By Jennifer Shin, MBA, Consultant and Mariah Fosnight, MBA, MID, Client Service Associate
Congratulations! As you near year end, you can momentarily rest in cruise control knowing that the craze of event season is an image in your rearview mirror. Imagine you’re in a position where both the total number of attendees and the number of new attendees spiked at the variety of friend-raising events you’ve held throughout the year. Exhale a sigh of relief, crank up the volume to your favorite song and enjoy the fruits of your labor!
Now the dust is settling and it’s time to take back control of the car. You run your annual metrics and expect to see strong retention numbers with the added donor engagement you’ve invested in over the last two years. To your surprise, you see that retention rates for the last fiscal year actually decreased for the first time in several years. Yikes! Before you accelerate off the next exit, let’s take a deeper dive. Along the way, we’ll provide helpful strategies to get ahead of these downward trends.
Basic Fundraising Analytics: base retention rates
The chart above shows retention rates over the last three fiscal years, in which the FY18 retention rate reduced by 7% from the previous fiscal year. Although this decrease is subtle, let’s assume this organization has maintained a retention rate of 65-70% over the last five years and this is the first time it’s dipped below that point. This situation vastly differs from an organization that has experienced volatile retention rates due to changing fundraising priorities, staff turnover and new fundraising initiatives. Instead, this data represents an organization that has invested in new friend-raising strategies that yielded an increase in total donors in FY18, managing to retain a steady number of donors year after year.
According to the 2018 Fundraising Effectiveness Survey Report, the national average donor retention rate is 45%. Although this organization’s overall retention rate exceeds the national average, it fails to meet its historical average. Let’s take a more advanced look at retention.
Intermediate Fundraising Analytics: new and recurring donor retention rates
The numbers above confirm that the donor engagement work has brought in many new donors over the last two fiscal years. This is a victory; however, we must also acknowledge that retaining these new donors will always be more challenging than securing repeat donors. This organization has an average retention rate of 22% for new donors, while the overall retention rate and the repeat retention rates are more than triple this rate.
This means new donors typically don’t give a second gift and are much less likely to give again in comparison to the donors who give year after year. Low new donor retention rates will impact your overall retention rate, so it’s important to engage this donor group in a more strategic and effective way. This is especially important to note when you are seeing an increasing volume of new donors each year!
Know your blind spots! 4 tips to consider
- It costs more to go after new donors than it is to keep the ones you have! Have you measured the ROI for your new donor acquisition strategies and how are you currently investing in gaining new donors?
- Evaluate your new donor stewardship strategies and make sure you are paying attention to distinct donors groups: repeat, reactivated and new donors. What trends are you seeing?
- How quickly are you engaging new donors once they come through your doors and what methods do you have to bring them in closer to your organization? Evaluate your follow-up communication, clear opportunities to continue their involvement – and don’t forget to segment out event and major donors for more personalized engagement.
- Retention rates for your regular donors will always be higher than those for your new donors, so getting a huge influx of new donors will disproportionately impact your overall retention rate. Be sure to have a plan in place to engage this new group of friends!
Driving beyond retention rates
Let’s move beyond donor retention rates and take a deeper look into the trends within your philanthropic revenue. This analytical approach will help you identify donor groups and inform you of their impact on your overall revenue. When we use the Growth in Giving model to assess revenue growth, the data will reveal gains and losses that provide insight around your donors’ behaviors. For example:
Total revenue from new donors
+ Total revenue from returning donors who increased their gift
Total loss in revenue from lapsed donors
+ Total loss in revenue from returning donors who decreased their gift
Let’s examine the example below where an increase in overall revenue does not always indicate good donor health.
Advance Level: growth in giving breakdown
In this example, we see a 9-22% growth in revenue over these three years and a net positive in each year. At a high level, this is always a good indicator for your organization. When further evaluating the total gains, the increases we see remained stagnant in FY18, while losses have increased over time. Although the gains are greater than the losses (thus yielding a positive net gain) opportunities for further engagement and stewardship exist and are evident in the growing losses.
Know your blind spots! 4 giving indicators to monitor
- Do you have a number of key major donors who have reduced their giving or have stopped giving altogether? In what ways can you get ahead of big losses in these areas and upgrade other donors to make up for this type of loss through stronger donor stewardship and cultivation practices?
- What percentage of your revenue comes from new donors and how is this impacting a growing amount of losses year after year? Is this increase in your losses justified with a growing number of new donors and are you maintaining your baseline repeat donors to compensate for this loss?
- Are you upgrading your donors regularly, making sure you’re not forgetting about your monthly donors and providing all supporters with the opportunity to give bolder and higher gifts of support?
- What kinds of trends are you seeing in your donors’ support? Are you seeing increases from the mid-level donors who have stepped up with larger gifts in response to your strategies or is it an aggressive upgrade strategy used in your annual direct mail campaigns? Or, are you seeing significant decreases in individual giving for the first time and how might this be reflective of the national trends reported by the Giving USA Report and how will you continue to monitor these effects?
We hope you can apply these tips to your next roadmap for maximizing fundraising ROI and effectiveness to confidently shift your gaze from the rearview mirror to the horizon ahead.
Alford Group can help you assess your fundraising department’s opportunities and leverage meaningful metrics that will take your shop to the next level! Let us know what questions you have!