Ignore Donor Retention Rates at Your Peril
I was at a conference recently where a participant reported customer retention rates for various business sectors. I knew that the nonprofit sector’s retention rates were low and decreasing, but I was surprised at the difference between nonprofits and other sectors relative to customer retention. Here’s a snapshot of those statistics:
The average customer retention rate across all industries is about 75.5%.
The media and the professional services industries both have the highest worldwide customer retention rate at 84% each.
The hospitality, travel, and restaurant industries have the lowest customer retention rate at 55%, followed by retail at 63%.
In comparison, the nonprofit sector’s average retention rates hover between 40% and 45%. I’m not sure about you, but I find that astonishing and depressing. When you add the following statistics to the mix, and throw in a recession and/or economic instability, you have what some might call a crisis.
The percentage of donors who gave in 2021 and then gave again in 2022 decreased by 6.2% year-over-year (per the FEP 2022 First Quarter Fundraising Report). Despite some saying that this was due to COVID giving being unusually high in 2020 and 2021, it’s important to note that the percentage of donors who gave in 2019 (before COVID) and then again in 2020 dropped by 4.1% (per an FEP 2021 report). Sounds like a trend to me.
The percentage of donors who give to a specific organization only once (ever) is nearly 70%. Seven out of ten newly acquired donors — likely highly solicited, and therefore highly costly — won’t be giving to that organization again. Likely ever.
The percentage of donors who give once and give again to the same organization the next year has been in the 18-20% range for many years now.
Also according to the FEP, the recapture rate for lapsed donors is 4%. At the same time, I’ve seen articles online (by reputable businesses) saying that regaining lapsed donors is more cost-effective than acquiring new ones. Really?
As a fundraiser, do you ever feel like you’re spinning, or on a treadmill? (Yes, I know the answer for most of you.) With the statistics listed above, it’s no wonder. You have to work on recruiting new donors while knowing that more than half of them won’t give again.
Maybe it’s time to do things differently. Maybe it’s time to look at a larger potential donor population, no?
Perhaps we need to rethink who we see as potential donors. That means not ignoring younger donors (“they don’t have any money”), volunteers (“they’re just volunteers — they don’t have any money”), and people who don’t “look like donors”.
Once we see the benefits of inclusivity and “expanding the pie”, we might want to think about how giving feels for donors. Why they give in general, and why they give to your organization, is critical information for you to know. So knowing about them as humans — what they want in terms of communication, acknowledgment, and even non-financial ways to help, are all critically important pieces to creating a long-term relationship with a donor. In turn, long-term relationships mean lower churn/ more stickiness and a more fulfilling experience for both the fundraiser and the donor.
I have lots more information on how donors feel and ways to build sustainable, long-term relationships with donors. Not only can you find plenty of examples in my book, but you might also want to check out (or revisit) these articles:
If we embrace change — immediate change— we can alter the trajectory of the donor churn rate. If, instead, we continue to work the same way because “that’s the way we do it”, then we can expect to stay on that treadmill.
Exciting news! Lisa is now providing coaching to nonprofit professionals and executives. Please email us if you’d like to discuss ways Lisa can help you and your organization increase the size of your donor “pie” and increase your revenue!
Lisa Greer is Saving Giving by providing a clear path to success, supported by data, statistics, and interviews. You can find more great newsletters like this one here on Philanthropy 451, in my bestselling book, Philanthropy Revolution, or on Twitter, and LinkedIn to learn more.