What is Donor Retention Rate and Why is it Important for Advancement Offices to Calculate?
In this blog post, Diana covers how to calculate your donor retention rate. This is part one in a series of three posts that will talk about donor retention, metrics and strategies. Bookmark our thought leadership page today to stay up to date.
There is a myth in the fundraising world and it doesn’t involve trolls, witches or wardrobes. The myth is that “the best way to raise more money is to simply acquire more new donors.” In reality, it costs more to acquire a new donor than it does to retain an existing donor. Donor retention is all about focusing on your existing donors and finding creative solutions and engaging ways to turn them into repeat, loyal donors; because keeping existing donors is more cost effective than acquiring new ones.
One way to determine the effectiveness of your fundraising program is to develop metrics. One metric to calculate and track, using your database, is your rate of donor retention. Developing this metric and adding it to your Advancement dashboard will allow your organization to spend time and resources wisely.
A donor retention rate is the measurement of how many donors continue to make donations to your organization year-after-year. Nonprofit organizations with high donor retention rates have long-term supporters who come back yearly; these are loyal donors who believe in the mission and purpose of your organization. Nonprofit organizations with low donor retention rates need to continually acquire new donors or secure larger gifts to remain viable.
By calculating your donor retention rate you can analyze giving trends, the habits of your constituents, and determine who you should focus on to upgrade giving levels. The overall donor retention rate for 2016 was approximately 45%.
So, how do you calculate your organizations donor retention rate?
1. Run a report and calculate the number of donors who gave in both 2017 and 2016.
2. Run a report and calculate the number of donors who gave in 2016.
3. Divide the number of donors who gave in both 2017 and 2016 by the number of donors who gave in 2016. Then, multiply by 100.
Example: (875( number of donors who gave in 2016 and 2017))/(1800 (number of donors who gave in 2016)) x 100=48% Donor Retention Rate
Knowing your donor retention rate is important because it’s often a reflective indicator of donor satisfaction. If your donor retention rate is “high” keep up the good work! When donor retention rates are higher, fewer dollars are spent on marketing and more resources can be devoted to upgrading current donors, securing legacy gifts and recruiting volunteers. Long-term donors recruit other volunteers and donors; and, they tend to move up the giving ladder more quickly.
If your donor retention rate is “low” it’s time to shift gears to design communication and fundraising strategies aimed at retention. Increasing your donor retention rate by 10% over a five-year period can make a significant impact on the overall health of your fundraising program. By leveraging this data you can evaluate the performance of your fundraising program, and understand how donors are interacting with your organization. You can also use data to determine how to maximize giving requests to strengthen support for your organization, yielding greater overall success.
To learn more about Changing Our World and how we can assist your organization with donor retention and other fundraising strategies, keep browsing our website or contact Diana directly at [email protected].