“Seven percent? It has to be more than seven percent. Are you sure that’s right?”
I couldn’t help but grimace. “It seems to be true,” I mustered.
If you’re an avid reader of the Fundraising Report Card® blog you know by now that I spend a lot of my time partnering hand-in-hand with development staff to analyze, review and parse through their organization’s fundraising metrics. That’s one of, if not the most, rewarding experiences I have day in and day out.
Every organization has its quirks and inevitably, every review session has new twists and turns. Yet, over the past year or so, a few common themes have stood out. One of which I find so profoundly powerful that I think it’s worth sharing here today.
“Well, we have been doing a lot of peer-to-peer fundraising over the past year or two. Maybe that could be it,” the development director mentioned.
“That could be why that first-time donor retention rate is so low,” I went along. “On the flip side though, you deserve some kudos. Your repeat donor retention rate is 52 percent. That’s magnitudes better than your first-time rate, and is worth diving deeper into.”
This organization (as with so many others) fit into the pattern I had been noticing. Quickly I navigated to their acquisition dashboard.
“Did you know that your average first-time donation amount is $72.71?” I asked.
“No, that’s great! I didn’t realize it was that high,” the director said.
I clicked on the retention dashboard and said, “Better yet, did you know that your average retained donation amount is $181? When you retain a donor, they give on average $181.42”
“Oh wow, that’s incredible. I had no clue it was that high she said.”
I paused, and so did the development director.
You could sense it. We were moments away from acknowledging and beginning to cross the chasm that many development offices struggle to cross — focusing on the second donation .
Hundreds of review sessions similar to the one above have convinced me that the “acquire or you’ll expire” mindset is alive and well. Development offices across the world focus a lot of their attention on donor acquisition. Although every organization I’ve had the pleasure of working with is different (different sector, size, budget, resources, etc,) there has been one constant in all of my work — first-time donor retention rate is always lower than retained donor retention (the rate at which last year’s retained donors are retained again in this year).
Sure, that may seem obvious to you, but after reviewing hundreds of Fundraising Report Cards® it has become all the more clear to me. You may be muttering to yourself, “Of course, newly acquired donors will be retained at a lesser rate than already retained donors. What is this guy talking about?” And you would be right, a retained donor from last year is more likely to be retained again this year — they’ve already been retained, why wouldn’t they simply do it again?
A first time donor on the other hand could be “feeling out” your organization. There are a variety of logical reasons why they would be retained at a lesser rate than some of their other peers.
Yes, this pattern may seem obvious, but its implications are many. This rationale is where our chasm begins to develop. For many years (decades) our sector has been consumed with the need to acquire new donors. However, with that mindset we brush aside the fact that first-time donor retention rates are lower than repeat donor retention rates.
Of course those two rates will be different. We agree that first-time donor retention rate will most certainly always be lower than repeat donor retention rate, but do they need to be so wildly different? So far apart? Seven percent versus 52?
Part of our chasm has developed as a result of our “numbness.” Most organizations don’t measure first and repeat donor retention rates, and those that do brush the low first-time donor retention rates aside, “They’re new, they’re just feeling us out.”
Another pattern I’ve noticed, that can also be confirmed with logic and intuition, is that first-time donors make smaller donations than retained donors. If you were to run your organization’s data through the Fundraising Report Card® you would most likely see the same thing. Retained donors make larger contributions that first-time donors, plain and simple.
What’s fascinating is that when you combine the fact that…
- First time donor retention rates are lower than retained donor retention rates
- Average donation amounts are higher among retained donors than they are among first-time donors
…you begin to wonder why our sector has such a fascination with donor acquisition.
Crossing the chasm
In order to breakthrough the “acquire or we’ll expire” mindset you need a healthy dose of reality. One of, if not the most, powerful strategies a nonprofit can employ is sitting right in front of them: get donors to make a second gift.
Our industry is fixated on acquisition (don’t worry, this isn’t a nonprofit only thing, for-profits struggle with it too). Just imagine for a moment, if your organization can find a way to get a second donation from even 10% more of your first-time donors. You’d be setting yourself up for unbelievable success!
You’ll of course want to measure your own metrics (first-time donor retention rate, retained donor retention rate, first-time donor average donation amount and retained donor donation amount), but remember that once a donor makes a second donation they are more likely to be retained again in the following year, and they are also more likely to make larger contributions . It’s not just me saying that. Look at your metrics, it’s your data telling you.
To cross the chasm you’ll need to switch the development mindset away from donor acquisition and towards something equally as straightforward, getting a second donation. Goal setting is a powerful tool in this instance. Create monthly goals for “second donations,” or staff prizes (or even bonuses) that reward moving first-time donors into the repeat/retained segment. If goals exist that explicitly reward getting the second donation, you’ll be well on your way to crossing the chasm, and better yet, you’ll boost retention rates and average donation amounts across the board.
Focus on the second gift.
Applying this at your shop
So how do you cross this chasm? How do you shift the mindset internally?
Start with your metrics. This blog post is great (okay, I know I wrote it, but hopefully you agree with me) but it isn’t going to move the needle at your organization.Your metrics will move the needle though. Use Fundraising Report Card® to calculate your retention rates, and first-time and retained average donation amounts. Then take that to your next staff meeting.
Data is unbiased and not opinionated. Use that to your advantage. Do your best to explain to your colleagues the importance of receiving a second donation from your newly acquired donors and then hopefully, with the data as supporting evidence it will be easier to persuade your team and leadership.
And, hopefully that will be the inspiration your team needs to start changing their mindset and raising more money instead of simply acquiring new donors. Preaching “we need to retain more donors” is one thing, striving to get more second donations is another. I recommend pursuing the latter.
4 thoughts on “Want Fundraising Success? Adopt This Mindset.”
Soooo true and another great post, Zach! We recently put out our New Donor Timeline to help nonprofits create their systems for securing the second gift. Free, no optin required: http://www.pamelagrow.com/9592/systems-place-new-donors/
Zach, you are absolutely right! We should take a lesson from Google. I had a long conversation with my niece who has worked for Google for 2 years in the e-commerce advertising division. Her sales team services national “attained customers” . These clients are assigned to her team after their initial purchase of advertising that was brought about by a team designed to bring in new business.
only. The goal and ultimate success of her team is to increase the percentage of their clients advertising budget with Google. Much research and client interaction take place throughout the whole process. The point is, Google recognizes the best way to increase business from a client is to have a plan of action for them, to align there success with yours. A successful team knows more about the clients product, budget, goals, ROI and challenges then the clients employees. A non-profit organization’s budget is much different than Google or any corporation but if for purposes of this discussion we look at the two teams as a mindset/process not as additional staffing, we can learn that success is in the approach & management of the client. If we move first time donors to the “second team” where we get to really know them through research, communication, and an understanding of their hot button issues we can work to increase a higher % of their charitable budget to our organization. Our approach should be to develop annual goals by establishing individual donor goals of increased percentages of their previous years giving and a greater percentage of their annual charitable budget.