For a long time, the nonprofit sector, like many industries, worked without the benefit of big data. For nonprofits, this meant that a sense of accomplishment came with continuously recruiting new donors to the cause. With each new donor relationship, the org was ensuring its future, right?
Unfortunately, that intuitive sense of forward momentum was wrong. We now have the benefit of a few decades of major reporting and analysis of nonprofit financials from organizations like the Fundraising Effectiveness Project. It turns out that new donors usually cost nonprofits money, and far fewer donors return for repeat donations than many orgs expected – the average is less than 50%.
Effective donor retention can determine the financial stability and sustainability of a nonprofit organization over both the short and long term. If your organization can build a strong donor retention rate, you will have a base of loyal supporters that not only contribute to financial sustainability, but also amplifies your mission and fuels long-term impact.
But with donor retention declining across the nonprofit sector, how can organizations ensure that their investment in courting donors translates into a long-term relationship?
In this article, we’ll look in depth at donor retention rate, learn how to calculate it, and discuss various strategies to increase it. Get ready to turn your donor base from fleeting contributors to lifelong partners, building a powerful force for good in the world along the way.
Guide to Donor Retention
- What is donor retention?
- Why donor retention matters
- How do you know if your donor retention rate is good?
- How do you motivate and retain donors?
- Let’s talk about donor retention rates
What is donor retention?
Donor retention is a metric that captures how many donors give to your organization repeatedly. As a marketing strategy, it means focusing on maintaining relationships with existing donors, and encouraging them to continue giving month after month or year after year. By focusing on donor retention, you can increase your organization’s funds and offset the high costs associated with a strategy that focuses more on new donor acquisition.
Organizations with low donor retention are forced to use a lot of time and resources on courting new donors and impactful one-time gifts. On the other hand, organizations with high rates of donor retention can create a bigger impact and make long-term plans that only come with the relative financial stability provided by ongoing, repeated donor support.
How do you calculate donor retention rate?
To calculate your rate, simply divide the number of repeat donors in a given year by the total number of donors from the previous year, and multiply by 100.
Donor retention rate = Return Donors in Y2 / All Donors in Y1
For example, if you had 100 donors in 2023 and 75 of them donated again in 2024, your retention rate would be 75%.
What is the difference between donor acquisition and donor retention?
While both donor acquisition and donor retention are crucial for fundraising success, a strategy focused on acquisition, or finding first-time donors, is costly. Donor retention instead focuses on encouraging previous donors to give again.
Acquisition involves raising awareness, generating leads, and converting interest into that first-time gift. Retention, on the other hand, is about stewarding existing relationships, providing exceptional experiences that deepen loyalty, and therefore inspire repeat donations.
The allure of a fresh pool of potential donors can be tempting, but neglecting retention efforts is costly. It’s more expensive to acquire new donors, and a high donor retention rate can be a key indicator of your organization’s future financial stability.
Why donor retention matters
Donor retention is not just about financial sustainability; it’s about building a powerful community of dedicated advocates for your cause. Here’s why it matters:
- Increased ROI: Retaining existing donors is significantly cheaper than acquiring new ones. This frees up resources for mission-driven activities and amplifies your impact.
- Increased unrestricted/special project funds: While first-time donors often give based on their specific interests and motivations, once a long term donor/organization relationship is established, donors’ giving is more influenced by the nonprofit’s needs and asks, which means you’ll have a much better chance of fundraising for special projects or initiatives with a long-term donor base.
- Greater stability: A loyal donor base provides predictable income, allowing you to plan for the future and weather inevitable fundraising challenges.
- Amplified impact: Repeat donors often give more over time, contributing significantly to your financial stability. Their long-term commitment helps sustain your programs and create lasting change.
- Advocate network and community: Loyal donors become vocal advocates for your cause, spreading awareness and inspiring others to contribute. This expands your reach, amplifies your message, and builds a community united by a common goal.
By prioritizing donor retention, you not only secure financial stability but also cultivate a powerful network of advocates who drive your mission forward and create a lasting positive impact.
How do you know if your donor retention rate is good?
Knowing your donor retention rate is like having a financial fitness tracker for your organization. It helps you measure the impact of your retention efforts and identify areas for improvement.
What is a realistic retention rate?
A healthy retention rate varies by sector, but a typical retention rate generally falls between 40% and 50%. Aiming to increase this number over time is a key indicator of a thriving donor-centric organization.
Is a 20% donor retention rate good?
20% retention may be considered good in some circumstances, but is below the industry average for nonprofits, which is generally between 40-50%.
Distinguishing between new-donor retention and repeat-donor retention
To dig more deeply into your organization’s donor retention rate, the next step is calculating the retention rate separately for new-donors and repeat-donors.
In terms of retention rates, new-donors are defined as first time donors from the previous year. To calculate your new-donor retention rate for 2023, you would first create a segment of all first time donors in 2022. Then, determine how many donors from that list gave again for a second year in a row in 2023.
New-donor retention rate = Return New-Donors in Y2 / All New-Donors in Y1
New-donor retention rates are generally much lower than your overall retention rate, often around 20% for nonprofits. This is because once a donor has been converted into a repeat donor, or a donor who has already given more than one time, it is much easier to retain that donor.
This is why it is key for nonprofits to focus efforts on retaining first-time or new-donors. If you can build a relationship over the first year and have the donor give a second time, your chances of a lifelong partnership have increased exponentially.
How do you motivate and retain donors?
The key to keeping donors engaged lies in cultivating genuine connections and demonstrating the impact of their generosity. Here are some crucial strategies:
Personalize the journey
Treat your donors as partners. Get to know their passions, preferred communication styles, and specific reasons for giving. Once you have a clear sense of your donors’ preferences and motivations, consider creating donor personas to help organize your communications for different kinds of stakeholders. Customer relationship management (CRM) software can help you stay in communication as well as segmenting your list according to donor giving history, location, level of engagement, and more.
Also, support the forms of engagement that your community wants to use. If peer-to-peer fundraising is their preferred method, use it! Engaged donors can become fundraisers and spread the word about your mission to their own networks, driving both community engagement and donations.
Whenever possible, keep things personal – thank-you messages, exclusive invitations, and reports highlighting the specific impact of a donor’s contributions will create a sense of deep connection with your organization and your mission.
Show impact through nonprofit storytelling
Donors want to see their generosity translated into real-world change. Don’t just tell them about your mission; showcase it! Sharing well designed annual reports each year, as well as impact stories within regular communications, are two effective methods for sharing the wins with donors and reminding them why they should keep giving.
Use visuals, data, and beneficiary testimonials to paint a vivid picture of the impact their gift has made. This kind of storytelling creates a sense of shared purpose and reinforces the power of their giving.
Go beyond the “Ask”
Relationships shouldn’t revolve around fundraising drives. Cultivate genuine connections by providing opportunities for deeper engagement beyond financial contributions. Organize volunteer events, educational workshops, or exclusive behind-the-scenes experiences. Let donors feel actively involved in your mission. This builds a sense of community and makes them feel like more than just a number on a spreadsheet.
Listen and adapt
One-sided communication leaves donors feeling a lack of connection. In order to create a more authentic relationship with donors, make dialogue a central part of your plans for engagement – ask donors for opinions/feedback in surveys, host online or in-person events that feature community exchanges, and/or use social media to elicit direct responses from donors and community members.
Actively listen to your donors’ feedback, concerns, and preferences, and create meaningful opportunities for dialogue, either at in-person events or virtually. Showing that you value their voice and are receptive to their suggestions strengthens trust and demonstrates your commitment to continuous improvement.
Celebrate and recognize
Appreciation goes a long way! Publicly acknowledge the significant contributions of your major donors through naming opportunities, dedicated events, or donor walls. Celebrate milestones and anniversaries with personalized messages and gestures. This makes them feel valued, inspires others, and reinforces the positive ripple effect of their generosity.
How do you retain major donors?
Retaining major donors requires balancing personalized attention with respect for their unique motivations and philanthropic goals. Recent data, however, paints a worrying picture – the Fundraising Effectiveness Project’s Q4 2022 report highlights a decline in both the number and total contributions from major donors in that quarter. In the current landscape, it’s never been more important for organizations to focus resources on new-donor and major-donor retention.
Here’s how to cultivate long-term generosity among your major donors:
- Build Deep, One-on-One Relationships: Invest in personal connections. Assign dedicated staff to understand donors’ individual giving journey, motivations, and long-term philanthropic goals. Regular in-person or virtual meetings, phone calls, and personalized updates allow you to forge trust and demonstrate genuine interest in their priorities.
- Offer Exclusive Engagement Opportunities: Go beyond generic invitations. Extend personal invitations to exclusive events, board meetings, or behind-the-scenes experiences that align with their interests. This provides a sense of VIP access and deepens their connection to your cause.
- Tailored Communication and Impact Reporting: Share stories of beneficiaries impacted by their generosity and highlight their unique role in creating positive change. This can sound overwhelming for organizations with limited staff, but something as simple as sending a personal email along with your annual report that includes a note explaining how their contribution made “x” possible can be a great, low-investment strategy for connecting directly.
- Public Recognition and Appreciation: Publicly acknowledge their significant contributions through naming opportunities, dedicated events, or donor walls. This fosters a sense of belonging and inspires others to follow their lead. Remember, major donors often value not just their own impact, but also influencing others to join the cause.
- Flexibility and Responsive Communication: Be attuned to their needs and preferences. Adapt to their preferred communication styles and engagement methods. This demonstrates respect and builds trust, laying the foundation for a long-lasting partnership.
By implementing these strategies, you can cultivate genuine partnerships with major donors. When they feel truly valued, understood, and connected to your mission, they’re more likely to remain engaged and continue their generous support, even in challenging fundraising climates.
Remember, though, while retaining major donors is key for your organization, smaller donors often provide the backbone of an organization’s connection to their community. Don’t fall into the temptation of ignoring smaller-level donors in favor of courting and retaining major donors alone.
Let’s talk about donor retention rates
Ready to supercharge your donor retention rate? Partner with Big Sea. We know (and love!) nonprofit marketing – from grassroots organizations to national campaigns to mutual aid efforts – we’re here for it. Let us help you grow your mission and impact by building long-term relationships with your donors.