Why We Must Pay Attention to Declining Donor Retention Rates
As a donor, what should I do when an organization whose work I care about lets me down? When is it time to stop giving, even though I support the mission of a given nonprofit? At what point do I excuse a nonprofit’s “behavior” (whether it be pushiness, not showing gratitude, or a general lack of communication?)
I don’t have an answer to these questions, (as each situation and donor is different), but I feel certain that every donor has had issues that led them to think “is this the time to bow out, or double down, or do nothing?” Fundraisers and nonprofit leaders need to remember that donors have these questions, and their ultimate decision can be consequential to your organization. (Note that more often than not, you’ll have no idea why they stopped giving.)
Understanding why donors stop giving directly impacts our sector’s continuously declining donor retention rate. It’s important that we try to understand why our sector’s average customer retention rate is in the 40-45% range, when all other industry sectors average a customer retention rate of about 75% (with 55% being the lowest.) Our sector’s new donor retention rate declined nearly 12% from the year before.
For more specifics, it’s important to look at the newly-released Fundraising Effectiveness Project report . For a bit of context, it’s worth thinking about our industry’s reception of that FEP report — in April 2023 and again in April 2024. When I heard the report at AFP ICON in 2023, people thought the drop in Q4 giving was bad news, but many thought it was just a quirk, with little reason for grave concern. When the new FEP report was presented at AFP ICON in 2024, the press release stated that the report “acutely shows the growing challenge for American nonprofits: a near-universal decline in fundraising metrics, including dollars raised, donor counts and retention when compared to 2022.”. The announcement continues by stating that “…a drop in the total number of donations from all donor sizes demonstrates an evolving challenge for fundraisers.”
For fundraisers, it seems clear that it’s critical we think about the donor experience overall. What makes so many donors stop giving? I don’t believe the answer is in pandering to the donor. (If you’ve read my book or heard me speak, you’ll know that’s a pet peeve of mine). Rather, we need to acknowledge that authentic relationships are a big part of the key to keeping your donors long-term. By “authentic relationship”, I mean thinking about the donor as, well, a human being. You can’t have an authentic relationship without thinking about the donor as a person with their own unique thoughts, perspectives and feelings.
When you change the mindset from “transactional” to “relationship-based”, more donors will stay with your organization. And the longer they stay, the more “sticky” they are. (Research, including the FEP report, supports this.)
If you or your nonprofit are still on the “just get the money” bandwagon, note that again and again we’re seeing statistics (and trends) that confirm the fact that treating donors transactionally will result in lower retention rates. They might give initially, but that 80-82% churn rate (for first time donors giving the next year) isn’t improving over time, as we’d all wish. Unfortunately, wishing for donors to stick with you isn’t a strategy, and the recent report from this new Fundraising Effectiveness Project report tells us that the downturn reported in April of 2023 wasn’t an anomaly. If we don’t pay attention to this clear trend and radically change the way we interact with donors, our donors will stop giving (or evaporate). That’s bad news for not only your organization, but for the sector, because many of those previous donors may just stop giving altogether.
Between the healthy stock market, low unemployment rates, higher salaries, and The Great Wealth Transfer, we’re fortunate that there’s so much money available for and interest in giving. Many sectors of our population are newly interested in a life that includes purpose, including charitable support, but unfortunately many, if not most nonprofits seem to be unconcerned with tackling the changes that are critically and immediately needed.
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As to those donors who are trying to decide if they should keep giving to a particular organization — or not — we need to prioritize keeping those donors. We need to prioritize learning to understand them as individuals. We need to get to know them. Trust me (and most, if not all, researchers) — it’s worth the effort. Do you know that on average, it costs 5x more to find a new donor than it does to retain an existing donor?
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The Philanthropy 451 Team
PROSPECT RESEARCH Fundraising | Marketing | Strategy | Leadership
6 个月I'm actually neither alarmed nor curious because I've been watching this trend develop for 15 years, as a direct result of short-sighted strategic decisions by nonprofit leaders. I'm beyond glad solution-oriented discussions are finally happening.
Helping fundraisers help donors experience the joy of philanthropy | Director, Gift Planning Services, University System of MD | Owner, Akorn Consulting Group, LLC | Diversity makes us stronger | Opinions my own
6 个月There's a lot of competition for donor dollars, not just from other nonprofits. Unless you can offer a compelling reason why donors should support your particular org and invite them into your community as a valued partner, you'll continue to deal with a leaky bucket.
Nonprofit Management and Leadership
6 个月We have made it a key KPI that we report to our board as matched up to industry benchmarks for ourselves and the wider sector. We are making a concerted effort to educate leadership and staff about facilitating philanthropy and the importance of ongoing relationship building and growing.
We help your supporters self-qualify their interest in giving so your frontline fundraisers spend their valuable time with the right people — when they’re ready to move forward. imarketsmart.com
6 个月The reason this is happening is really simple. The solution is complex. People don't give again because the value they feel they gain from the first giving experience simply isn't good. So, they make either a conscious or subconscious decision to NOT do it again. If nonprofits want to increase retention rates, then they have to increase the value of the giving experience for donors. Again, easier said than done. You can read more about the value proposition here: https://imarketsmart.com/the-myth-of-the-disappearing-donor/
Helping Nonprofits Build Lasting Donor Relationships | Coaching, Workshops, Facilitation and Strategic Support
6 个月You bring up a lot of important points. I think nonprofits need to analyze the 'why' behind their own declining donor retention rates. Are donors making conscious decisions to jump ship because of a loss of faith or lack of trust in the organization? Or is the nonprofit just not top of mind anymore and thus, they didn't think about giving again this year? Those are different scenarios with different symptoms and different cures. In the end, what you said about human relationships is the ultimate answer. I believe all nonprofits would benefit from less transactional and more transformational, and all need to do a better job connecting with the deep emotional attachment their donors and prospective donors have with their cause. Thanks for sharing all of this great info!