Do You Know if Your #Fundraising is Failing?

You might think it’s a blunt, maybe even a harsh, question. It is.

Do you know if your fundraising is failing?

If your nonprofit organization is typical, I have some bad news for you. You’re fundraising effort is most likely sorely underperforming. That’s according to the newly released 2015 Fundraising Effectiveness Project Report, from the Association of Fundraising Professionals and the Urban Institute.  Here are some of the key findings:

•  For every 100 donors gained in 2014, 103 were lost through attrition, a net loss in donors of three percent!

•  For every $100 gained in 2014, $95 was lost through gift attrition. In other words, organizations are running hard to remain essentially in place.

•  The median donor retention rate in 2014 was just 43 percent. There was no improvement over 2013’s rate despite all of the publicity and advice about the issue.

•  The median dollar retention rate increased slightly from 46 percent to 47 percent in 2014. However, the fact that the retention rate is not well above 50 percent is pathetic. Sadly, that’s been the case for nearly the past decade.

The Scream by Mark Tighe via FlickrRoger Craver, one of the Editors at The Agitator blog and author of Retention Fundraising: The New Art and Science of Keeping Your Donors for Life summed up the results perfectly with just one word: “depressing.”

Even if your charity is performing on par with the median nonprofit organization, make no mistake about it, it is failing. Unfortunately, many organizations do not even know whether or not they are performing well. They usually don’t look at or understand their numbers. Fortunately, the solution is simple. Here’s a story I told The Agitator:

I’ve been involved with the nonprofit sector for decades. Over the many years, the speakers at the front of the room have preached about the importance of donor retention. On occasion, I’ve even been the one doing the preaching. Sadly, the message never seems to sink in.

After one speaking engagement, someone came up to me and said, ‘Well, I guess everything you just said in there was just common sense.’ I responded, ‘Yes, it was. And, when it becomes common practice, I’ll stop talking about it.’”

The solution to the donor retention problem is common sense. But, you actually need to do what it takes. As a sector, we need to turn common sense into common practice: Understand your numbers. Set goals. Build stronger relationships.

To improve your fundraising efforts, you can start by checking out the following posts, in no particular order:

Also, pick up the following books:

Have you tried to address your organization’s donor retention challenge? If so, let me know what has or hasn’t worked. We can all learn from each other.

That’s what Michael Rosen says… What do you say?

14 Comments to “Do You Know if Your #Fundraising is Failing?”

  1. I say I could not agree more. If you’re not making donor retention your #1 priority, you’re working like a hamster on a wheel — feverishly running, running, running; yet never making progress. The data is clear. It’s been clear for a long while now. Take the Nike pledge: JUST DO IT!

    • Claire, thank you for commenting. I know from reading your blog posts that you’re a big believer in the need for nonprofits to boost their donor retention rates. Unfortunately, despite your efforts, my efforts, Roger Craver’s efforts, and the efforts of many others, the numbers remain terrible. I wonder why that is. Why don’t organizations JUST DO IT?

      • I’m not sure. But I think it may be because the “powers that be” don’t reward staff for donor retention the way they reward them for bringing in new gifts. Folks would rather hear, “We gained 100 new donors this year” (never mind the 104 donors we lost) than, “We retained 10% more donors this year.” I liken it to shopping for new clothes. We enjoy the hunt, and the newness of our “finds” and stuff the old, already acquired stuff (donors; clothing) deep into the corners (of databases; closets) where we neglect them terribly. We need to rediscover the art of getting to know folks better; then discovering how much added joy that can bring.

      • Claire, thank you for sharing your insights. I think you’re really on to something with the clothing metaphor. Now, I wonder how can we overcome this deeply rooted orientation?

      • I think by talking about it. A lot. By making it one of the memes du jour. I’m happy to talk about it any time. It’s one of the topics about which I’m most passionate. I just hate to see nonprofits wasting their limited resources running on a treadmill. We’re all about the work ethic in this country. We need to shift to a “work smart” ethic.

  2. While I totally agree about the importance of retention, and have been speaking about it and focused on it with clients for years, I would add one other factor. I think it is vitally important to separate out the renewal rate of ongoing donors from new ones. If you are doing a big acquisition effort, you want to know if it worked, for example. Another way to delve into your data is to look at acquisition efforts of two or more years ago, and see if the newly acquired from one approach have performed differently than those from another approach. It can really help you hone into successful strategies, and relinquish those that are less productive.

    • Colleen, thank you for sharing your thoughts. I agree with you. Looking at single-year retention rates is of limited value. We need to also look at multi-year retention rates. Furthermore, we need to look at the Lifetime Value of the donor. That means we also need to understand the gift upgrade/downgrade rates as well. Organizations that have significant donor-acquisition efforts but who do not track these numbers are simply flying blind.

  3. Michael, great post as always. I don’t find the report depressing, it is a direct insight into the quality of the questions we’re asking. It has been just over ten years of tracking donor single year renewal rates and surprise….little if any progress. I’m sure you, like myself, have read numerous posts about thank you’s, engaging donors, doing surveys, or insert the latest idea. None of these will impact this epidemic because they ignore the real problem. Peter Drucker stated years ago, “Every business model reaches a point of diminishing returns.” We are seeing this before our eyes. The way we have gone about this work for the last 4-5 decades is no longer providing the kind of outcomes critical to fueling our missions. This is a great time for the innovative and brave. Turning to old research and old ideas will continue to produce the kind of results in the latest report you highlighted. Perhaps the title may have read “Is the way you are thinking about fundraising failing?” Thanks again for a great piece!

    • Jay, thank you for sharing your thoughts. Your insights are always appreciated. The single year AND multi-year donor retention rates are terrible and have been terrible for years. As you point out, much has been written and talked about regarding what the sector can do to enhance those retention rates. Unfortunately, it’s not having a sector-wide impact. This is due to one of two possible reasons: 1) the ideas are ineffective, or 2) not enough organizations are using these techniques to address the problem. Given the anecdotal evidence I’ve seen, I tend to believe the issue is more with the latter than the former.

      Part of the reason why more charities are not addressing the retention issue is that they don’t look at or understand the data. Most fundraising professionals I speak with can’t even accurately tell me how many donors and lapsed donors they have! They certainly don’t know what their single or multi-year donor retention rates are or what their donor upgrade/downgrade rates are. Whether the organization is large or small doesn’t seem to matter. Ignorance reins throughout the nonprofit sector.

      Given what I’ve just stated, I’m not ready to declare the retention crusade a flop. I think we need to see more charities dealing with the issue before we can determine whether or not the stewardship and engagement techniques being discussed are worthwhile.

      As for reaching “the point of diminishing return,” I’m not convinced that we’re there yet. For decades, philanthropy has remained at a relatively constant two percent of Gross Domestic Product. Rather than having reached a point of diminishing return, the nonprofit sector seems to have long ago reached a plateau.

      Over those decades, there have been enormous changes in the way the sector has thought about fundraising. We have significantly more charities. We have more fundraising professionals. Fundraising professionals are better educated. More fundraising books and training programs are available than ever before. More research has been conducted. Fundraising has been professionalized. Yet, despite all of these massive changes, philanthropy is still stuck at two percent of GDP!

      If we’re going to dramatically increase philanthropy relative to GDP, we not only need to think about fundraising differently, we need to think about it effectively. As you’ve stated, we do indeed need “innovative and brave thinking.” Unfortunately, the nonprofit world tends to be more risk-adverse rather than brave. As a result, innovation happens very slowly.

      On the micro-level, I have found that more personal touches, transparency, engagement, and asking (particularly for planned gifts) can have a massive positive impact for individual nonprofit organizations. Also, an organizational commitment to a culture of philanthropy, a donor-centered orientation, and sound ethical decision making also makes a difference.

      You’ve raised an interesting, provocative, and vital point: “Is the way you are thinking about fundraising failing?” For most organizations and the sector in general, the answer is yes. So, Jay, what’s the solution?

  4. Michael, I agree donor retention is a key performance indicator of a fundraising/development program. I wonder, however, how trends in donor attrition compare to customer attrition in the service, entertainment, and similar sectors.

    I have no research to support this (but I’m going to start digging), but I suspect that shrinking donor attrition rates have as much to do with the proliferation of nonprofits, the ability of donors to do better research to find organizations that more closely meet their interests, the constant flow of online appeals and crowdfunding mini-campaigns that draw donor attention toward the current cause of their friends, and a cultural shift from previous generations who had a limited number of causes or organizations to support.

    • Kevin, thank you for sharing an interesting theory. Let me know if your exploration reveals any important information. If it does, I hope you’ll consider doing a guest post. If your theory is true, it underscores how essential it is for fundraising professionals to act proactively to retain their donors. New challenges require new actions.

  5. Michael,

    I, too, have long been aware on fundraising being roughly two percent of GDP for decades. Your comment has had me thinking a little bit about diminishing returns. Since we are both data guys, I knew I wanted to research a bit before responding. According to the National Center for Charitable Statistics, there has been a 74 percent growth in the number of nonprofits filing 990s just in the last 20 years. If this is true, then the simple math alone means each year every nonprofit is losing a little of their percentage of the entire two percent because of the increased number of organizations. This silent erosion is at the heart of Peter Drucker’s position that “every business model reaches a point of diminishing returns.” I also think this fact has been overlooked by many. This data is being worked into a post I am looking forward to sharing with you and your readers in the near future.

    Happy Monday!

    • Jay, thank you for sharing your further insights. Yes, while the philanthropic pie has remained at roughly two percent of GDP, the number of nonprofit organizations sharing that pie has grown significantly. One of the things that has long troubled me is: Since the number of nonprofits has grown significantly, and since fundraising has become professionalized, why hasn’t philanthropy increased dramatically past the two percent share of GDP? While many charities have been able to grow, others have not. As a sector, nonprofit organizations are treading water, at best, or have reached the point of diminishing return. In either case, doing more of the same is not going to affect positive change. This is a critically important issue for the sector that gets too little attention. I look forward to your post.

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