The Causes of Donor Attrition
What causes donor attrition?
Donor attrition is nothing new. But the latest trends for nonprofits and higher education institutions are alarming.
To a degree, donor attrition is natural. There's bound to be some change in the financial situations or interests of some supporters each year. But that doesn’t explain the major donor attrition numbers organizations have seen over the past few years. In fact, a recent study shows that more than half of all donors do not return year-to-year. That leaves a retention rate of only 45.5%. The data is even more staggering with first-time donors, where the attrition rate is 71% for offline donors and 78% for online donors.
So what’s happening in the industry that is causing this trend? Collapsing trust in organizations seems to be a major reason. Fundraising organizations aren’t alone in this struggle, and they may not even be to blame. After all, it seems every other story in the media today tells us reasons why we shouldn’t trust politicians, big businesses, or even other media entities. But addressing the trust crisis is still crucial for nonprofits and higher education institutions.
Why donor trust and confidence are so critical?
There is a lot of data that shows us how important trust and confidence in organizations are to prospective donors. According to a 2017 study by Give.org, 73% of donors say that trust is a very important factor when they decide whether or not to donate to a cause. But only 19% say that they “highly trust” nonprofit organizations - a number that continues to fall. And just 10% think that their trust in these institutions will rise over time.
With statistics and trends like this, it’s no wonder that fundraising organizations are struggling with donor attrition. Unfortunately, donor trust and confidence continues to erode. This is a problem that may keep growing and growing if strategic adjustments aren't made.
Measuring and Benchmarking Donor Retention Rates
How do your donor retention rates compare?
While the donor attrition problem is global, its effect on each organization varies. Since some natural attrition is unavoidable, it can be difficult to know exactly how your institution is faring.
Your fundraising team may be performing better or worse than average when it comes to donor retention. Even if you sit ahead of others today, there could be some important warning signs to prepare for.
Of course, much of the story can be told through your fundraising trends. Your team can only do so much to change the public’s perceptions of the entire industry, but you can certainly improve your own results incrementally each year. By growing donor trust and confidence over time, you can expect retention rates to follow suit. On the other hand, spotting dips in trust and confidence can point to an attrition problem around the corner.
Putting all of this information together can help your organization understand the true cost of your own donor attrition woes. How many fundraising dollars can you save by improving retention rates to the sector average? What kind of return on investment can you gain by prioritizing tasks that build donor trust and confidence? Many fundraisers struggle to get answers to these complex questions. The answers can be very impactful for your entire team.
Balancing Donor Acquisition vs. Donor Retention
What share of resources should go towards donor retention?
We know that donor attrition is a major problem. Many organizations believe that donor attrition is just a natural obstacle, and that the solution is acquiring more donors to fill the void. But as the retention rates of first-year donors are in the 20%-range, the vast majority of those donors will immediately churn. Then, your organization is simply back where it began. You're chasing after new donors again with expensive campaigns that only bring short term results.
That is not to say that you should ignore donor acquisition. It's a valuable initiative and deserves significant resources to identify and convert the right types of new donors. But too often, organizations overlook donor retention efforts. Since you have an identifiable pool of donors to engage in retention campaigns, they are typically much more efficient. And since they have an interest in your cause, it is generally much more effective.
Some of our Causeview customers have been able to achieve donor retention rates of 70% or greater. That has not required any major investment in advertising or promotions, just strong donor management capabilities, tracking the right metrics and the tools to build donor trust and confidence. Over time, the support from these retained donors will only grow. That will lead to more major gifts and pledges, which are unlikely to occur with the overwhelming attrition rate of newly acquired donors.
Understanding Donor Sentiment
How do donors feel about your organization?
If you’re ready to increase your focus on donor retention, it’s important to take stock of the major underlying factors: trust and confidence in your organization. When existing donors consider making another gift, there are two questions they typically consider. How much do they trust your organization to make good use of the contribution? And how confident are they that your mission will be achieved?
Understanding the answers to these questions gives your organization important insights. First, it can help you predict whether donors are likely to give again or to churn. When their answers are very positive or very negative, it also suggests what they are likely to say to others. That kind of word-of-mouth can affect both your donor acquisition and donor retention results over the long haul.
You can begin to improve these perceptions right now, but major progress is unlikely to happen overnight. After all, it takes a lot for any single act to change the attitudes of a large group. But with effective donor management tactics designed to grow the trust and confidence in your organization, we are confident you can steadily improve this sentiment.
Strategies to Improve Donor Retention Rates
How can you boost your donor retention rates?
Donor retention is bound to occur when you’re providing great experiences at every supporter interaction. That includes engaging donors with information that matters to them, flawlessly capturing and displaying data, and onboarding donors with valuable, educational materials. From there, you can learn how donors feel about their experiences and work to build upon them.
Tracking donor sentiment levels will help you know that you are making an impact that will help retention rates going forward. You can survey your donors a few times a year, and you should see an upward trajectory if you’re using effective donor management tactics. If there is a dip in one survey or another, it may be a sign that an adjustment is needed before it takes a toll on your fundraising dollars. Plus, donor sentiment surveys also show your supporters that you care about their opinions and will make an effort to do better in their eyes.
How can you effectively report to your donors?
For the vast majority of donors, that means providing more information about the impact of their contributions through donor reports and status updates. You should provide these frequently, and they should be as relevant to each donor as possible. When possible, include data on the specific initiatives they have donated towards and any allocations they have selected. They should also be consistently formatted so that donors can compare the progress made from report-to-report.
For these reports to be as effective as possible, they should also connect your organization’s initiatives to larger societal goals. For example, the United Nations Sustainable Development Goals (UN SDGs) set out 17 overarching objectives for organizations to strive towards by 2030. These range from poverty and hunger to clean energy and climate action. Each goal also contains a series of metrics that allow progress to be tracked. In your donor reports, you can use these UN SDGs to show not only the progress your organization is making but how it impacts larger goals that have been universally agreed upon. This shows your donors that not only are you succeeding at hitting your organization’s own objectives but that it is making a difference in the areas that the United Nations believes are most impactful.