The nonprofit sector has a problem. And it’s a major problem. It hurts nonprofits’ bottom lines, affects their ability to keep their programs funded, and leads to wasteful spending. The problem is donor attrition. And here at Mightycause, we feel we need to talk about it.
Donor Attrition by the Numbers
The 2018 Fundraising Effectiveness Report provides a wealth of information about nonprofit fundraising trends. The report is a joint project between the Association of Fundraising Professionals and Urban Institute. And overall, the news is positive, because they reported 2% growth in nonprofit giving in 2017!
But even though there was growth, there is a major downside: donor attrition. The overall retention rate for nonprofits in the study was under 50%. That means only 45.5% of donors who gave to nonprofits in 2016 made another gift in 2017.
And, the report goes on to say, “every 100 donors gained in 2017 was offset by 99 lost donors through attrition.” That means for every 100 donors you gained, you lost 99. Scary, right?!
Let’s take a look at why this happens … and what your nonprofit can do to prevent donor attrition.
Top Causes of Donor Attrition
Okay, so donor attrition statistics are scary. We know! But it’s not hopeless. And, in business, some attrition is normal. But the nonprofit sector needs to take a cue from their for-profit counterparts and take attrition seriously.
So, what’s going on? What causes donor attrition?
1. Focusing too much time and effort on bringing in new donors
New donors are important! We get it. It’s exciting when you’re able to turn new people on to your cause, engage them in a campaign and get them excited about what you do. But when you throw all your time, effort and fundraising budget into donor acquisition, it can lead to donor attrition. And here’s why that’s no good.
New donors cost more
Most studies agree that it costs nonprofits about 10 times more to bring in a new donor than to keep an existing donor. And the 2018 Fundraising Effectiveness Report backs this up. For each 100 new donors nonprofits brought in, they lost 99. So, while you were spending time and money courting the new kids on the block, the old ones (who were already sold on your cause and showed up to support you) simply left.
And those donors would have required less money and less effort to keep engaged in your cause.
Donor attrition undoes the good that donor acquisition does
It’s very simple: What’s the good in bringing in new donors if you’re not keeping them?! The importance of new donors is that they are potential long-term supporters who will show up to support you time and time again. But if you’re losing them to donor attrition, it can make donor acquisition feel like a fool’s errand.
2. Failing to follow up
This can mean a few things, so let’s use a hypothetical situation to clarify how nonprofits lose donors by failing to follow up.
Let’s say you run a private, nonprofit animal shelter. Your washing machine breaks down. With dogs and cats producing new piles of dirty laundry for your staff and volunteers to wash every single day, there’s no question about it. You need a new washing machine. So you start a fundraising campaign on Mightycause for a shiny new industrial washing machine. And within a week, you’ve got the money you need to buy the washing machine.
Not personalizing your thank you
At Mightycause, we aim to make acknowledging donors easy. We take care of sending tax receipts for you, and we automate the first thank you by embedding a customize message into the email with donors’ tax receipt. And when we crafted our new Donor Experience tool, we made sure to include new ways to thank donors, such as a thank you page where we send donors after they complete their donation.
But it’s a mistake to think that your thank yous end there! There is no such thing as thanking a donor too much. Your animal shelter should be sending personalized emails, calling donors, mailing thank you cards with handwritten notes and going above and beyond to thank the people who help you buy the much-needed washing machine. (I mean, how cute would it be for donors to get a card written by one of the shelter animals with a picture included, signed with a paw print?!)
Failing to close the loop
So, at your animal shelter, your campaign was a massive success because you did a great job demonstrating the immense need for a washing machine. It’s not a glamorous ask, but you made it emotionally compelling. You not only posted pictures and video of the animals who were counting on you for clean bedding, but showed the staff and volunteers who were spending twice as long trying to provide clean bedding without a working washing machine. And, just like that, you drew in tons of new donors!
But after the goal was met, and the machine was purchased, you never mentioned the washing machine again. You had lots of laundry to get caught up on, and that same week, you took in an injured dog in need of some specialized veterinary care that you had to start fundraising for.
And because you drew people in, got them emotionally invested in the washing machine, made them care about that washing machine, and never followed up to show them how much their contribution meant to your animal shelter … you probably lost a good chunk of those new donors. Because you didn’t close the loop (which could have been a simple video of staff and volunteers saying thanks, or pictures of animals enjoying their clean bedding), your donors didn’t get the emotional payoff from their donation. And that means they are less likely to come back to make another donation.
3. Not investing in fundraising
This one is hard for small nonprofits especially. And we totally understand that at Mightycause, because we were built to serve small nonprofits. But even nonprofits that aren’t entirely volunteer-run and have full-time development employees can be hesitant to invest in fundraising. And that, unfortunately, leads to donor attrition.
The dreaded “overhead”
One of Mightycause’s employees worked for a big, national nonprofit. And one of the most common questions that nonprofit got from donors was, “How much of my donation goes to overhead?” The nonprofit had quick statistics at the ready, but it’s a huge concern for nonprofit donors across all sizes and budgets. “Overhead” just sounds bad, doesn’t it?!
“Uncharitable” author Dan Pallotta breaks down the misguided concern about “overhead” in his TED Talk, “The way we think about charity is dead wrong,” which we highly recommend watching.
Nonprofits need talented people to run them. And in order do good in the world, nonprofits need talented people to create and run programs. And in order to keep those programs funded and those talented people on staff, nonprofits must fundraise. Sometimes that means paying development staff, or investing in the correct tools, but it’s necessary for “overhead” to exist in order for nonprofits to grow.
When nonprofits fail to spend money on “overhead” that matters, they lose donors and stunt their own growth. The 2018 Fundraising Effectiveness Report recommends that nonprofits make “significant, incremental increases to their budget, by category of fundraising effort,” “measure the corresponding incremental return on those investments (ROI),” and make additional increases based on the performance of those investments.
Not having the necessary tools
There comes a point in every nonprofit’s life when the tools that served them well in their early days no longer do the trick. Tracking donors in an Excel spreadsheet may work when you have 100 donors, but when you reach 1,000, that method becomes untenable. But fear of investing in fundraising tools can keep nonprofits stuck in old routines and tied to old tools that no longer work for them.
Whether it’s resistance to investing in email marketing software (or marketing automation software that allows you to do more), insisting on sticking with old donor tracking systems that have been outpaced by the growth of your donor list, failing to invest in the appropriate fundraising tools can lead to donor attrition.
4. Not creating a donor retention plan
It’s not enough just to realize the importance of donor retention. And you can’t stop at saying, “Okay, we’ll follow up better!” You need a plan. A plan that not only outlines the scope of the problem of your organization, sets goals for donor retention, and determines what metrics you will use to measure your success, but a plan for specific actions your nonprofit will take that retains donors.
Donor retention (the flipside to donor attrition) requires an organized effort. And your donor attrition rate can be systematically improved over the course of a quarter, a year. But if you don’t understand where your nonprofit is at, don’t crunch your donor attrition/retention numbers and think through an action plan for your nonprofit, you will continue to lose donors.
5. Not listening to feedback
You’d be surprised how many donors are lost because of things that have nothing to do with a nonprofit’s mission or communications. Things like broken links on a nonprofit’s website, a cumbersome donation form, not being sure where or how to donate, being unable to donate with certain credit card types or an unsecured website can be huge stumbling blocks for donors that can be easily fixed.
But if your nonprofit is not asking donors for their feedback, or isn’t easy to contact with feedback, you could be losing donors for reasons you could fix in a matter of minutes.
Improving Donor Attrition
So, now that we’ve been through the top causes of donor attrition, we can move into how to prevent it.
1. Assess your donor attrition and retention metrics
Before you can tackle the issue of donor attrition at your nonprofit, you’ll need to first sit down, crunch the numbers and find out where you’re at. Here’s what you’ll need to know:
- Your donor retention rate for 2016 and 2017
- Your donor attrition rate for 2016 and 2017
You can calculate those by first pulling your donation report for each respective year. For 2016’s donor retention rate, you’ll need to pull 2015 and 2016 cumulative totals. For 2017, you’ll need to pull 2016 and 2017 cumulative totals. You calculate donor retention by finding the number of donors that gave in one year (say, 2015) and then finding how many donors from that same pool donated in the following year (2016). You find your donor attrition rate by calculating the reverse.
For Mightycause Premium customers, we’ve got good news: You can find your donor retention rate calculated for you right in your analytics!
2. Get feedback
So, if you’ve been slacking on collecting and listening to feedback from your donors, now’s the time to find out what they’re thinking! You can send out a survey (sites like Survey Monkey and WuFoo let you easily create online surveys) and send it out to your donors. Here’s what you should find out:
- How their donation experience was (you can have them rate it on a scale to quantify their feedback)
- What stumbling blocks or barriers they encountered to donating
- How they found out about your nonprofit
- Feedback about the level of contact you made after their donation
- Suggestions for improvement
We suggest allowing for some freeform answers to get good, insightful feedback but you’ll want to make the process of responding to your survey quick and easy for donors! And you’ll want to focus on numbers and easily quantifiable answers so you can accurately measure donor sentiments and trends among responses.
Once you’ve gotten feedback, you’ll want to ensure that you are regularly collecting donor feedback and incorporate it into your plan to improve donor retention.
3. Create a donor retention and recapture plan
Once you know where you stand, both with the data and your donors, you can formulate a solid plan to keep the donors you have and recapture lapsed donors. Take the feedback you got in the survey, and take a long, hard look at what you’re currently doing to keep donors engaged in your work. And then create an action plan based on the items your team and your donors identified.
These are the categories of donors you need to pay attention to:
|Laspsed New Donors
|Lapsed Repeat Donors
Recapturing Lapsed Donors
Recapturing lapsed donors can be tricky, but it’s not impossible! And, good news, it’s less expensive than bringing in new ones. So, it’s well worth the effort.
Here are steps you can take to recapture lapsed donors:
- Identify them. Obviously, if you want to recapture lapsed donors, first you’ll need to figure out who they are! Any donor who made a donation last year and has not returned to donate this year is a lapsed donor. If you’re planning a large-scale effort to recapture lapsed donors, you may want to go back several years. Find out who they are an organize them in a spreadsheet, with the most up-to-date contact information you have.
- Prioritize them. All donors are important. But some donors are more important than others, at least when it comes to recapturing them. Your Lapsed Repeat Donors (meaning, people who were retained and then did not come back another year) should be your highest priority, because they have the highest potential for you to recapture them. You will also want to look at the levels at which these donors gave. Recapturing a donor who gave at the $500 level will be a priority over a one-time donor who gave $10. And the more recently a donor gave, the more likely you are to be able to recapture them. (So, lapsed donors from 2014 may not be a hot prospect.)
- Reach out. How you reach out depends on your nonprofit’s communication style and the bandwidth of your staff. But once you’ve identified and prioritized your lapsed donors, it’s time to reach out.
Outreach to lapsed donors
So, one thing that won’t work to recapture lapsed donors is a blanket approach. You’ll need to personalize it! Whether you reach out with a phone call, or a handwritten note, or an email, you’ll want to make sure you tailor your approach to each specific donor. When a lapsed donor knows you’re speaking to them directly as individuals and asking them to come back, they are more likely to respond than they would be if they received an obvious email blast. (And you can use email marketing personalization — just be careful! If your personalized email says, “We miss you, FirstName!” … let’s just say that donor is not likely to be recaptured.)
Make sure you have a low-pressure opportunity to reconnect with your nonprofit. If you have an event coming up you can invite them to, or a newsletter they can sign up for, those are great reconnection opportunities. You can also ask for their support with an ongoing campaign, but tread carefully! Make sure you emphasize that you want to reconnect ahead of asking them for money.
We also recommend doing your due diligence to find out all you can about a lapsed donor. For instance, what was the last campaign they gave to? How did they give? Do they seem to show a heightened interest in one area of your work? Use that knowledge to tailor your outreach!
Donor retention planning
Take all of the feedback you’ve collected, and all the trends you’ve identified, as well as insights from your staff, and devise a plan to keep donors engaged. Choose metrics you can use to evaluate your success throughout the year.
Need help with donor engagement and retention? No problem — we’ve got a blog for that!
4. Invest in the right tools
Regardless of where your Achille’s heel of donor attrition is, there are ways you can upgrade that will help you engage and retain donors better. Mightycause Premium is a cost-effective, powerful upgrade for nonprofits. Our subscription plan has prices to suit all budgets, and here’s what you’ll gain with a subscription:
- Rich analytics, include your donor retention rate
- Supporters records to help you track donors better
- Volunteer management tools
- Data integration through Data Connect
- Custom donation page to capture more donations on your website
- Additional donor data collection that will help ensure you have more ways to communicate with donors
- Freedom from platform fees
You can take our Advanced plan for a free test drive and see firsthand how you can super-charge your fundraising. Learn more and see these tools in action at a live demo!
5. Invest in staff and engage volunteers
Often, nonprofits tell us at Mightycause that they just don’t have time for development work. But, as we’ve discussed, development work is essential to running a successful nonprofit. So, when you’re looking to increase your donor engagement and improve donor attrition, you’ll need to invest in staff.
Whether it’s a part-timer or adding a full-time staff member, or just training and repurposing existing staff members to do development work, it’s important to make sure that taking care of your fundraising efforts and donors is an everyday part of your nonprofit.
And if your nonprofit is small and can’t afford to add employees? Reach out to volunteers! Many nonprofits only think of volunteers as folks who can help with one-off tasks or greeting visitors or events or grunt work, but you could be wasting a brilliant business-minded volunteers on other tasks! Find out from your volunteers if they have an interest in fundraising, or even better, experience. Many sales and business skillsets can be easily transferred to nonprofit fundraising. Volunteers can help you crunch the numbers, formulate a plan and put it in motion. You can use Mightycause’ volunteer management tool to post an open volunteer position in development, work with your volunteer coordinator, or even ask your board of directors for any leads!
Make the Effort
The nonprofit sector has a problem … but there are plenty of solutions! At the end of the day, your approach to solving the problem is dependent on the nature of the problem at your nonprofit, your resources and your style. But with a thoughtful, data-focused, systematic approach, you can engage your donors better and prevent them from adding to your nonprofit’s donor attrition rate.
Want to learn more?
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