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Retention
WHAT IS RETENTION?
Retention is the number of ($) donations or (#) donors from last year who gave again this year to your organization. First, retention refers to a certain point in the donor lifecycle and it can come at different points for different organizations: it could be monthly, quarterly, or annually. In the Fundraising Report Card we calculate retention annually (year over year). Second, there are two different ways to calculate retention: 1. Donor Retention Rate 2. Donation Retention Rate
WHAT IS IT FOR?
- Monitor retention strategy effectiveness
- Set realistic goals for retention rate across giving segments
- Compare donation and donor retention rates to find patterns in giving behavior
HOW IS IT CALCULATED?
We find all the donors (and their donations) who left a gift in a previous year and gave again in this year.
For example, a donor who left a gift to your organization last year and left another gift in 2012 would appear in the 2012 section of your retention report. This donor could potentially be in the 2013 section of your report if they left another donation in 2013.
WHAT IS DONOR RETENTION RATE?
Simply put, donor retention rate is the number of donors you manage to keep with respect to the number you had at the start of your period. This does not count new donors. It is basically the opposite of donor churn. It will included upgraded and downgraded donors. To calculate donor retention rate we take all retained donors in a year and divide that by all donors from that year. For specific giving segment breakdowns we simply take all retained donors from one year to the next and determine which segment they currently belong in. This is how upgraded and downgraded donor behavior can be found in retention rates. For example, a donor could be counted in the $1,000-$5,000 segment in 2015 and then counted in the retained $5,000+ segment in 2016. This donor would be part of the calculation for 2016, $5,000+ retention rate because they are now a $5,000+ donor. Retained Donors ÷ All Donors = Donor Retention Rate
WHAT IS DONATION RETENTION RATE?
Donation Retention Rate is basically revenue renewal values – the dollars that renew – and is generally measured on an annual and/or cohort basis. In the Fundraising Report Card we calculate donation retention rate annually, and as of right now provide no way to do cohort analysis. The important point here is that Donation Retention Rate focuses only on the money, the actual revenue you retain, rather than donors. So if your existing donors start giving more, through upgrades, your Donation Retention Rate might grow even if you’ve lost some donors. We break this data down by giving segment as well, which can become a little overwhelming. Retained Donations ÷ All Donations = Donation Retention Rate
HOW TO INTERPRET RETENTION RATE?
If you are consistently losing donors then at some point you will start losing donation revenue, no matter how many times your existing donors upgrade. On the flip side, you might see a drop in Donation Retention Rate but a rise in Donor Retention Rate. This would happen if your existing donors start downgrading to lower gifts. For example, if a donor changes from a $100 giving segment in one year to a $50 giving segment in the next year, you might have still retained that donor, but you lost 50% of the revenue generated by the donor. Now if other donors start doing this too, you might see a big hit in your Donation Retention Rate. Let’s say your Donor Retention Rate is 90%. If half of your donors drop from $100 to $50, your Donation Retention Rate will now be half the donors at the original value, 45%, and half at half the value, 22.5%. So in total, your Donation Retention Rate is now 67.5%. So which is a better metric? Neither. They need to be used hand-in-hand to get a complete picture of what is happening with your organization.
