Your board probably doesn’t know the difference. But you need to. Donor churn is not the same thing as lapsed donors. They are related, but they reveal quite different insights into what’s happening with your nonprofit’s fundraising.
Your goal is to get a firm handle on these terms and be able to calculate, update, and present them at a moment’s notice. Why?
Because if you want data to drive decisions, rather than relying on whims or hairs on the back of your neck, you need to be able to contribute actionable data to conversations about strategic planning, while it’s happening. Not days or weeks later.
So let’s take a look and learn the difference between donor churn and lapsed donors.
What Are Lapsed Donors?
Lapsed donors are donors who gave during the previous year but did not give this year.
That’s the simplest way to understand it. You can also look at lapsed donors month to month if you wanted to examine only your recurring donors. But the primary use of lapsed donors is to keep track of how many donors you appear to be losing each year.
How to Calculate Lapsed Donors
This is fairly straightforward. Look at all the donors from one year. Then, look at the same set of donors next year using their donor IDs. The ones that don’t show up the second year, those are your lapsed donors.
So if you have 1,000 donors one year, and 800 of those same donors give the next year, you have 200 lapsed donors. The lapsed donor rate would be 20%.
Are All Lapsed Donors Gone Forever?
You have many different donor behaviors going on, and the lapsed donor metric kind of crams them all into one box. Here are a few types of lapsed donors with very different stories behind their recent lack of giving:
Occasional donors
Some donors give irregularly. They respond to campaigns, letters, emails, and other fundraising communications now and then, but there’s no deliberate pattern. They might give a few times one year, but then none the next.
When that happens, this person becomes a lapsed donor, even though they might not realize it’s been over a year since they donated.
Occasional donors come from all levels of giving, including major donors.
These types of donors can be reactivated more easily than the other two types discussed next, because they see themselves as a regular supporter of your organization, but they haven’t committed to consistent giving.
Recurring donors
Here, you’re dealing with monthly donors who signed up for automated giving in some form. When this type of donor cancels their giving, you’ll know it the very next month – if you’re paying attention. By the next year, you’ll certainly know it, but by then the donor will be long gone, because a full calendar year of non-giving would have to elapse before they’d technically be a lapsed donor.
Unless you move the goal posts every month and count your lapsed donors as having not given since the current month last year.
For example, suppose a monthly donor stops giving in May 2024. If you count lapsed donors by calendar year, they won’t show up as lapsed until January 2026. The entire year of 2025 would have to take place first. If you count lapsed donors based on whatever is the current month, this donor would show up as lapsed in May 2025.
However you measure it, when a monthly donor cancels their giving, you can be sure something significant has changed in their life. Their finances changed, they moved, they got a new job, their life situation and priorities changed – something shifted to the point where they decided that giving monthly no longer made sense to them.
It’s more difficult to reactivate a lapsed recurring donor because they have moved on and made the decision some time ago.
One-time donors
This type of donor technically counts as a lapsed donor too. Here, this person gave just one time, one year. The next year, since they never gave again, they count as a lapsed donor.
This type of donor is the hardest to re-capture because they never really forged much of a bond with your organization to begin with.
Reactivated Donors = Reactivated Lapsed Donors
When you reach out to lapsed donors and try to motivate them to give again, this is called a donor reactivation campaign. You are specifically targeting people who used to give but stopped for some reason.
The reason we broke down lapsed donors into the three above categories is because, if you can segment your donor database accordingly, the way you reach out to lapsed recurring donors will probably be quite different than how you reach out to occasional or one-time donors.
In terms of fundraising data, you can use the Fundraising Report Card to update your metrics after you run a reactivation campaign. If your campaign won back some previous donors, your reactivated donor data will serve as the counterweight to your lapsed donor data.
In other words, if 200 donors lapsed last year, but after your campaign, 40 of them give again, you now have a net loss of 160 donors from the previous year.
What Is Donor Churn?
Donor churn helps you understand the growth or shrinkage of the number of donors giving to your organization within a specific period of time. This metric gives more context for the growth of your overall organization than just looking at the lapsed donor metric by itself.
When calculating churn, you can include reactivated and newly acquired donors because churn measures the overall movement of donors in and out of your donor pool. Including reactivated donors, who were once inactive but start giving again, and newly acquired donors, who are new supporters, gives a more comprehensive picture of donor engagement.
For example, suppose you had 500 lapsed donors last year. But you also gained 600 new donors. In that case, your donor churn is +100, which means you gained more donors overall.
This matters because you will always lose some donors. The idea is, are you gaining more new ones than you’re losing?
Although, if you are interested in uncovering your organization’s churn RATE, follow this simple formula:
First, determine the time period for which you want to calculate the churn rate. For example, you might want to calculate the churn rate for a month or a year.
Count the number of donors you had at the beginning of the time period. Let’s call this “C1.” Count the number of donors you lost during the time period. Let’s call this “L.” Then, count the number of new donors you acquired or past donors you reactivated during the time period. Let’s call this “C2.”
Calculate the churn rate using this easy formula: Churn rate = (L / (C1 + C2)) x 100
For example, let’s say you had 100 donors at the beginning of the month or year, lost 10 donors during whichever time you chose, and acquired 10 new donors while reactivating 10 lapsed donors too. Using the formula: Churn rate = (10 / (100 + 20)) x 100 = 8.3% This means that during that month, 8.3% of your donors stopped giving donations to your non-profit. So, your churn rate is 8.3%.
Meanwhile, your retention rate is the opposite of your churn rate. While your churn rate measures the rate at which donors stop giving over a specific period of time, your retention rate measures the percentage of donors that continue to support the organization over that same period. In essence, retention rate shows how successful a nonprofit is at keeping donors engaged and giving over time.
Therefore, if your churn rate is 8.3%, then your retention rate is 91.7%.
Donor Churn at Various Giving Levels
But donor churn on its own also doesn’t really give enough information.
Using the previous example, suppose you gained 600 new donors and lost 500 donors. But what if, among those 500 lost, three of them were major donors who gave an average of $50,000 per year. Even though you gained 600 new donors, what if none of them are major donors?
That would mean you have more donors, but you probably lost ground in actual dollars raised. And that leads to another fundraising metric.
Donation Churn vs Donor Churn
This expresses the problem just discussed.
How much money did your lapsed donors give the previous year? And how much did your newly acquired donors give this year? That would be donation churn.
So, using the same example, if the 500 lapsed donors gave $250,000 their last year, that includes the three major donors who gave $50,000 each. If the 600 new donors give a total of $150,000, you’ve lost ground even though you have more donors.
You can have positive donor churn, but negative donation churn. And vice versa. Winning one big new major donor can overcome the lost of many low dollar donors.
The Power of Giving Levels
This is why it’s so helpful to examine all your data broken down by giving level.
Your donor churn rate at the major gift level will have much more in common with your donation churn rate. But a positive or negative low level donor churn rate won’t have as much impact on your overall finances, for most organizations.
With five giving levels, looking at the churn for each one will give you a much clearer picture of what’s happening to cause your overall fundraising to grow, shrink, or remain consistent.
Suppose you lose a major donor, and your overall giving goes down, but you gain a bunch of new donors at the four lower giving levels. That would mean you have a good supply of potential new major donors, because your overall donor base is growing.
The Value of Churn and Lapsed Donor Data
When you look at donor churn and lapsed donors at the five giving levels using the Fundraising Report Card, you’ll have a clear picture of where you’re gaining or losing donors. And, you’ll be able to make wise decisions related to how much you want to invest in stewardship and reactivation.
If, like most, your budgets are limited, you will probably want to invest the most into reactivating and stewarding those donors who made the largest gifts. For them, you should aim to hyper-personalize your outreach through multiple channels.
It’s smart to communicate differently with donors at different giving levels. Using the Fundraising Report Card’s analysis, you can segment your donors by giving level so you are sure to spend your budget judiciously.
Let’s suppose you are tasked with running a reactivation campaign for lapsed donors. The goal should be to generate revenue, not just reactivate donors. So, if your fundraising budget is limited and you don’t have any other information about these people, you should probably spend it primarily on reactivating the donors who gave from $1,000 to $5,000 or more. After the campaign, you’ll know how many reactivated and you’ll surely raise more money than you would have if you were to solely focus on reactivating the donors who previously gave $1 to $999.
Imagine your CEO or board coming to you and asking, “How’d the reactivation campaign affect those numbers you showed me at the last meeting?”
With the Fundraising Report Card, you can upload the reactivated donors, update your donor churn data, and see clearly how that campaign helped your overall fundraising revenue.
And you can do it in seconds, not hours or days if you were doing all this number crunching and data visualization on your own. You’ll have the numbers and graphs to answer that question, and give immediate feedback to anyone – including yourself – on the success or failure of that campaign.
Sound like a great tool? It is!
