In a world of fluctuating generosity, why is donor retention important? Because while acquiring new donors is vital, maintaining the trust and support of existing ones ensures a sustainable foundation for any nonprofit.
To explore the intricacies of donor retention, we asked the experts who work at nonprofit organizations who focus their fundraising strategies around improving their average donor retention rate.
Ready to learn more about why donor retention is re-emerging as a sustainable revenue driver for nonprofits? Let’s dive in.
The Current State of Donor Retention
The state of giving is constantly changing. With the pandemic skyrocketing generosity in record leaps over the past two years, we’re now beginning to see it leveling out.
For those of us who work in the nonprofit sector, we sit in anticipation each summer as we wait for the latest giving numbers from the Giving USA report. When the pandemic hit, we weren’t sure just how giving would pan out, and to our surprise, Americans banded together and poured their generosity into the organizations that needed it most—with a record $516 billion in donations in 2021.
But as trends typically go, when we see significant growth over time, a plateau eventually comes. As we all predicted, the plateau finally hit our sector. We’re seeing now that giving is beginning to level out, with $499 billion in total giving reported in 2022. This drop results from many economic factors: stock market decline, high inflation costs, and the threat of a recession.
Before you panic and think people are becoming less generous, it’s important to point out that giving is still 11% higher than in 2019.
Still, as nonprofits navigate the constantly changing landscape—increased generosity or not—one thing remains clear: There is a consistent need to find authentic ways to engage donors and unlock their generosity.
Balancing Donor Acquisition and Retention
Right now, there’s steep competition for new donor dollars as organizations are mulling through creative marketing tactics to attract these first-time givers. While donor acquisition remains at the forefront for organizations battling donor churn, many are also reevaluating their strategies and turning their focus to increasing their donor retention rate.
Why is donor retention rate important? One essential reason is that donor retention is both more valuable and less expensive in the long run. After all, existing donors, having already shown their support in the past, primarily need reminders and reinforcement of the cause’s value rather than a full introduction. This underscores the importance of maintaining communication and continually nurturing trust with them.
A Genuine Way to Build Strong Relationships
Two revenue sources ruled most nonprofits in years past: major gifts and new donors. While it’s important to diversify fundraising efforts to include major donors and new donor acquisition, nonprofit organizations often overlook stewarding existing donor relationships (aka lapsed donors).
There’s immense potential for unlocking the recurring generosity of loyal donors who are already in your donor database. Building stronger donor relationships, in turn, increases the donor lifetime value and helps your organization maintain a healthy donor retention rate.
Relationships Turn Into Referrals
“The biggest impact that comes from donor retention is the increased awareness that an organization receives from their donor’s relationships,” shares Kayla Schneider, who has ten years of higher education experience as a senior data analyst for advancement. “When I have a fantastic experience, I am more likely to share that with my friends, family, and colleagues. When we focus on donor stewardship, those relationships that we are investing in will multiply through word of mouth and the reputation we will build in our communities.”
Mike Esposito, CFRE, Director of Growth and Strategy at Hudson Ferris, adds, “Our role as fundraisers is to shorten the gap between the donors and their impact. This is more easily done when we are in regular communication with our donors. By stewarding them more often, they will have a stronger connection to the work and are more likely to refer the organization to their friends and family.”
There’s a domino effect when you have effective donor retention strategies. When donors feel appreciated for their generosity and know the impact they are helping your organization create, they will feel more inclined to share their affinity with your cause with their community. While it’s clear to see the value of retaining donors, how can organizations effectively achieve this?
Building Relationships Through Donor Passion
Creating relationships that inspire donors to become advocates must be based on the genuine passions of your donors. “Retention comes down to the relationship and highlighting the why of someone giving. Through that relationship and maintaining that energy, the mental decision to give again becomes natural as opposed to forcibly asking for it,” says former gift processor of the Virginia Museum of Fine Arts, Maggie Paynter. “Why spend your donor dollars trying to gain numbers rather than communicate your mission to those who genuinely care?”
The reality is donor retention isn’t rocket science. The ability to retain donors is about understanding the psychology of long-term relationships and building a strategy around communicating with your donors. Like you and I, your donors thrive off the feeling of doing something meaningful but also seek genuine connection.
Jack Humphrey, former data manager at the John 3:16 Mission, summarizes the necessity of relationship building well. “In my years working in nonprofit development, I’ve seen how essential it is to build genuine, long-lasting relationships with donors. Very often, your supporters don’t just want to be sold on a mission; they want to believe in the people carrying it out.”
He emphasizes how these relationships are the first step to growing awareness around your cause. “To me, this is one of the most powerful catalysts to retaining an engaged, committed donor base! When you establish that bond between your organization and your donors, you create a community that you can count on. In the end, having that support makes it that much easier to share your message and make a real impact!”
Cost-Savings Over Donor Acquisition
As mentioned earlier, donor retention takes up fewer resources than donor acquisition. Industry research tells us that acquisition has hefty upfront costs, and it could take up to two years for organizations to break even on donor acquisition costs.
The Cost of Donor Acquisition
Diana Hoyt of Formula for Fundraising succinctly describes the issue: “Donor retention is a financial issue. It is extremely expensive to secure first-time donors.” Not only is donor acquisition expensive, but donor retention has multiple financial benefits. “Taking the time to cultivate and engage current donors is less expensive and encourages them to become life-long donors, as well as planned giving donors.”
Jocelyn Kwok, Principal Consultant of jskwok consulting, says, “The cost of acquiring new donors far outweighs that of nurturing and strengthening connections with existing donors.” She further breaks down the reasons why acquisition is so expensive. “Establishing a rapport with new donors essentially entails commencing the relationship anew—a process involving the cultivation of trust, imparting knowledge about the organization, and engaging them with your mission.”
As Hoyt and Kwok point out, there are increased costs associated with donor acquisition both financially and in time. It should remain an important strategy to keep in your fundraising arsenal. Still, you must prioritize retention over acquisition to survive, especially if you’re experiencing high donor attrition.
The Efficiency of Donor Retention
Donor acquisition is a layered process that weighs on several factors that include:
- Significant marketing and advertising costs that differentiate your cause from other nonprofits
- Continued outreach to build trust with new donors to deem your organization as a worthy cause to give to
- Constantly optimizing and iterating campaigns based on donor response and conversion.
On the other hand, retention requires fewer steps in getting the donor to give more regularly.
“Donor retention is the lifeblood of nonprofits today,” shares Kelly Cristaldi, former marketing manager of an animal welfare organization. “It’s challenging, not to mention expensive, to reach new donors in this noisy world.”
She continues, “When working in animal welfare, our fundraising team quickly discovered how easy it was to tap into our database of donors to encourage generosity rather than spending a lot of our team’s time procuring new donors. These donors had an existing relationship with us and were familiar with our cause either because they had volunteered, fostered, adopted, or given previously.”
Not only is donor acquisition costly, but donor retention is more efficient since you are tapping into a pool of people who have proven that they care about your cause and are willing to donate. Convinced yet?
Retain More Donors with Responsive Donor Journeys
Hopefully, you are bought in on the value of donor retention. However, you maybe aren’t quite sure whether or not your team could afford the additional resources it would take to launch a full-on retention effort. The good news is that with a responsive nonprofit CRM you can automate donor journeys that will encourage donor retention while freeing up staff time to focus on relationship-building activities.
For example, with Virtuous, you can create an automated new donor journey. This automation workflow can automatically send messages via email, SMS, letters on demand, and more—while also creating tasks for your team members to focus on the most personalized touches, such as phone calls. Building those genuine relationships is much easier with good automation!
Virtuous expert, Emily Beck, has seen this reality for hundreds of organizations. “I’ve seen the efforts and money that goes into getting new donors in the door only to struggle to keep them engaged and retained—often losing donors at a faster rate than new donors coming in. The root cause? Capacity and having a CRM that empowers rather than holds you back.”
Losing donors after you put so much time and money into acquiring them is incredibly defeating for fundraisers.
Fortunately, Beck continues by sharing the success she has seen when organizations have the tools they need. “Countless times, I’ve seen our nonprofits connect and create deeper, more meaningful relationships with their donors. Increasing giving while saving their team time through using automation and built-in suggestions from Virtuous based on listening to those donor signals.”
Having the right tools is important, but taking the right approach is also key.
Beck points out, “Being responsive is the only way to retain donors. Giving is personal, and our connections to our donors should be too.”
Increase Donor Retention Rate with Responsive Fundraising
At Virtuous, we believe that fundraising should be responsive. That’s why we’ve built a fundraising platform based on the proven principles of responsive fundraising. Through personalized donor journeys that respond to the needs of each individual, we’re empowering nonprofits not only to grow giving, but to double down on donor loyalty.
If you want to learn more about how our responsive fundraising framework is helping nonprofits increase retention by 12%, chat with one of our team members today.