The idea that it is more cost-effective to re-engage current or lapsed donors than it is to convince new donors to give to your nonprofit probably isn’t news to you. But, as with most common knowledge, the reasons why are often forgotten or just never really understood in the first place.
There are a lot of blog articles out there that mention that keeping donors requires fewer resources that signing up new ones, but not a lot of them explain why. And, fair enough. These days most people want solutions more than explanations. But, we think that understanding the why will help you implement and tailor solutions that make sense for your nonprofit.
To really understand why it’s financially smarter to re-engage current or lapsed donors, we need to take a look at the business of acquiring and keeping new customers.
We know what you’re thinking: “But nonprofits aren’t the same as for profits!” That may have been true a few years ago, but these days the similarities are, well, pretty similar.
To get started, here’s a bit of a TL;DR:
- Finding the balance between investing in current, lapsed, and new donors is a struggle most small, medium, and large nonprofits need to deal with.
- It costs nonprofits about 10 times more to bring in a new donor than it does to keep an existing donor.1,2
- Most nonprofits have a lot of room for improvement when it comes to re-engaging current or lapsed donors.
Only 45.5% of donors who gave to nonprofits in 2016 made another gift in 2017.1
- An increase in donor retention by just 5% can lead to a more than 25% increase in donations.3
- Donors are more likely to contribute to a nonprofit they trust—which is why it takes a lot more effort to convert a new donor than to hold on to a loyal one.3
- You can learn more about what people like about your nonprofit from current donors than you can from new donors.
- A free, simple fundraising platform—like, say Zeffy—can make it easier for donors to give and for nonprofits to stay in touch with current and potential donors.
When it comes to nonprofits retaining donors, what is normal?
In business—yes, even the “business” of running a nonprofit organization—some donor lapse is normal. But there is one big difference between the nonprofit and for-profit sectors: for-profit businesses take customer attrition seriously and nonprofits often don’t have the resources to.1
Attrition measures the reduction in the number of [donors] over a specified period of time.4
So, what is considered a normal donor attrition rate? The average donor retention rate across the nonprofit sector is somewhere between 40% and 45%. In other words, for every 100 donors who give, only around 40 will give again next year and of those 40 half will churn within six months of their first (and only) donation. All that means that almost 70% of donors give only once to your organization.5 So, for nonprofit organizations, normal isn’t necessarily good.
To solve this problem, your nonprofit needs to understand why donors leave your organization.
So, what causes a donor to leave in the first place?
Just like donors can give to your organization for more than just one reason, they can stop giving for more than one reason as well. But, the good news is: there are steps your nonprofit can take to keep donors engaged.
1: Focusing too much on finding new donors and not enough on keeping your current donors.
What’s the point in bringing in new donors if you’re not going to keep them?!
You know when you sign up for a new service and you get a lower price for your first year or two, but when it comes time to keeping you around after that, well, it’s almost like the company doesn’t really care if you stay or not… Nonprofits can fall into that same practice by focusing too much time and effort on bringing in new donors and not enough on keeping current donors engaged.
We’re not saying new donors aren’t important—they are! But, it’s just as important (if not more once you realize how much time and money you’ll save) to keep treating your current donors just as well (if not better). After all, if you’re losing donors faster than you’re replacing them, donor acquisition can feel like a loosing battle.
2: Failing to follow up—AKA forgetting to thank your donors.
Let’s start this section off with an impressive, but not at all surprising, fact: 96% of customers (and in the case of nonprofit organizations, donors) say customer service is important when it comes to brand loyalty. So, why is this important?
Loyal donors are 5 to 10 times more likely to donate again and 4 times more likely to refer a friend.6 AKA, treating your donors like people by acknowledging the good they are doing, saying thank you, and reminding them of what their contribution has helped accomplish can have a huge impact on donor retention.
We know, this probably isn’t news to you—but, it is a simple solution that is easy to overlook.
3: Nonprofits choosing to not invest in overhead.
Just like the nonprofits that use our software, we’re obsessed with overhead. Why? Because it’s another huge difference between the for-profit and nonprofit sectors.
The for-profit sector has always understood the importance of investing in overhead: talented talent that believes and cares about your cause, communications to stay in touch with donors, marketing to attract new donors, technology to make it all doable and reduce costs, the list of tools and benefits is long. But, nonprofits have always been judged on the amount they invest in overhead.
Investing even a little in donor retention can have a huge impact on your fundraising.
4: Not having a donor retention plan.
Wait. A donor retention plan? Yes. A donor retention plan. Why your nonprofit needs one is pretty self-explanatory: to retain donors. But, that doesn’t explain what it is.
So, ChatGPT defines a donor retention plan as “a strategic approach that organizations, typically nonprofit or charitable entities, use to maintain and enhance their relationships with existing donors.” No surprises there.
A donor retention plan is used to encourage donors to continue supporting your nonprofit by building and maintaining strong, long term connections, acknowledging donor contributions, and reminding them of the impact their contributions have.
We get into the nitty-gritty details of a donor retention plan in our article: What is a donor retention plan and why does every nonprofit need one? (We think it’s worth a read. But we are biased.)
Anyways, a well-crafted donor retention plan can lead to a more stable and sustainable funding base for your nonprofit organization.
5: Ignoring donor feedback.
Again, there is nothing new here… But the importance of asking for and listening to donor feedback is, well, too important not to mention. So, ignore this section at your own peril!
Creating a feedback culture is not only key for your professional growth, but some research finds it is also the most critical driver of positive organizational and financial outcomes.7
Feedback can be uncomfortable to hear. But, that doesn’t make it any less important to seek out. Some donors will give it freely, others will give it happily if asked, and some may not give feedback at all. Either way, it is worth asking.
It doesn’t have to be complicated, you can include a comments section on your site, ask for feedback in the footer of your newsletters and emails, call up current or lapsed donors and ask. Most people will be happy to share their thoughts.
We know you’re probably cringing right now. Most feedback isn’t all that helpful—it can be empty, unconstructive, too personal, etc. But, asking and actively listening doesn’t mean implementing. (Although your nonprofit may actually end up implementing some of the ideas.) Most donors just want to be heard.
Now that you know why nonprofits loose donors, how do you keep them engaged?
First, figure out what your donor retention rate is and why your lapsed donors lapsed.
Luckily there’s a pretty straightforward calculation to help you figure out what your nonprofit’s donor retention rate is:
Retention rate = (donors that gave this year ÷ donors that gave last year) x 100 (expressed as a percentage)
That’s it! Remember that a normal donor retention rate for nonprofits is around 40%.5 So, if your nonprofit is close to that, you’re doing a-okay. But, there is always room to improve.
Next, try and figure out how much signing up a new donor costs your nonprofit. (Also know as your donor acquisition cost.)
This step is a bit—okay, a lot—more complicated. But, it’s worth it to help you understand how important (and inexpensive in comparison) it is to keep your current donors engaged with your nonprofit.
To figure out your donor acquisition cost:
- Collect data from a recent fundraising campaign. Look for expenses that are related to finding new donors: marketing costs, advertising expenses, event costs, staff time, etc.
- Break down those costs.
- Marketing and advertising expenses (e.g., direct mail, online ads, social media promotions).
- Event costs (if you held events to attract new donors).
- Staff time spent on donor acquisition efforts.
- Creative design and copywriting costs for marketing materials.
- Any software or tools used for donor acquisition. (Zeffy’s 100% free event management and fundraising platform can help you save money!)
- Add up all the expenses related to signing up new donors.
- Determine how many new donors signed up as a result of the event or campaign.
- Divide the total cost of acquiring new donors by the number of new donors acquired: Donor Acquisition Cost = Total Cost / Number of New Donors
As an example, if your total acquisition expenses amount to $10,000 and you acquired 200 new donors through those efforts, the donor acquisition cost would be: $10,000 / 200 = $50 per new donor.
In addition to helping you understand how much it costs to sign up a new donor, knowing your donor acquisition cost will also help you understand how much you need to earn from each donor in order to break even.
Donor acquisition costs can vary widely depending on factors such as the type of fundraising campaign or event, the size of your organization, and the specific donor demographics you're targeting. By continually analyzing your donor acquisition costs, you’ll gain valuable insights into the efficiency and effectiveness of your nonprofit’s donor acquisition efforts.
How donor retention helps nonprofits invest more in their cause.
When you spend less on signing up new donors, you can invest more in your cause.
Fewer resources required to retain a donor doesn’t mean investing nothing on donor retention, it means investing a minimum in customer success and support teams to periodically check in on current donors, reach out to lapsed donors and sort out issues or bugs.
You may also have to offer free tickets to events every now and again and send the odd thank you letter. These regular measures are normally less expensive compared to investing your limited time and resources on ads and events to acquire new donors.3
Current donors are more likely to give more.
It takes more effort to convince a donor to trust your nonprofit that it does to convince a donor who has already given to give again.
Donors that know and trust your nonprofit are more likely to contribute more by volunteering, referring their friends and family, and yes, donating money. So, don’t be shy about staying in touch with your current donors. Offer them discounted tickets on events, ask them to share your nonprofit with their friends and family, send them the odd thank you letter or small token of your appreciation.
After all, current donors are 50% more likely to attend new events and 31% more likely to donate again.3,8
Donors are more likely to repeat their contributions when they trust your brand due to good customer service, ease of use or simply because the product solved their problem effectively.3
- Saravana Kumar
Now, we’re not saying your nonprofit can ignore new donors, it’s important to attract and sign-up new donors. But, it shouldn’t be donor retention versus donor acquisition.
So, when choosing how much to invest in acquiring and retaining donors, it's important to consider and compare a donor’s acquisition cost with a donors potential lifetime value.3
One last piece of (biased) advice for donor retention.
Existing donors are more likely to stick around and donate more often when they trust your nonprofit because of consistently good customer service and a fundraising platform that is really, really easy for donors to use.
More resources to help you re-engage lapsed donors:
Keep learning (our sources):
1. Donor Attrition: Why Nonprofits Lose Donors—And How to Bring Them Back.
2. Returning Customers Spend 67% More Than New Customers – Keep Your Customers Coming Back with a Recurring Revenue Sales Model.
3. Customer Retention Versus Customer Acquisition.
4. How To Calculate Attrition Rates for Employees and Customers.
5. A Guide to Donor Retention for Nonprofits.
6. The Currency Of Gratitude: Retaining And Building On Client Relationships With Gratitude.
7. Why Asking For Feedback Can Be A Key To Success.
8. Ignore Donor Retention Rates at Your Peril.