(Updated post from July 2015)
Happy summer, fundraisers! How’s your lawn looking?
As we’ve reached the mid-point of the calendar year, it’s a good opportunity to take stock of how things are going – especially as we catch our breath and prepare for the end-of- year blitz.
And there’s some good news to celebrate. The Giving USA 2019 Annual Report on Philanthropy released last month announced that charitable giving reached an all-time high. Donors of all kinds—individuals, foundations, and corporations—are back, baby! The future has never looked better for the nonprofit sector, right?
You may be asking yourself how to start building your donor base to welcome these new donors to your mission. “We need more of those donors” and “If only more donors knew about us, just think how much more money we would be raising” may cross your mind. But as tempting as this thought may be, truth is: The grass isn’t greener with a brand-new set of donors. It’s greener wherever you are watering it.
Bear with me while I extend the metaphor, and let’s dig beneath the turf. 45% is an important number. That’s the median donor retention rate that the Fundraising Effectiveness Program (FEP) calculated from 2016-2017 fundraising results of its survey respondents. Every 100 donors gained in 2017 was offset by 99 donors lost through attrition.
Why? There’s no one single cause. Some giving factors, like changes in personal circumstances, are out of your control. But, according to Penelope Burk, nearly 50% of respondents cite reasons like over-solicitation, overhead costs, and the lack of impact demonstrated by the organization as influences in their decision to stop giving. These lie squarely in the hands of nonprofit organizations in how we communicate with donors.
The solution to this attrition problem isn’t getting new donors. Quite the contrary. Getting new donors is:
Expensive (anywhere from $.25-$1.50 to raise $1);
Has a very low ROI of $1.00;
AND only 23% of first-time donors ever give a second gift.
That seems like an awful lot of work to break even or come up with a slight loss each year.
On the other hand, it’s worth growing and retaining the 64% of loyal donors who have been supporting you over multiple years. After all, fundraising costs to raise $1 from renewals are very low ($.20-$.25) and these donors have the highest ROI ($4).
How to do it?
First, understand your donors’ behaviors. Analyze your database to learn:
What’s the giving patterns of your donors? By comparing how gifts have fallen over the last few years within gift levels such as $1-$499, $500-$999, $1,000-$2,499, and so forth, you’ll be able to see where you have had the greatest growth and losses.
What is your own donor retention rate, both generally and for first-time donors?
What is the average gift rate for each of the years you are comparing?
Knowing these data points grounds how you solicit your donors in ways that encourage growth. For example, you may want to specifically focus on donors within a certain gift range to tailor higher asks. You may also segment a group of the inactive donors or higher-level donors, personalizing outreach to them by phone, mail, and in person.
Second, understand who your donors are. Identify the top 50-100 of your longest donors, your largest donors over their lifetime, and newest donors (with particular eye to those who made large first-time gifts) last year and this year.
If you have the resources, it’s helpful to run capacity screening of these three groups to understand where there is greater gift potential. These are the donors who will comprise your major gift pipeline. Major donors rarely bounce around from organization to organization. Your next major gift will likely come from one of these donors who has capacity and who has been supporting you for a long time (and not giving at particularly high levels) – and may also have been involved as a volunteer. Segmenting your donors into these kinds of groups helps you to prioritize your time so you can understand who to get to know this group to build stronger relationships.
Third, consider how you communicate with your donors. Multi-channel is the way to go these days. It’s not just what you are sharing with your audience, but how you reach them.
Did you know that according to MobileCause, 50% of donors are more likely to respond to direct mail when they receive multiple messages across fundraising channels reinforcing the call to action?
This means the printed direct mail or newsletter pack combined with an email and/or social media creates a stronger interest to act than one channel alone.
And about that content you’re sharing… It must be focused on impact and the difference your donors are making to your outcomes. What is your organization able to do because of your donors? What do you still need to do to reach your goals? To move closer to putting yourself out of business because you solved the problem?
Penelope Burk’s survey results show us that two top reasons donors stop giving are tied to impact and effectiveness of an organization. More than ever before, donors want to understand how their gift is making a difference in your work. They are giving through you to address a societal need that has meaning for them.
Is their gift helping you make a difference? Bring them closer to your work by sharing a personal story of a beneficiary (even better from the beneficiary him/herself), other measurable accomplishments you have achieved, and what else you need to do to greater results. Reporting back on progress through your newsletters or 1:1 conversations show donors how they are making a difference. It’s not about you. It’s about their need to have an impact.
Fourth, don’t completely ignore acquisition. After you’ve watered and fed your backyard of current donors, you can (and should) plant seeds for the newcomer donors.
These names aren’t rented from mail houses. They can be, but as you saw from the statistic above, it’s not a cost-effective solution in the long run. Potential new donor names are people who self-identify in some way. Perhaps it’s through a sign-up on your website or by following you on social media. It can also (and should also) be from the networks of your Board and other volunteer leaders. Adding even 10 new names a month can yield up to 120 new donors — if you communicate with them through the relationship model described above.
You make the grass you’re standing on greener!
It happens when you base your fundraising approaches on a solid understanding of donors’ giving patterns and interests, create strategic communications that invite donors into your work, and plant the seeds for new supporters. This will strengthen all of your fundraising – annual fund, major gifts, planned giving, and events – and create opportunities for donors to partner with you in bigger and better ways.