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What are the Obstacles to Improving Donor-Retention Rates?

I’m disgusted and frustrated. You should be, too.

Once again, the already horrible existing-donor and new-donor retention rates in the USA have further declined, according to the 2016 Donor Retention Report issued recently as part of the Association of Fundraising Professionals and Urban Institute Fundraising Effective Project.

Among new donors, the report says:

An alarming finding in this research is that the New Donor Retention rate has been steadily declining since 2008, averaging a reduction of -3.4% year over year.”

The new-donor retention rate in 2008 was a terrible 29.35 percent. By 2015, that dropped to an even more pitiful 22.93 percent!

red-alert-by-bash-linx-via-flickr

Red Alert time for the nonprofit sector!

Among existing donors, the retention rate has dropped by an average of 1.68 percent since 2008. In 2008, the existing-donor retention rate was 67.88 percent compared to just 60.23 percent in 2015.

I’m puzzled. Since 2008, there have been books written about how to effectively retain more donors. There have also been seminars, workshops, webinars, articles, and blog posts offering superb advice on the subject. Yet, despite the wealth of available information, the numbers are steadily declining.

In the past, when I’ve been confronted by poor retention data, I’ve offered helpful tips. You can search my site for “donor retention.” However, for now, I’m too fed up to offer more tips here. I don’t even believe you need more information to retain more donors. Something else is going on, and I want to understand it. I hope you’ll help me.

It’s your turn now. Please tell me, as a comment below or via email:

  • What major obstacles do you face at your nonprofit organization when it comes to increasing donor retention?
  • While it would be bad enough if donor retention rates simply did not improve and merely remained in place, what is driving the numbers steadily downward?
  • Do you know the retention numbers for your organization? If not, why not?
  • What would it take to improve your organization’s retention rates, and why aren’t you doing it?

Individual charities are losing massive amounts of support because of feeble donor-retention efforts. The report mentions that increasing an organization’s donor-retention rate by just one-percentage point can have a significant impact in just one year. Organizations of $500,000 to $1 million in size would see a single-year gain of $11,759. Organizations over $5 million in size would see a single-year gain of $186,873. These numbers don’t even reflect increases to the lifetime value of donors nor do they reflect the long-term impact that the increased retention rates can have on major gift and planned gift fundraising.

Let’s get serious about donor retention. Let’s get a conversation started. What’s going on!?!

If your organization is ready to get serious about donor retention, you can contact me directly.

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

Posted on February 1, 2017 at 9:20 pm in Current Events, donor relations, Fundraising, Stewardship   |  RSS feed |   Reply   |   Trackback URL

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19 Responses to “What are the Obstacles to Improving Donor-Retention Rates?”

    
  1. Janet (Jan) Aldrich Jacobs, CFRE, CAP
    February 2, 2017 at 6:45 pm

    Michael, I agree that declining donor retention rates is one of the greatest challenges facing many nonprofits. It is very difficult to grow, even with successful fundraising tactics in place, when retention is so low. Challenges I have observed include: (1) Getting donor retention data in the first place. Our very well known, commonly used, supposedly leading-edge fundraising system–and the way we follow accounting rules rather than enter gift information in a donor-centered fashion–makes it very complex to determine retention rates (i.e. it requires painstaking de-duplication of thousands of records that must be done by hand). We did not know our retention rates when I came here 5 years ago and it took, if I recall, at least 18 months before we finally had baseline data. We do track it now annually and on several donor gift levels. Generally, it isn’t pretty. Overall individual retention hovers at 35%. We have seen 5%-8% improvement over the past few years in the retention of donors giving $500 and more (67.8% for $1,000+ donors)–the level at which our stewardship program begins, which leads me to (2) CEOs and peer colleagues do not understand the value of stewardship programs. Because it is very difficult, if not impossible, to draw a direct correlation between stewardship efforts and increased retention, when it comes to deciding where resources should be spent, stewardship efforts are in the crosshairs for elimination. This is true even though the fundraising team knows better, says better, and believes it can point at the chart showing improved retention as proof. (3) In fact, it’s hard to really know what stewardship efforts are most effective. Was it the thank-you call or the personal visit? The personalized letter or the modest thank-you gift? And the answer can vary from donor to donor. Some love receiving the notecards designed by the children we serve, while others may see it as a waste of their funds. The only way to know, of course, is to have direct communication from your donors, which may not happen where that two-way communication street was not established from the get-go. And, even then, one must have the ability to personalize the donor’s desired stewardship. That takes significant resources, adds to the already overly complex system noted in (1) above, and which most nonprofits don’t have because they rarely feel they can afford to hire development positions that don’t directly produce revenue. The pressure is always on to raise more money; there lacks understanding that there IS money in retention (though business people on the board do get it) and improved retention is essential to the organization’s sustainability. Thus, the Catch 22.

    It does also seem that people today are more fickle in their giving. Loyal donors, like we saw among The Greatest Generation, are hard to come by these days.

    Reply
    • Michael J. Rosen
      February 2, 2017 at 8:32 pm

      Jan, thank you for your insights. I suspected that the issues you identified might be in play at many organizations.

      To my readers, I just want to add that I know Jan’s email may strike you as a bit lengthy. However, I hope you have taken the time to read it for three reasons. Jan is smart and generously shares her wisdom here and elsewhere. It’s one of the reasons I quoted her in my book, Donor-Centered Planned Gift Marketing. Second, Jan provides some valuable insights. Third, I’d like to hear if you’ve had similar or different experiences.

      Reply
  2. Gregory Warner
    February 3, 2017 at 9:16 am

    You can see your organization’s donor retention rate in about 3 seconds using the Fundraising Report Card. It’s free. Check it out here: http://www.fundraisingreportcard.com . In the interest of full disclosure: I invented the Fundraising Report Card.

    Reply
    • Michael J. Rosen
      February 3, 2017 at 11:33 pm

      Greg, thank you for sharing the link to the Fundraising Report Card. As my readers know, I try to keep my blog commercial free. However, I posted your comment because you are offering a trial run of the basic Fundraising Report Card as a FREE service that I think folks will find useful.

      Unfortunately, as with all data-analytic tools, the old adage applies: Garbage in, garbage out. For those who maintain good records, the Fundraising Report Card will provide some interesting insights. Then, the challenge becomes acting on those insights.

      Reply
  3. Michael J. Rosen
    February 3, 2017 at 10:02 pm

    On LinkedIn, I received the following insight from Kathy Swayze, Owner of Impact Communications:

    “For our clients, one of the main obstacles we see is that staff has no time to think. We have more channels, data, strategies and techniques than ever before . . but staff sizes haven’t grown that much. It can be easy for people to get excited about the new shiny thing, and lose sight of the fundamentals like good donor stewardship and renewal campaigns. We see communications teams with 10-15 people to manage ‘social’ conversations while the fundraising team still has limited staffing to manage their multi-channel campaigns.”

    I thank Kathy for her insights, and agree. Losing sight of the fundamentals can be extremely costly.

    Reply
  4. Michael J. Rosen
    February 7, 2017 at 7:27 pm

    Jeremy Hatch, blogger at Artful Fundraiser, has written a provocative post that’s worth your time to read: “Donor Retention is (Probably) Not Your Biggest Problem.” Needless to say, he presents a very different perspective from mine. Nevertheless, he does offer some food for thought and much with which I can agree. For example, he suggests that new fundraising techniques and tools impact the relationships donors are having or not having with charities; this could explain the slide in donor retention rates as the new approaches have gained traction. If so, I believe that stewardship will need to evolve to keep pace. So, be sure to checkout Jeremy’s post and join the conversation.

    Reply
  5. Michael J. Rosen
    February 7, 2017 at 7:46 pm

    Over on LinkedIn, I received another interesting comment to this post. I love receiving messages that present the donor’s perspective. Here’s a good one from Kirt Manecke:

    “I agree. It is disgusting. I donated to five animal rescue charities and one land trust near the end of last year and never received a single thank you note. Not that it matters to me that much, as I want to help the cause as much as I can, but it shows a real lack of professionalism and business experience. And next time I donate, it will probably be to different groups because of these organizations’ lack of appreciation.”

    Reply
    • jeremymhatch
      February 9, 2017 at 11:05 am

      Donors are getting more savvy about how they should be treated, and this is contributing to the retention issue for sure! I’ve started calling up organizations to share my concerns related to my personal giving. On occasion they even call me back!

      Reply
      • Michael J. Rosen
        February 9, 2017 at 8:46 pm

        Jeremy, thanks for sharing your thoughts here. As I get older, I’m getting more and more frustrated with and cranky about some of the issues that the nonprofit sector has been dealing with that just won’t go away due to stubborn inaction my so-called professional staffs. Sigh.

  6. Zach Shefska
    February 15, 2017 at 7:34 am

    I have one thought about what may be causing new donor retention rates to slip… Millennials. As younger people attain more wealth and become more philanthropic they will pollute reports and statistics like the ones referenced here.

    Millennials are notorious for their lack of an attention span (I’d know, I am one, I’ve also written extensively about that here: http://recharity.ca/how-to-get-millennials-to-give/).

    I wonder what the new donor retention rate is for Gen Xers or Baby Boomers. My hunch is that it would be higher then the 22.93 percent we have as an industry standard right now.

    I’d also like to suggest that retention rates such as these should be broken down by giving level to provide more context. New donor retention rate for under $100 donors is most likely below 22.93 percent, where as it is my hope that over $1000 donor retention rates are well above that.

    I think segmenting donor retention rates in this fashion would help organizations keep their eye on the ball.

    One final thought, where is the mention of donation retention rate? Donors are great, but from a funding standpoint donations (or revenues) are better. I wonder what new donation retention rate is?

    Reply
  7. Derek Yarnell
    September 4, 2018 at 5:46 pm

    When all is said and done, it is about dollars and cents, so providing those responsible for retention in an organization the tools they need to demonstrate “Stewardship IS a fundraising strategy” will help. For example using average gift amount to calculate Lifetime Value for a segment of donors and then running variable scenarios by modifying attrition rate in the denominator will illustrate the financial impact of increased retention in a very tangible way. If we as Stewardship advocates can’t articulate our goals from a revenue perspective, we are not speaking the right language to influence our executives and boards to focus more on this longer-term key performance indicator.

    Reply
    • Michael J. Rosen
      September 10, 2018 at 2:44 am

      Derek, thank you for sharing your insights. You’re right! We must be prepared to justify stewardship efforts by demonstrating their impact on revenue, donor lifetime value. A number of years ago, I was talking with a client’s board member. He had no idea that a huge number of the organization’s major donors first engaged with the organization as small donors and, over the years as trust was established, gradually and significantly increased their giving. Sadly, most of his board colleagues were equally clueless. The staff and I immediately implemented a plan to educate the board about donor lifetime value, donor retention, and donor upgrade. It had the desired effect.

      Reply

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