Donor Retention and Loss: A Tale of Two Charts (actually 5)
Which chart would you rather show to your CEO, finance chief or Board?
The answer is obvious and also underscores an innate human condition – we hate the thought of loss. In fact, we have such a subconscious aversion to loss that we will irrationally choose to frame everything as gain even though the two charts are based on the exact same data; number of donors acquired and number of donors who remain each year vs. donors acquired and lost each year.
This subconscious bias to frame it as ‘gain’ (the first chart) with number of donors kept creates a false sense of comfort and hides the industry problem – the number of donors we lose.
The focus on the retention number means the center of attention is on what we kept, not what we lost even though the latter is the far bigger group– and a percentage change on that group has a much larger impact on the financials of the business than the same percentage change on the group we keep.
To underscore the mental distinction, consider the interpretation at year 4:
- Retention chart: We keep 90-95% of the donors in year 4 (meaning those donors who are still around to keep…which ain’t many)
- Donor Loss chart: We only keep 10 to 15% of the donors we acquired four years earlier.
Focusing on the group we kept (the retention chart and mental focus) creates another, more insidious problem – this group, almost by definition, is more innately invested in the cause than the much larger group we lost. Those who are innately loyal and have some connection to the cause are the low-hanging fruit: the ones who are easy to keep because they will tolerate a marketing, fundraising and communications experience that is far from their preferred one.
And what about the much bigger group who leaves every single year?
Surely the ‘donor journey’ we’ve created in order to show impact and make them feel good with warm glow (with lots of “you” pronouns) can’t be a part of donor loss problem?
This chart shows the correlation between years on file and number of communications received over their lifetime. The correlation coefficient is exceptionally high, .9 (on a scale of -1 to 1). It is almost a perfect correlation and while it is true that correlation does not equate to causation; causation does equate to correlation.
This is a cause and effect relationship that visually shows the charity fundraising business model:
If a donor exhibits a pulse during any 12, 18 or 24 month stretch they will receive another 12, 18 or 24 months of communications. Said differently, a donor showing life in a given year (X axis) is what causes another year (or two) of communications being sent (y axis).
Many in the sector see this and draw the exact opposite and wrong conclusion – that the stuff we send (Y axis) causes people to stay. Volume – send more, make more. This only measures our “success” among the tiny group who stick around (the retention version of the chart), instead of the failure, the much larger group that leaves (the attrition version of the chart).
Evidence for the fallacy is found in this chart, showing the relationship between tenure (i.e. my decision to stick around for another year) and the number of communications sent in a given year (any year). This shows a moderate, negative relationship (-.33), which means that in any given year the number of communications a donor receives has a negative bearing on their decision to stick around for another year.
More mailings in a given year (any year) increase the irritation and frustration felt by donors (albeit not linearly).
And not an isolated handful, but most donors.
Sending more stuff creates more irritation. And guess what? It often doesn’t matter if the communication asks for money or not. The internal machinations and distinctions between asking versus “stewardship” and no-ask touchpoints often fails to exist in the real world. Why? We’ve sensitized or otherwise conditioned donors to expect that anything they receive is asking for money and it takes way too much mental motivation and effort for the donor to have the wherewithal and time to review a given communication to judge its intent and purpose; it is much easier to assume it is yet another ask for money, which is exactly what happens.
Who sticks around through year after year of irritation? Well, not many folks as it turns out (donor loss). Those who do (donor retention) are only the most loyal, the ones who have some innate, pre-existing connection to the cause for starters. Or, the ones simply better able to tune out the frustration and give in spite of it.
We only measure our success, we only talk about our success and we only share our “success” with the Board. I’m reminded of a for-profit sector client who measured customer satisfaction year over year and got a similar chart to the charity sector retention chart. Management thought this was outstanding, a clear indication of business health.
The problem? Only the highly satisfied were sticking around. This company was hemorrhaging customers and went bankrupt despite a trendline up and to the right.
Kevin
13 responses to “Donor Retention and Loss: A Tale of Two Charts (actually 5)”
Behavioral Science Q & A
Integrating an individual giving appeal with other communications from a charity can have both positive and negative effects, and the outcome largely depends on how it’s executed. Advantages of Integration Brand Consistency: Maintaining a consistent appearance and messaging across all communications can reinforce the org’s brand identity and strengthen brand recognition and trust among your […]
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I’m not aware of any in-market tests specifically comparing recurring vs. gift frequency language. I suspect the answer might not be the same with all gift frequencies, nor with all people. It sounds like a great opportunity for you to test and find out what works for your audience. Based on the literature, here’s a couple […]
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Based on what we know from existing data, those renewal notices can actually be pretty effective in getting people to donate. They tap into our psychology – creating a sense of urgency, reminding us of past support, and using personalization to make the message hit home. They’re playing on our natural tendencies to feel obligated […]
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Interesting question. I had a quick look at the testing done on this topic. On the positive side, in all cases, over half of donors decide to cover the fee. In some cases, it goes as high as 65%. Not a negligible percentage at all. Here’s another test from iRaiser showing consistent results (see point […]
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There’s just one thing to consider when designing a supporter journey: the supporter. More specifically, you need to take into account: Who the supporter is i.e. their identity, which is the reason they support this cause, and their personality, which describes the way they “see” and process the world. These will determine the kind of […]
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I’m not an expert in this but a quick search surfaced this article on the effect of tax reforms on 2019’s charitable giving. The researchers didn’t find a reduction. Actually, they observed an “increase in charitable contributions in 2019, even with the lower tax rates and the dramatically smaller number of taxpayers who itemize their […]
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Interesting charts, Kevin, but what’s the solution?
If you can’t communicate with your donors in any way shape or form, you can’t keep them, no matter how you slice and dice it or how you present the charts.
So many donors you don’t have an email address for, no matter how hard you try to get it, so mail and phone are the only ways to reach them (if you even have a phone number).
I’d love to see the impact of doing a donor survey
I’d love to see the impact of making a phone call. or sending a text message.
I’d love to see the impact of engaging donors via email and mail combined.
what does the research show?
Hi Erica. The solution is, in our view, digging deeper into the why of behavior and letting that be the guide. We know of many a test/control where sending nothing – literally nothing – to monthly donors beat the control (i.e. sending something) on the only metric that really matters for that audience, retention. That can seem depressing and while nothing can be a random something, we’d argue there is hope for “something” if it’s more grounded in theory and evidence. For example,
1) there is ample evidence that pulsing or sending bursts of communications and then nothing (a ‘breather’) is the best way to drive response while reducing irritation. But, this isn’t the norm. The norm is filling up the calendar.
2) channel is tactical and a donor preference, it has nothing to do (directly) with the why of behavior. Not saying it doesn’t matter but if it does, why not assign value to it at the point of acquisition? For all our clients doing monthly donor acquisition we collect all manner of important data beyond what is currently treated as “important” – i.e. payment details. I know Identity, Commitment, experience ratings, email address and channel preference. For everybody.
3) identity is about their “why”. The communication will always be sub-optimum if it and the journey are one-size fits all. It doesn’t matter if you use their “preferred” channel if the content is generic and generic rules the day – one size fits nobody. Though not for our clients…which I raise to note this is all doable and possible and is being done.
4) we have got to stop thinking about ‘newsletter’ or ‘phone call’ or “survey” or “this” or “that” internal generic label, comm as being best practice. The only best practice is becoming expert in the why of human behavior and decision making (i.e. behavioral science) and using that evidence base to get beyond one size fits nobody with testing and creative ideas bound by evidence. There is no perfect answer but how we do business now is wildly imperfect.
#2 is solid gold.
Thank you (in this order) Erica (for asking the right question) and Kevin (for getting the conversation up and running AND then providing a detailed answer to Ms. Waasdorp). After I’d read just the article, I thought, “Bizarre and unconvincing.” When I read Kevin’s reply, I thought, “Bizarre but quite convincing.” Cool way to start the day. You two should be an act.
Tom, thanks for the feedback and sharing how you experienced it. It’s informative. I owe Erica a $1 for helping bring the conversation to life. Or I’ll buy her a drink when the world permits such things again.
Agreed… Reducing communication to those non-responsive becomes a self-fulfilling prophecy that they will continue to respond even less. So we need to analyze the non-responses… what we don’t see. The same challenge came up in WWII when a smart mathematician realized that you don’t look where the bullet holes are on the planes that survived their invasions but the places that were NOT hit that did NOT bring them down — a telling story of analyzing the right data.
https://worldwarwings.com/the-statistics-that-kept-countless-allied-fighter-planes-in-the-sky/
This is great stuff and just to make it more complicated, you can’t look at the contact you have with your supporters in isolation.
Often the consumer lumps charities/causes together.
The data I see, shows that often, if the supporter is irritated with “cause A” for over contacting them, they can also feel that causes “B” and “C” are over mailing – even if that is not factually accurate.
Allan, thanks for the feedback and the additional insight. Yep, tragedy of the commons is in full effect.
To me, this makes a great argument for quality over quantity. Even the biggest nonprofits should stop playing the numbers game and gambling that they’ll replace people they piss off with new prospects they entice. But for small nonprofits, finding “the most loyal, the ones who have some innate, pre-existing connection to the cause” is the single most important thing to do (followed by serving them, thanking them, and convincing them to connect you to other people just like them!)
I’m thinking about the irritating business emails that clog up my inbox day after day. Most of them I look at and delete. These are for businesses that I shop at regularly. Then there are the ones who captured my email to send me a 15% off coupon; I bought something once and now they email me two-three times a day. The smart ones let me change how often I receive emails when I go to unsubscribe; instead of nothing I choose, say, once a week. I feel a little bit better about those companies that give me some control over my emails. I’d like to do that with my nonprofit but the CRM software doesn’t allow me to customize email frequency by individual. Why not? We are small/mid-sized NGO and don’t have lots of $$$ to spend on the CRM. How would we customize when our CRM doesn’t allow that?
Hi Kevin,
Interesting piece!
Have you seen the research paper called Poisoning the Well: A donation request fatigue behaviour model by Jose Sakakibara? If you haven’t, let me know if you’d like a copy as I’m sure you’d find it interesting.
James, I’ve not see the Poisoning the Well paper so please do send a copy, thank you, much appreciated.
Will do! All the very best.