“Everybody wants happiness, nobody wants pain; but there can’t be a rainbow without a little rain.” – Dolly Parton

Yesterday, rainbow; today, rain…

Donor retention is at best flat and generally down.  We are stuck at 45.5% donor retention for the second year in a row, down from 45.9% in 2015 and down from 46.7% a decade ago.  Is it up from the doldrums of the Great Recession?  Yes, and that’s what the AFP focused on in their release:

“Annual donor retention also increased to 46%, which means that nearly half of all donors who gave in 2016 also gave in 2017 to the same nonprofit organization.  This figure is an improvement from the annual donor retention rate of 41% reported in 2009.”

I would argue, however, that saying retention is better than during the Great Recession is like the Taller Than Kristin Chenoweth Award; you not need be very tall to win.

Moreover, we are bound to a range of more than half of our donors leaving us each year:

We can and must do better, lest we (pick your metaphor: stay on the hamster wheel, keep filling a bucket with holes in it, bailing water out of the boat, etc.)

This is also worrisome, given that:

New donors are down.  It’s challenging to do year-to-year comparisons in raw numbers in reports like this where some organizations are coming in and some are leaving the data set.  That said, looking at the fourth quarter FEP report, we see gains in new retained donors (yay!), repeat retained donors (outstanding!), and recaptured donors (huzzah!).  But we also see a 19% decrease in the number of new donors into organizations, offsetting these gains.

(OK, not entirely offsetting.  There’s a .7% increase in the number of donors.  But there was also a .7% increase in the U.S. population.  No real gain here in donor numbers.)

This may have a counterintuitive effect, in that next year’s retention numbers are likely to go up.  After all, new donors are the most likely to leave.  If there are fewer of them, our overall retention numbers may increase because we have a greater proportion of long-time donors less likely to leave.

However, as any nonprofit who has had the wise (#sarcasm) idea of cutting acquisition for a year to make ends meet can tell you, this leads to what I call the soggy mattress problem: fine on both sides, with a dip in the middle.  That dip will move throughout your file with effects reverberating for years.  I hope this is not what faces us as a sector.

Yes, it’s more important to look at retention than acquisition.  But we have to have enough pipeline so that there are donors to retain in the long term.

Recapture rate is down.  This is a consistent problem – from 2013 to today, it’s gone from 6.9% to 6.2% to 5.6% to 5.3% to 5.1%.  This means that when donors leave us, they are more likely to leave us forever.

Gains may not be sustainable. I mentioned that Q4 2017 basically saved the year.  But there are some outlier events that may be causal here:

• While Hurricane Maria made landfall in Puerto Rico September 20 and two hurricanes had battered the continental United States before that, a decent portion of the disaster giving occurred in October and after, as donors saw the effectiveness (or lack thereof) of government response.
• Changes to the tax code. As I’ve noted, I’m often somewhat skeptical of this as an explanation given that taxes are a benefit to, not core reason for, giving.  However, taxes can change timing and structure of gifts.  It would explain why it was $1000+ donations that buoyed Q4 growth (46% year-over-year increase) while mid and general donations retracted.  It may be these donors aimed to get their gifts in while they were still usable for itemized deductions.

While there may also be a temporal shift in giving as discussed yesterday, these would be less replicable reasons for the year-saving quarter.

Between yesterday’s and today’s good news/bad news debate, I’d say the report is generally good, but that there are clouds on the horizon.  How do we work to address these?  More on this tomorrow.

Nick