Lemmings With Suicide Vests
Once again … the nonprofit world has painfully proven Aldous Huxley’s maxim that “facts do not cease to exist simply because they are ignored.”
Once again … for the 7th year in a row the Donor Retention Rate among 2,840 American nonprofits surveyed has again dropped.
Once again … millions and millions of $$ have been thrown away at a time of desperate need.
Here are the key findings of the AFP/Urban Institute’s 2013 Fundraising Effectiveness Project Survey as summarized in this powerful — and frightening — infographic from Bloomerang.
Overall, Nonprofit Donor Retention in 2012 was 39%. Attrition was 61%.
Every $100 gained in 2012 was offset by $96 in losses through gift attrition — a net gain of just $4.
Every 100 donors gained in 2012 was offset by 105 in lost donors through attrition — a net gain of negative -5.
Overall donor attrition was 61% — that is, 61% of 2011 donors did not give again to participating nonprofits in 2012.
Last year (2012) new donor retention was only 22.9%!
Not that any organization can afford or sustain such lousy retention rates, but those especially impacted negatively are smaller groups that raise in the range of $100,000 to $500,000 (average loss of 5.1%) and groups raising under $100,000 (average net loss of 13.5%).
Clearly, when it comes to retention there is an immense experience and talent gap between smaller and larger organizations.
I hasten to add that with a national average of 7.5 out of every 10 first year donors hitting the exits, organizational size is not much of a vaccine against this epidemic.
What truly puzzles me is the fact that this downward retention trend continues year after year despite the fact that the value of solid retention and the high cost of poor retention is so well understood, and the response should be so apparent: taking positive steps to reduce gift and donor losses is the least expensive strategy for increasing fundraising income.
Why are nonprofits failing so miserably when it comes to retention?
One simple answer is that few fundraisers, CEOs or board members even know their organization’s retention rate. A frequent speaker at fundraising events recently told me that only about 20 out of every 500 fundraisers he questioned at his sessions knew their organization’s retention rate.
Another may lie in the mistaken belief that an organization must chose between ‘acquisition’ and ‘retention’ in terms of its budget priorities. But, as Tom pointed out yesterday in Shoot the Moon, these are not either/or alternatives in a well-run organization.
Given the existence of low-cost donor management systems like Bloomerang that display retention rates, donor engagement scores and other vital signs of loyalty on a daily basis (see this one minute YouTube video for an example), it’s inexcusable that year after year we must witness the continuing hemorrhaging of our sector’s most vital asset — its donors.
Why do you think this is happening? Please share.
Roger
8 responses to “Lemmings With Suicide Vests”
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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I believe mailing too often is, in fact, causing attrition even though most formal studies and research indicates otherwise. That’s because donors are not necessarily being honest when asked about their giving habits (in research studies). Who on earth would publicly admit to saying “no” to any worthy charity? No one likes to sound like a Scrooge. But privately, they are bewildered by the ever-growing number of times they are hit up for a donation. And when they see the same direct mail package (control) over and over and over, they tune out. Read the white mail. For every faithful donor who goes through the trouble of writing to say, “Hey! Enough is enough!” there must be 10 or 20 more who won’t write.
This is not necessarily true: “Clearly, when it comes to retention there is an immense experience and talent gap between smaller and larger organizations.”
What small nonprofits do suffer is having too much to do with too little staff to do it all. That doesn’t mean that their staff isn’t experience or talented. I’ve worked for several small nonprofits and each staff was very experienced and very talented, just without the time to do all that we wanted to do. Now, working on those boards to spend more money to more people…aye there’s the rub.
I think you might need to spend some time in a small nonprofit juggling too many balls, Roger. You seemed to have forgotten what it is like.
What about the acquisition strategy in all of this discussion about retention? The other very real culprit is the fundraising model and they type of donor they are bringing in. Yes, you need to steward your donors but you also need to look at the package, lists, giving levels and real return on investment to understand the long term value of the donors you are bringing in.
It seems to me that much of social media is disconnected from real relationships. I know that as our “likes” skyrocket (51,000+) our retention rate (32% last time I looked) is dropping. Is there a human/physical/emotional connection missing? Do people think, “I clicked, I am part of the tribe, I don’t have to give money to join the movement, I just need to keep up on Facebook.” I know our organization is focused less on events (human) and direct (physical) mail, and more on electronic communications. Is there a correlation?
Also, what is the size of the market per say, is the nonprofit sector over capacity? Are people not giving at all, or they just moving on to the next nonprofit? It may be that there are too many of us.
We are well aware of our donor retention rate – so teach us how to do it! You make it sound as if it is an easy thing to do and it is our own lack of capacity that is the problem. Specific, concrete (and new) suggestions would be most helpful and appreciated! Thanks!
Roger,
The lack of comments reminds me of a proverb. “Success has many parents, and failure is an orphan.”
With respect to over solicitation. I recently met with an organization that had a 55% retention rate for major donors! ($5,000+ last year). They were mailed twice! (“We’ll visit them!”) Most of our clients are at 80%+ with respect to majors…and they are mailed frequently….and they have the highest frequency of giving of any segment. They love to give!
It’s my opinion that under solicitation is largely the problem for most organizations. Nearly everyone is fearful of soliciting and many don’t get it done regularly and on time. A number of years ago a CEO complained to me about the frequency of solicitations…”How can you be sure you’re not over-mailing.” I indicated that it was possible to test. He/she said “do it.” We split the group in half and mailed one group 50% less for a year. A few months later….”who talked me into this?” They had contributed 50% less and the retention rate dropped significantly. Needless to say, we went back to frequent solicitations.
My take on this is that most CEO’s, CFO’s, BOD’s and most of the staff are focused on major and planned gifts, and really don’t give a ***** about the bulk of the file as long as it produces some net revenue. There of course are exceptions, but this is my observation over 40+ years.
They are leery of investing in timely and relevant acknowledgments…thank you calls…and high quality solicitations, and often give the responsibility to “newbies.”
Finally, with respect to the size of an organization I would postulate that the difference is really just scale and access to the capital which enables growth, and this makes the case for mergers and acquisitions. The proliferation of charities with similar missions is confusing to donors and has led to high overhead.
Keep up the good work!
Denny makes some very excellent points! It’s really hard to know what’s going on without lots of research and many tests, but these are some great guesses.
MAJOR GIFTS: Yes, many leaders don’t care much about the ‘little folk’ who give them only 3 – 20% of their goal. They’d rather put energy into acquiring one more major donor than into retaining 10% more of their smaller donors. The fact that this could lead to a 200% increase in the lifetime value of these donors means very little to most people TODAY. And there’s merit in this philosophy. Quality generally beats quantity (but not always — especially if you’re a multi-national emergency relief organization).
OTHER GIFTS: Given that the trend is for donors to give larger gifts to fewer charities that means all those other charities (the ones that don’t make a donor’s “Top 5 – 10” list are going to be bleeding. So the fact that your competition is doing a super-duper job with stewardship is going to hurt you more than it did in the past (when almost no one bothered with stewardship). In other words, the fact that many nonprofits today are actually paying attention to retention could be resulting in more attrition for their competitors. Weird, no? And losing those non-major donors is horrible for another reason too — one that too few nonprofits consider in their focus on the day-to-day — these are the folks who tend to leave bequests! Because being a non-major donor doesn’t mean you don’t have capacity to give more (especially if you own a house and die without heirs). So there!
DIGITAL DISRUPTION: Virginia alludes to this. We’ve got the same number of hours in the day, and a lot more things to do with that time. We can’t ignore digital. It’s a fabulous relationship-building tool. And, more and more, it’s becoming the number one way a lot of people find us and communicate with us. But… is there a lost opportunity cost there? You bet! The solution is probably to allocate more resources to fundraising and marketing. Which is why, as Dan Palotta has been preaching, nonprofits need to get more comfortable with higher overheads.
Solution? The last thing I said. Put enough boots on the ground to become effective at building relationships. Thank your donors more. Cultivate an attitude of gratitude organization-wide. I don’t believe over-solicitation is the problem The problem is only-solicitation.
Next year, we will know a lot more about donor retention. The Fundraising Effectiveness Project (FEP) is currently implementing a data collection method that can measure donor retention – and many other fundraising performance indicators as well — by various gift ranges. For example, under $100, $5,000 & up and several ranges in between. To illustrate the significance of gift range, one of our pilot case studies had a donor retention rate of only 32 percent for under $100 donors while the rate for $1,000 and up donors was 87 percent. We expect to report 2012-13 retention rates by gift ranges for over 3,000 nonprofits next year.
Roger, we really appreciate your getting the FEP donor retention story out.