Donor retention statistics continue to worsen, with 2022 showing the lowest overall rate ever recorded, at 42.6%, according to the Fundraising Effectiveness Project. This applies to donors across the board, from low-dollar donors to major donor retention. But that’s not all we need to be concerned about.
The FEP also reported that while the number of donors from 2012 to 2022 declined by 19%, the overall amount of money given rose 69%. This means far fewer donors are giving much more of the money. Clearly, this is an unsustainable trend, and it’s what we at MarketSmart refer to as fundraising climate change. We call it this because if something doesn’t change, disaster looms on the horizon.
But why is donor retention declining?
Can we blame it on covid? The economy? Inflation? Biden? Trump?
If you think any of those reasons are the cause, then why, even after the Great Recession of 2008, was donor retention higher than now? The economy then was far worse than at any time in the last few years. Unemployment was much higher.
Another study, called A Better Way, recently came to a startling conclusion.
They found that the primary cause of deteriorating donor retention is weak relationships with donors at all levels – mass market donors, mid-level donors, and major donors.
Because MarketSmart helps nonprofits identify, qualify, cultivate, and retain major donors, we’ll focus primarily on major donor retention in this article. But we’re going to touch on all three categories of donors, because as you know, low-dollar and mid-level donors can become major donors.
The same study found that a significant number of nonprofit professionals believe we should be focusing on near-term gifts rather than long-term donor relationships. With cratering retention figures, this approach doesn’t seem very wise.
Let’s look at each category and what you can do to improve donor retention, especially major donor retention.
As the study found, only 8% of nonprofit workers – which included fundraisers, CEOs, and people from various staff positions – see their organizations as being highly effective at building relationships with their current low-dollar donors.
8%! That’s pretty bad.
Not only that, just 6% think their organizations are doing well at this with potential mass market donors, and 11% think their organizations have a specific strategy for getting feedback from these donors.
This is a monument of donor neglect.
While donor retention is always lower among low-dollar donors, some of these people will ascend to become major donors. But only if you identify them and nurture the relationship. If you neglect them, you can almost guarantee most of these donors will disappear.
There are several fairly simple things you can do to increase donor retention among first-time and repeat low-dollar donors.
1. Thank Them Early
There’s little worse than giving money and hearing nothing back from the organization. I don’t care if you only gave $20. Every donor should receive at the bare minimum an automated thank you email – and this is distinct from the giving receipt email. It should be a separate communication.
2. Thank Often
Over the next few months, the donor should be thanked again. Perhaps in a follow-up email. Perhaps with a hand-written thank you note designed specifically for new donors. Perhaps with a letter, which larger organizations can afford to do.
3. Show Impact
You can do this in the thank you communications. Show the donor what their money accomplished. Tell them where it went, who was blessed by it, how it helped. Donors want to know their gift mattered. This is pretty easy to do.
4. Give Opportunity to Connect
Send additional communications asking for feedback, offering other ways to help and get involved, sharing upcoming opportunities, and gauging their interest in your various programs. You can do this with surveys, polls, special reports, and live events.
The ones who show interest in these things – these are people to continue engaging with.
The retention and engagement data from the ‘Better Way’ study isn’t much better for mid-level donors.
Here, nonprofit staff and leadership revealed that only 16% of organizations have a strategy for getting regular feedback from mid-level donors. Not much better than the 11% for low-dollar donors.
The other statistics are even worse. Just 7% report effective relationship-building with current mid-level donors, and only 3% say they’re doing well at this for potential mid-level donors.
Let’s be clear who these people are. “Potential” mid-level donors could be first-time low-dollar donors, first-time mid-level donors, or monthly donors.
If you have no way to identify these people, you can’t establish a stronger relationship with them. But as the study found, only 19% of staff and leadership believe their nonprofits have an intentional strategy for treating mid-level donors differently.
In other words – they are getting lumped in with everyone else. And you can bet your recurring donor dollars that your mid-level donors feel this neglect.
Strategies to Strengthen Relationships with Mid-Level Donors
Mid-level donors should be communicated with using the same strategies as low-dollar donors –at first. Gratitude still matters. But personalized gratitude matters more.
Bloomerang wrote a great article with tons of ideas for how to thank donors in personalized and ongoing ways. This is especially important with mid-level donors.
Include giving amounts. Mention when they gave, what they gave to, and any other details you might know about them. It just takes an additional sentence or two in a thank-you letter.
Does this take more time? Yes. But anyone who gives you $500 is worthy of extra time. Do you want them to give another $500? Do you want them to give $1000? Ignore them, or treat them like everyone else, and you can be quite confident they won’t.
The other key with mid-level donors is continuous and personalized outreach.
Use email in particular, due to its lower cost, and send out consistent communications. But also – ask the donor if they want to keep hearing from you with email. Get permission to keep talking to them. Give opportunities for them to get further involved.
Make offers, such as
Here are 31 ideas for how to nurture mid-level donors.
Why do this? Because mid-level donors can become major donors. The ones who respond to these sorts of outreaches are far more likely to become major donors, assuming they qualify in terms of their net worth.
The ‘Better Way’ study gets a little better for major donors. But only a little. And when your numbers in the other categories are as dismal as reported, it’s not much of an achievement to score higher here.
With major donors, 28% of organization staff and leadership feel they are highly effective at relating with their current major donors. Again – these are your existing major donors, people who provide the lion’s share of your budget if you’re like most nonprofits. 28% is…abysmal.
Even worse, just 6% think they’re doing well with potential major donors. It’s hard to identify, qualify, and cultivate new potential major donors if you have no methods in place to make outreach and build relationships with them.
Along the same lines, 58% say their organization does not have a good strategy for treating major donors differently.
But a donor who gives $20,000 IS different – very different – from a donor who gives $20. So you should have a strategy in place for treating them accordingly.
Strategies to Strengthen Relationships with Major Donors
Each major donor will have different interests, needs, preferences, and reasons for giving to and getting involved with your organization.
Your goal in building relationships with people should be to know each of them on a personal level. This means learning things such as:
This is big stuff.
How do you get to this level of communication with anyone, let alone a current or potential major donor?
Even more challenging, how do you do it with all the other major donors in your caseloads. Even trying to communicate at such a personal level with 20 donors would be quite challenging. How many gift officers have just 20 people in their caseloads?
MarketSmart exists to solve this problem, because building and deepening relationships with your major donors should be one of your top priorities, and most organizations struggle to do it well, as you have seen.
Why is this so important?
Why Major Donors Are Unique
We’ve already said that major donors represent the great majority of most nonprofit budgets. But how much a majority?
A somewhat older study found that over 80% of donation dollars come from donors giving $250 or more. And these days, $250 is a low threshold. If you raised it to $1000, the percentages would be even more striking today, as we have explored in other writings including our Fundraising Climate Change report.
This older study also found that donors who gave over $250 also had far higher retention rates than donors giving less than that. This was true of new donors and repeat donors – meaning first time and repeat retention. So bigger donors retain more often, and give almost all the money most nonprofits raise.
But here’s where it gets interesting.
Only 33% of new donors giving over $250 gave a second gift. While this was far more than the 11% retention rate for low-dollar donors, it still means that two thirds of larger-dollar donors did not give a second gift to human service organizations.
So yes – major donors supply almost all your funding. But at the same time, a large percentage of one-time major donors never make a second gift.
This is a huge lost opportunity for stabilizing and growing your fundraising. And it’s why you need to make special efforts to reach out and build relationships with major donors.
As mentioned earlier, the problem with managing so many major donor relationships is the time, energy, and staff hours required to do so.
How do you keep up with so many different people?
How do you keep their information updated?
How do you keep each donor’s information separate?
When you make outreach, do you have a way to quickly remind yourself what you spoke about in previous interactions?
And, how can you keep track of emailed communications – and the donor’s responses – over the many months and years you’ll be cultivating and stewarding this relationship?
MarketSmart makes all this possible through our AI-fueled, personalized, automated donor outreach and communications system. We call it engagement fundraising software.
It sends out personalized communications to each donor, responding in kind based on their previous engagement activities and responses. Then, it scores them on their engagement level so you know where each donor sits in terms of who to prioritize for personal outreach.
You’ll also know who is open to talking about major gifts, who has wealth assets and is willing to discuss them, besides just cash which tends to be a smaller proportion of their wealth.
And you’ll know other valuable information, such as which supporters are childless.
If you want to increase donor retention – especially major donor retention – our software will be one of your most valuable and rewarding tools. Your gift officers will love it, because it will free them up from so much of the tedious, data analysis work they don’t enjoy. It will free them to spend more time actually talking to major donors and prospects identified and qualified by the software automation.
And, donors will feel heard and valued. They will feel connected to your organization through the consistent, timely, relevant, personalized, and respectful communications you’ll be sending them.
Watch this video to see how our system qualifies and cultivates major donors.
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