Donations are great, but donor retention is better. Nonprofits and fundraisers already know the revenue stability repeat donors provide to their organizations. But there’s a question that far fewer are answering:
Are you tracking, measuring, and reporting your donor retention?
In this edition of our data storytelling series, we’ll look at how donor retention gets calculated and the valuable insights it provides your organization that will help you know what’s working and what can be improved. We’ll also look at its limitations, and the other fundraising metrics you want to align with donor retention to get a fuller picture of what’s happening.
Lastly, we’ll get to the most exciting part – how to turn donor retention into a story you can share with your team, your board, and anyone else who needs to know about the health of your charity or nonprofit.
What Is Donor Retention?
Donor retention refers to the number or the percentage of donors who make a charitable gift in two consecutive periods of time, usually a year.
All donors who gave a gift last year and then give at least once this year would quality as retained donors. This is distinct from lapsed and reactivated donors. In that case, if a donor gives one year but not the next year, they would be considered lapsed. And if they resumed giving the following year, they would now be reactivated.
So, donor retention refers to donors who give at consistent intervals, at least two consecutive times.
How to Calculate the Donor Retention KPI
To calculate donor retention, all you need are two data categories – donor IDs and dates of donation. With the Fundraising Report Card, you can calculate your donor retention over as many years as you have those two data categories, in seconds.
First, take all the donor IDs who gave last year. Then determine how many of those same donors gave again this year. Divide the ones who gave again this year by the total donors last year, and you have your donor retention rate. Use this formula:
Donors who gave two consecutive years/Total donors from previous year = donor retention rate
For example, if 1000 donors gave last year, and 650 of those gave again this year, your donor retention would be 65%.
Now, you could also decide to calculate donor retention over a different time period, such as every six months, or every two years. But the basic process is the same.
What Donor Retention Tells You
Why measure and report your donor retention? It’s one of your most valuable fundraising metrics, and here are four reasons why.
Reveals Follow-Up Effectiveness
What happens when a new donor (or any donor) gives? For some nonprofits, the tragic answer is “absolute silence.” They hear nothing. Not even an automated email giving receipt.
When donors give, they need to hear from you. They should receive the automated receipt for tax purposes, yes. But that’s boring. That’s a chore. They should also receive an automated thank you email, and then ongoing follow-up communications after that such as newsletters, invitations to volunteer, and all the other things you can send over email, text, and direct mail.
If you’re following up effectively, you should see your donor retention rate increase.
With the Fundraising Report Card, you can find out. Start implementing consistent follow-up strategy for new donors, and over the years, you can measure your donor retention to see what happens.
And with the Report Card, you can also track it over five giving levels. You may, for example, see donor retention actually decline in one level. But if that’s because more of those donors have increased their giving enough to be upgraded to the next higher level, you’ll now know your retention rates aren’t just showing more repeat gifts, but larger gifts.
Upload your data to the Fundraising Report Card today
Indicates Donor Inspiration about Your Mission
People give for a variety of reasons, but one of the core ones is that your mission means something to them. With higher donor retention, you can be confident that your mission is connecting with more donors on a deep emotional level, and they are motivated to remain a part of it.
Inspired donors are loyal donors – and you can nurture that inspiration with effective follow-up communications.
Shows How Well Donors Believe They Are Helping
Donors also need to believe their giving is making a real difference. By communicating the impact of their gifts, you are providing confidence and assurance that their gift matters. When donors can see, feel, and hear what their gift is accomplishing – and it’s for something they care about – they will continue to give.
Gratitude Sincerity
Giving money is an unselfish act, and thanking donors remains one of the simplest and most effective ways to maintain a higher donor retention rate. After your donors make a gift, do they get thanked? Do they receive a sincere note of gratitude from your nonprofit?
Thanking donors increases donor retention. So if you’re thanking your donors consistently, especially new but also repeat donors, over time you will acquire more repeat donors and your retention rate will rise.
Limitations of Donor Retention Metric
Every metric has its blind spots. The primary limitation of donor retention is that it says nothing about the size of the gift. And there’s a big difference between two consecutive $10 gifts and two consecutive $5000 gifts.
So, if you only look at donor retention by itself, you don’t really know if your retention efforts are paying off for all donors, or only certain ones.
For example, you might discover that your low dollar donors are being retained far above industry norms, which are actually quite low according to aggregate data from the Fundraising Report Card. And then, you might find that you’re losing too many high dollar and major donors.
This would be a major problem, because your higher dollar donors account for the majority of your revenue, if you’re like most nonprofits. In that situation, you’d have a high overall donor retention rate, but you’d still be losing money.
This is why one of your best tools is to start tracking donor retention at different giving levels.
The Fundraising Report Card breaks annual giving down in to five levels:
- Under $100
- $100 to $250
- $250 to $1000
- $1000 to $5000
- Above $5000
With these, you can now track donor retention and donation amounts at the same time, with no additional effort, and you can create easily understandable graphs and visuals to make it easy for your board and your team to understand.
This is also helpful because if you find retention to be too low at some levels, you can look for ways to focus your efforts or alter your follow-up strategy for donors at that giving level.
And you should be trying to do this already. You don’t follow up with a $1000 donor in the same way as you do with a $10 donor.
How to Turn Donor Retention into Stories
Trying to talk about fundraising metrics with your board or your team can be tough. While some people have a natural affinity for statistics and data, others struggle to see the meaning or full value of it.
Data visualization overcomes this barrier for most. It’s much easier to understand the meaning of a graph than it is a chart filled with numbers, and certainly more than a written report trying to explain it all.
With the Fundraising Report Card, you can create graphs of your donor retention data – for all five giving levels – in seconds, as many times and as frequently as you update your database.
Then, you can more effectively communicate the story of your data.
The Data Story You Can Tell
What might you tell them?
First, you can look at your donor retention data at each giving level over several years. How is it changing over time? Is it fairly constant at all levels? Rising or falling? Is it all over the place year to year?
More importantly, can you correlate any retention trends you observe in the data with strategies you’ve implemented for follow-up, gratitude, inspiration, and the other donor retention motivators we’ve discussed?
For example, imagine being able to share this story with your board:
Three years ago, you ramped up your email communication from occasional one-off emails to one every week. You also created an automated thank you series for new donors and another one for recurring donors. And in the two years since then, your donor retention rates are raising at all levels.
That would be a very strong validation of your increased follow-up efforts. Now, your data has a story.
The story can also be a bad story. If you’re doing no follow-up, and your retention rates are in the tank, and you’ve been trying to implement a follow-up plan but keep getting pushback, the data will tell that story too.
Individual Stories of Donor Retention
You can also get more personal with your data storytelling by reaching out to individual donors who have given repeatedly, and find out why they like to keep giving to your organization.
Plan to do phone calls or emails with a handful of repeat donors each month, and find out what is motivating them to keep giving. This type of insight can help you understand what about your mission connects with actual donors, rather than what you think connects with them.
You can share these stories with your board and team also.
But it all begins with measuring your donor retention rate. You can calculate it yourself, which will take hours, and you’ll have to re-calculate it again every time you want to update it.
Or, you can use the Fundraising Report Card and get it done in seconds – including the creation of all the graphs and visuals you’ll need to tell the story of your donor retention data.
