only give to organizations once.
The report shows retention rates for new donors were down to 7.2 percent, a 7.6 percent year-over-year drop. Success rates in recapturing lapsed donors dropped 16.8 percent. The repeat donor retention rate decreased by 3.9 percent.
These numbers prove that it’s more important than ever to implement the right donor retention strategies and beat the odds.
Top Strategies for Improving Donor Retention
So how do you improve donor retention? Here are some donor retention strategies to include in your marketing campaign.
Segment Your Donors for Personalized Engagement
Segmentation is a crucial donor retention strategy. It requires segmenting your audience into groups to ensure you send personalized, targeted material.
Many traditional companies segment according to demographics such as age, location, profession, income, ethnicity, etc. They customize messaging to ensure it is relatable to the group they’re targeting. This strategy forges deeper relationships and prevents consumers from feeling like “just another customer.”
Nonprofits may segment by demographics, but they should also consider factors like:
- Donation frequency
- Event participation
- Lapsed donors
- Donation size
- Donation abandoners
- Volunteers
This type of segmentation helps organizations identify where donors are in the funnel so they can motivate them to take suggested actions.
Enhance Donor Communication
Many donors give because they want to feel like they are a part of something. You can enhance this connection through consistent and meaningful communication.
Reach out through event emails and social media. Phone calls and snail mail provide a more personal touch and are strong methods for connecting with donors.
Let donors know how you used the funds, the current goals your organization is working toward and the struggles you are facing. Invite them to upcoming events and meetings and when they do attend, use post-event surveys to gather feedback on how they felt about the event. Make them feel like a vital part of your community.
Leverage Recurring Giving Programs
Recurring giving programs are a great way to keep donations coming. Here’s how they work:
- When donors donate, they get an option to make monthly donations or choose another donation frequency. They can also choose their preferred payment method.
- The system continues withdrawing donations from their bank accounts, so nonprofits earn passive income.
- Donors receive automated receipts after every donation that they can use for tax deduction purposes.
A Vanco study of 25,000 nonprofits found that recurring givers donate two times as much as one-time givers. These statistics make recurring giving programs a worthwhile investment.
Check out Vanco’s Recurring Donation platform to learn how to boost your fundraising efforts.
Host Engaging Events and Community Building Initiatives
Donors enjoy being part of a community. What better way to encourage this connection than through events and community-building initiatives? In addition to making donors feel like part of something, these events foster a connection between your organization and your donors, so they are more dedicated to the cause.
Several online and offline event formats are ideal for improving nonprofit donor retention rates. They run the gamut from fun community affairs to formal galas, such as:
- Bake sales: Bake sales are a great way to make money for a minimal investment. It’s likely someone on your team knows how to bake, even if it's making brownies from a package. Set up a table with your goods in a community space and get to work.
- Concerts: A concert featuring local talent is an affordable choice. Many of these performers will play for free knowing they will gain exposure and support a worthy cause. If you have more of a budget, consider hiring a national band.
- Galas: Galas are formal events that typically require black-tie attire. People pay admission to attend and a meal is usually served. You can increase gala earnings by hosting silent auctions and raffles and including other fundraising efforts in your affair.
- 5K and other runs: Marathons and walkathons are popular fundraising events. People pay to register and run for a cause. It brings in donations and raises awareness.
- Trivia nights: Trivia is a trending activity many people enjoy. Host a trivia night at a local brewery or use an online format. Charge participants to attend and reward the winning team.
Implement Donor Recognition and Appreciation Programs
Nonprofit organizations must thank donors for their donations, but an automated email may not be enough to boost donor retention rates. Here are some more effective strategies:
- Thank-you notes: Thank-you notes add a personal touch, especially when they are handwritten.
- Social media: After completing a campaign, post on social media to thank your donors. Tag them individually or make a post for each.
- Swag items: Gift donors with swag items like keychains, T-shirts and souvenirs.
- VIP seating at events: You may charge more for VIP seating at your events or reward reliable donors with special seating.
- Plaques: Award plaques to donors who make large contributions. Hang them in your facility or give donors plaques they can keep.
- Dedications: Dedications are major gifts. If donors give your organization a big donation, consider honoring them by naming a section of your building after them or adding their name to a bench or garden outside your building.
Award donors depending on how much they give. For example, award small donations with swag items. Award larger donations with plaques and dedications. The sliding scale of reward tiers will incentivize donors to give more.
Tracking Nonprofit Donor Retention Rates: Metrics and Tools
Nonprofits should track donor retention rates to identify areas of improvement and build stronger relationships. A high retention rate indicates donor satisfaction. A low retention rate means you may have issues with your communication and engagement strategies. There are several key metrics to consider.
Donor Retention Rate
The donor retention rate indicates how many donors are still actively donating to your organization. Bloomerang offers this formula for calculating donor retention rate:
Divide the number of last-year’s donors by the previous-year’s donors and multiply by 100
So, if you had 500 donors in 2022 and 200 of those donors renewed their donations in 2023, your formula would be:
200 / (500x100)
Your retention rate would be 40%.
Average Gift Size
To determine your average gift size, divide the revenue for the year (or month) by the total number of gifts during that period. You can also find a median donation amount by sorting the donation amounts and identifying the middle point.
You may also determine a major donor retention rate. To do this, divide the number of recurring major donors by the total number of major donors and multiply by 100 to get a percentage.
Lifetime Value
Lifetime value (LTV) is another critical metric. It goes beyond average gift size, revealing how long a donor stays with your organization and their average gift size. It gives you an idea of how much you can expect from a donor before they stop giving. You can use this calculation to determine how much you should budget for donor retention and acquisition.
LTV is not difficult to calculate, but it requires digging deep into your database to find the information you need. Here’s what the formula looks like:
LTV = Lifespan x Average donation amount x (Total # of donations/Total # of donors)
Measure LTV over time to determine which direction your organization is headed.
Actionable Insights
The data you gain from these numbers allows you to make actionable insights. You can:
- Determine how much you can spend on donor retention and acquisition based on LTV.
- Plot trajectories on a graph to learn if your organization is gaining or losing traction and identify areas of success and improvement.
- Break down statistics to determine which donors are giving more, giving less or staying at the same level.
Once you have this information, you can work out a strategy to target donors accordingly. For example, ensure you reward donors who increase their donations. Consider sending surveys to stagnant donors to determine their preferences and determine if they would give more with special attention. Find ways to increase engagement with donors who are giving less.
Using a CRM to Track Metrics
Nonprofits may use various tools to track metrics, but few are more effective than customer relationship management tools (CRMs).
CRMs store contact details, donation history and communication preferences in one location so you can better understand donor behavior. You can run reports on contributions, event participation and retention and use automated processes like messaging, email marketing and social media posting to make your life easier.
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FAQs
How does donor segmentation help in retention efforts?
Donor segmentation involves segmenting your audience so you can create more personalized marketing materials. They help build deeper relationships with your donor base and make them feel like part of their community. Donors will be more likely to continue giving to your organization.
What is a good donor retention rate for nonprofits?
The Fundraising Report Card shows the average donor retention rate is around 35%. Most nonprofit organizations agree a good retention rate is between 35% and 45%.
How can recurring donations impact donor retention?
A recurring donation system allows donors to sign up for automatic deductions from their accounts that are transferred to the nonprofit. Donors don’t have to think about making regular donations. The system charges them automatically, helping them retain support without the effort.
What CRM tools help track donor retention metrics?
Several CRM tools track donor retention metrics and provide other features that make them ideal for nonprofit organizations. Recommended systems include:
- Bloomerang: Tracks retention and monitors other metrics that support nonprofit progress
- Little Green Light: Features a donor database offering donor profiles, customizable reports and donor retention tracking
- Keela: Tracks retention rates for existing donors and finds new donors
- Virtuous: Tracks donor retention and helps nonprofits create personalized messaging that builds deeper connections with an intuitive interface and automated features that make it a user-friendly choice
How does Vanco support donor retention efforts?
Vanco supports donor retention efforts in several ways:
- Recurring giving options: Vanco's recurring donation feature allows donors to set up automatic, ongoing contributions. This reduces the chance of donors lapsing by ensuring consistent engagement without requiring them to manually donate each time. This stable revenue stream also fosters a sense of commitment and partnership with the cause. https://www.vancopayments.com/non-profit/recurring-donations-nonprofit
- Personalized communication tools: Vanco provides email outreach capabilities that allow churches and nonprofits to send personalized updates, impact reports and thank-you messages to donors. This regular and meaningful communication keeps donors connected and informed about how their contributions are making a difference, enhancing their sense of involvement
- Data-driven insights: Vanco’s analytics tools help organizations monitor donor engagement, identify trends and track giving habits. This allows nonprofits to tailor their outreach and follow-up strategies, ensuring they are contacting donors at the right time and with relevant information, which is key for retention
- Convenient and accessible giving options: By offering multiple donation methods – online, mobile app, text-to-give and in-person – Vanco makes the giving experience convenient and accessible. This ease of use encourages repeat donations, as donors can choose their preferred method without barriers
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