Maximize Revenue by Monitoring Donor Retention
One of the best ways to maximize fundraising revenues is to keep track of donor retention.
Even if it sounds tedious or you don’t like math, monitoring your donor retention rate is easy and very rewarding. If you’ve convinced yourself you’re too busy or you’ve avoided learning how to calculate your number of returning donors for fear of complex equations, fear not—anyone can do it, and it takes no time at all. You’ll find the benefits of doing so far exceed the effort.
While it can be easy to assume your donor retention rate is approximately X percent based on your gut or, worse, your memory, regularly monitoring the rate is the best way to know how you’re performing and what you’re capable of achieving.
Think of maintaining high donor retention like staying healthy and measuring your donor retention like going to your doctor for an annual checkup.
The effort and cost of maintaining strong donor relationships are far less than finding and building new relationships. Donor acquisition is still very important, and necessary whether existing donors remain active or not, so make sure you’re adding to an existing base and not working to replace lost relationships.
Don’t let the numbers fool you. Maintaining a donor retention rate as high as 80 percent could still spell disaster for your fundraising. Bloomerang does an excellent job on their blog of illustrating what can happen to your donor database with these kinds of numbers—with an attrition rate of just 20 percent and no new acquisition. Your entire list of donors can virtually evaporate in just five years!
Sadly, with an industry average attrition rate of approximately 40 percent, many would consider 20 percent to be a great accomplishment!
So, first and foremost, know your retention rate. Monitoring how the rate changes over time will give you a better idea of what types of activities impact the rate, which helps you determine how to improve and maximize revenue. Here’s how you do it:
Calculating Donor Retention
- Create a list of unique donors in a given time period—last year, for example. Count each donor only once, even if they gave multiple times in that period. Note: This method also works for individual months, appeals, campaigns, and events (ticket purchasers).
- Create a list of the donors who gave during your chosen time period and who gave again in the current period. At this point it’s easy to get distracted by those who gave in some entirely different period, but resist the urge for now. I’ll discuss in a future post how and why to evaluate those.
- To calculate the rate, divide the number of donors you identified in step 2 (for the current period) by the number of donors you identified in step 1 (from the previous period). The result is your donor retention rate. See the following example:
- Record your findings in a safe place—on a spreadsheet, for example—and schedule a recurring activity to conduct this measurement again in the future.
Monitor Your Progress
As you record your rate over time, you’ll notice fluctuations. As a best practice, you should record the details of your various fundraising activities during these periods of fluctuation so you can identify what efforts have had a positive or negative impact on donor retention. By monitoring your progress, you’ll soon find that you’ll begin taking donor retention into consideration more often and will make adjustments to positively impact the number of donors who make recurring contributions.
There is a fine balance between measuring retention too frequently and not often enough. Monthly is likely too often for most, yet doing so only annually makes it more likely you’ll lose sight of your goal between measurements and won’t remember to consider retention with each new fundraising activity.
If you’ve already been measuring your retention rate, or doing something similar, leave a note in the comments below and let me know how it’s working.