Why Donor Retention Is A Game Of Musical Chairs

During many of the presentations I give around North America, I often share research data from the Panel Philanthropy Study regarding the number of charities supported annually and year after year by households in the United States.

Among the many key points of the research study are two sets of data points that every single fundraiser should know about and utilize in their strategy for donor retention:

  1. Dollar Amounts Given By Household Income Level
  2. Number Of Charities Supported Annually By Household Giving Level

The first set of data points revolves around the amount given in dollars annually by each of three household income levels:

The household income levels shown are under $50,000, $50,000 – $99,999 and over $100,000. The study outlines both the average and median giving. Please bear in mind the average can be buoyed upward by extremely large gifts. During our presentations we focus in on the median levels to show just how few dollars there are up for grabs by the over 1.4 million registered charities in the United States.

Notice that the median total amount gifted is $540, $1,000 and $1,850 for the three respective groupings. When any charity analyzes their database to see just how many donors are being retained year after year and multiply that number times some portion of the household giving level can you realize the potential “Lifetime Value” of each household.

This provides a vivid introduction into just how important it is to have a strategy to retain those donors from one year until the next. Only by improving your organization’s donor retention strategy can you obtain your fair share and higher of the household dollars being granted to charitable giving as well as being in position to garner larger gifts and legacy gifts. (Those larger gifts and legacy gifts are most often made after consecutive years of giving to your charity…)

The second set of data points hones in on the number of charities supported annually:

  • Income $50K – 2-3 organizations supported
  • Income $100K – 3-4 organizations supported
  • Income >$100K – 4-5 organizations supported

However, in each income bracket, one of the supported orgs is usually a church (that they attend), and another is most likely a school (that they attended, that their children/grandchildren attend).

The actual number of charities supported annually truly surprises most fundraisers. My guess is that it would horrify most nonprofit board members if they were made aware!

Yes, the number of charities supported annually on the average in the United States is not what anyone of us deeply involved in the nonprofit sector would like to see. With the average donor retention rate being below 50%, in fact closer to 40% in our country we can see just how special year after year donors are!

Digging into the caveats mentioned above provides even more alarming insights. Of the charities supported annually by the various household giving levels, one is usually either their church or some other religious organization, and another is often either their school of some nature. The latter would include a member of the household’s high school or college and/or their children or grandchildren’s schools.

Once those caveats are taken into consideration you can easily see the number of annual giving slots decreases dramatically to either 1 or just 2 or maybe 3 slots for the households above $100,000! (There are often actual gasps when professional fundraisers attending our presentations see this information for the first time.)

Summary

Hopefully, the insights and data above provide the impetus for taking a deep dive into your organization’s donor retention strategies. This dive should include evaluating and comparing your donor acknowledgement processes and your donor stewardship processes. As we have outlined in numerous previous blog posts just moving your overall donor retention level up 10% can increase the lifetime value of your donor base by 100% to 150% or more.

Based upon proper strategies for donor stewardship and retention you can win at the game of “musical chairs” being played by all of the charities in our country vying for those extremely valuable year after year annual donors.

The 3 Step Crash Course in Winning Back-Lapsed Donors

Nonprofits are constantly facing the problem of annual or recurring donors lapsing into inactivity.

Unfortunately, far too many organizations make the mistake of not distinguishing their lapsed donors from other donor groups.

They’ll send these lapsed donors the same correspondence as their active donors or, even worse, prematurely mark them as inactive and ignore them altogether.

But giving up on your lapsed donors is a huge mistake. Considering the high value of donor retention to nonprofits, why wouldn’t you focus on donors who have consistently given to your organization in the past?

First of all, these donors have already shown their affinity for your organization and that they’re willing to give to your cause.

Secondly, it’s more cost-effective for your organization to win back-lapsed donors than it is to acquire new ones. Because you’ve already built relationships with these donors, your organization can forgo much of the initial stewardship process, which will cut your costs (both money and time-wise) significantly.

So, in the spirit of Fundrasing Effectiveness Project (FEP) and our focus on increasing fundraising results as quickly as possible, I thought it might be appropriate to give a crash course in winning back-lapsed donors.

Step 1: Choose the right donors.

To launch a lapsed donor program, first you have to define exactly who your lapsed donors are.

While the definition will vary from organization to organization, the general consensus is that a lapsed donor is someone who hasn’t made a gift in over a year and has given to your organization at least twice.

This definition will probably apply to a good chunk of your base, so it can be helpful to narrow the requirements of your program even further.

For example, it’s probably not worth the money to focus on donors who have made gifts under $10.

You only want to focus on the donors whose contributions will bring you a return on the resources you spent winning them back.

Step 2: Choose the right channels.

When it comes to winning back your donors, some communication channels will be more appropriate and effective than others.

Lapsed major donor prospects definitely warrant an in-person visit or a phone call, but it’s likely your organization won’t have the resources to approach all of your lapsed donors through these channels.

While email appeals and typed letters might appeal to some, I can’t recommend handwritten letters enough.

Handwritten letters provide a personal touch and show donors that you really took the time and effort to win them back.

Make sure to include a handwritten return envelope and a first class mail stamp, too, in case your lapsed donors want to give again!

Step 3: Be personal and heartfelt.

The very best way to show lapsed donors that your organization cares about them, however, is by personalizing your outreach and making it as sincere as possible.

Always, always address your lapsed donors by their first name. Use any information you have on hand that will help you individualize your outreach. (Bonus tip! This is done much more easily with the help of a nonprofit donor database.)

For example, if you know exactly when and how much a donor has given in the past, you should reference the time since their last contribution and suggest the same gift size in your correspondence.

This lets your lapsed donors know you care about them personally, instead of thinking of them as merely a dollar sign.

But above all: be transparent and genuine. Tell your lapsed donors that you miss them. Compliment their kind and giving nature! Don’t be shy in letting them know just how much you value them and don’t want to lose their contributions.

What strategies for winning back-lapsed donors have worked for your organization in the past? Let me know in the comments!

Confessions of a Fundraiser

Being a fundraiser for over 20 years and living in a community with a professional fundraisers organization not affiliated with AFP International, I thought I was doing a great job keeping up with the trends in the field.  After all, I have an advanced degree, attend professional development workshops and webinars, read books and articles, and, I always make my fundraising goals.

Then about five years ago, a small group of professionals started a local AFP chapter.  Still, I didn’t bite.  I didn’t know much about what AFP had to offer and it seemed expensive compared to the other local non-affiliated organization.

Last year, a colleague asked me to get involved in planning our local AFP National Philanthropy Day conference, which lead me to join the chapter’s board, become a Chamberlain Scholar and attend the International AFP Conference for the first time.
I went early to the AFP conference to attend a workshop on donor retention.

It was at this workshop on donor retention that I learned about AFP’s Fundraising Effectiveness and Growth In Giving Projects and the incredible information gleaned. That proverbial light bulb went off along with a little knot in the pit of my stomach.

While I always make my fundraising targets, have I done everything possible to build a strong, sustainable fundraising program for the organizations I served?  The truth is, I did, based on intuition though and general theories and best practices.  I was lucky.  Still in the back of my mind, could I have done even better had I possessed this new knowledge? I think so.

What I didn’t do as well, however, was educate staff, board members and volunteers based on hard facts and research, on the strategies and resources I was implementing.  Herein lies the problem.  I don’t think I’m so different from a lot of my colleagues.  Particularly when I hear so many colleagues are struggling with getting the right resources to fundraise effectively, or are questioned or even prevented from initiating better fundraising strategies, or unable to get rid of those sacred cow events that don’t produce.

Thanks to the tangible, concrete information gained through the Fundraising Effectiveness and Growth In Giving Projects as well as other research projects, the field of fundraising has evolved and achieved a higher level of sophistication and so have I.  My analytic, strategic planning, and creativity have all sharpened and improved my decision-making.  As a member of AFP, with this research under my belt, I know I am more effective as a fundraiser and as a leader in my nonprofit community.