Retention Rates Are Sick … Is It Terminal?
Yesterday Roger delivered the latest gloomy news about donor retention rates. Gloomiest of all is the fact that overall retention rates have fallen from 50% to 39% over the past seven years, as reported by the AFP/Urban Institute’s 2013 Fundraising Effectiveness Project Survey.
What that suggests is a broad systemic failure, not some momentary glitch or distraction.
Roger suggested two possible reasons:
- Few nonprofits even know their retention rates … and what you don’t know/measure you cannot act upon.
- Organizations might tilt their fundraising budgets to acquisition versus retention, believing this (erroneously) to be an either/or situation.
He asked for other thoughts on why retention is steadily declining.
Here are the possibilities as I see them.
- Profound lack of fundraising expertise — as suggested above, too many practitioners simply don’t understand the underlying theory and financial calculus.
- And/or knowing the theory, too many are clueless as to how to proceed tactically — poor implementation of proven messaging and contact tactics.
- Even more significant than tactical ineptitude, too many do not understand the more fundamental organization-wide requirement to nurture positive donor attitudes by engaging donors in a variety of ways that drive commitment.
Dare I say it? These first three reasons imply a talent gap!
However, there’s good news to be had … the reasons just given are all addressable by any nonprofit. The knowledge is out there and readily accessible.
But there might be more at issue here, involving factors less — or not at all — under the control of any given nonprofit. For example …
- There are simply too many nonprofits doing the same thing … and the declining numbers reflect donors’ weeding their gardens. And as it happens, the ‘losers’ outnumber the ‘winners’.
- Donors are aware of greater giving choice, are more demanding (of everything, from service to results), and can easily and independently access comparative information.
- More and more, donors perceive failure (in terms of making impact) as opposed to success or progress.
- The highly visible fraudulent fundraising practices of the few have eroded fiduciary trust in the nonprofit sector as a whole.
- The marketing communications blizzard has simply become too impenetrable — even the most compelling nonprofit, meeting the most urgent need, and communicating most effectively with its donors, is increasing overwhelmed by the sheer ‘noise’ in the marketplace.
These last five possibilities are more frightening than the first three, because individual nonprofits and fundraisers on their own can do little about them.
Will the nonprofit sector ever see a 50% overall retention again? I think not. Re-attaining that level would require heaps of organizations to become retention superstars, hitting the 70% retention level to offset the multitude of laggards.
In the commercial marketplace, organizations that cannot retain customers are routinely terminated, without fanfare.
In the nonprofit space, the laggards have appeared to be able to hang on indefinitely. But maybe the sorry retention curve is telling us that’s about to change!
Tom
P.S. If your nonprofit is a retention superstar, Roger and I would like to hear about you.
8 responses to “Retention Rates Are Sick … Is It Terminal?”
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 […]
Read Full Answer
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 […]
Read Full Answer
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 […]
Read Full Answer
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 […]
Read Full Answer
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 […]
Read Full Answer
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 […]
Read Full Answer
I would say all these things are true. And they all point to the need to increase spending on fundraising and marketing (and, IMHO, to seamlessly integrate these disciplines). More boots on the ground. Better salaries to attract better talent. Institution-wide culture of philanthropy.
It’s a cop out to say nonprofits can do little about the last five reasons. While there may be too many nonprofits, and more ready access to information, my mother always told me “If they’re only hiring one person, it may as well be you.” It’s the nonprofit’s job to stand out from the competition. Too many don’t know how to do this. Again, talent gap.
Tom and Roger –
Your excellent blog brought to mind our recently-released case study, “Acquisition’s First Priority? Secure the Second Gift” which addresses this issue. Like you, we believe this is one of the most vital issues facing nonprofits. You can find the case study here:
http://www.grizzard.com/work/case-studies/the-salvation-army-case-studies/acquisitions-first-priority-secure-the-second-gift/
The “Solutions” section of the study includes some straight-forward tactics we are using successfully to increase our clients’ second-year retention rates, which are well ahead of industry standards (and, as of the new FEP results you reported yesterday, have now dropped from 27% to 23%). The verticals in the study represent our Rescue Missions, Animal Care, and Salvation Army clients.
The “Results” section also includes our analytics showing the correlation between the length of time between the 1st and 2nd gifts and a donor’s lifetime value – a dramatic, critical metric. Accordingly, we focus our retention strategies on getting the 2nd gift quickly.
We would be happy for you to share this study, as your audiences might find the information helpful, and the tactics actionable.
I agree with you Tom, but let me add that in addition to the issues you noted, in my nearly 4 decades of working with many different types of NFPs it boils down to three things:
1. VISION
2. LEADERSHIP
3. A PLAN
Yes, many organizations — of all types, sizes, etc. — are largely clueless about their critical metrics, and what to do to move the needles. They have no real understanding of the true quilt- or mosaic-like make up of their donor files. Yes, files. Plural.
They have no real understanding of what motivates their donors to action. Why they give to their organization or in general…much less leveraging the information in their development plan.
Most organizations lack a fundamental “partnership” attitude. Think about it. In a healthy partnership all parties involved share common vision, purpose, needs, etc. They are working toward mutual satisfaction. How many organizations really think about, much less know, what their donors want out of the partnership?
It begins (and continues) with a clear vision and SOLUTIONS-FOCUSED mission, forward-thinking and acting leadership, careful and detailed planning, and creation of platforms that enables the organization in their own ways to educate, engage, advocate, and better serve their constituencies.
As NFPs change in this way they will begin to see long-term improvement in their metrics.
Dana
As a provider of senior housing and services, we have a significant number of “new donors” through memorials. Any statistics on retention of memorial donors? Is it worth the effort? Suggestions on tactics for cultivating such donors.
Tom and Roger,
You provide much to be taken seriously and contemplated. I think there are two other issues that you could throw into the mix. First, even with the right intentions and talent, if your leadership actively prevents the fundraising team from communicating with your donors, you will fail. For example, they resist allocating monies for retention/communication activities or bar the fundraising team’s from active involvement in the website and social media fortresses, relegating them to occasional projects instead of consistent messaging.
And related to that, given the economic scarcity in many organizations, they just don’t have the resources to devote to these essential retention activities. Do you allocate funds to mission-related work or fundraising? I’m not saying that this Sophie’s choice situation is right, but it’s often the reality.
Also, I think you need to pick apart your donor base, new, events-based, and tribute givers are going to behave (and retain) very differently from multi-year, DM, and monthly givers. I’m sure almost everyone will see dramatically different retention rates in these populations. The trick is moving enough of the first group into the second group in the long term.
Only because you asked…
Here at Colorado Public Radio, we’re enjoying a 70% retention rate over the last two years (it’s been climbing up from 65% prior to that). Of course, public radio has the privilege of reaching our donors in their homes, cars, offices, etc. But, we also know that if donors don’t feel engaged and connected to the organization, that next year their donation may go elsewhere. We’ve started using volunteers to call every donor to thank them for their gift. We’re regularly looking for ways to engage donors through events, valuable emails (whose goals are not solicitations) and making sure that every personal contact is a good one (or ends well).
Our Sustainer program (We call them Evergreen Partners) is a huge part of our success at retaining donors. With more than 10,000 Evergreen Partners giving monthly via EFT until they make a change, we have over a fourth of our current membership that will automatically renew next year, without having to be asked. (We will ask them for additional gifts and for an upgrade).
And, yes…that doesn’t mean we can neglect acquisition efforts. We’re still mailing huge volumes of mail to attract new donors, all the time.
Finally, we’re also putting a lot of effort into bringing lapsed donors back. While we like to ask donors for a gift at least once a year, many donors don’t think that way. They are a supporter/ member….until they think “it’s been a while since I gave, I should give again.” So, we’re very aggressively reaching out to those lapsed donors (mail, email, telemarketing) to bring them back…with some significant results.
The point to all of this is that if a non-profit thinks that it can focus on just acquisition or just retention or just one avenue of revenue they’re not shooting themselves in the foot. They’re shooting themselves in the head.
No heroic retention strategy will overcome the reality that people’s circumstances, interests, needs, concerns, addresses, employment, schedule, health, age, employment, situation, and resources are constantly changing. It’s life.
Where in this report are retention rates actually measured? Single year renewal rates is not donor retention. Retention is repeat business…how many years have customers continued to come back? what was that # 5 years ago? what was it 10 years ago? Are we making progress? Not sure how our industry figures out how too address a long term issue via short term metrics.