Build Resilience for the Tough Times Ahead
Given the volatile state of the economy and the general climate of uncertainty, my greatest fear is that many boards, CEOs, and fundraisers will fail to invest the time and money necessary to hold on to their most valuable resource—their donors.
It’s fundamental that donor retention remains one of the most critical factors in the long-term success and resilience of organizations.
Although the number of new donors has recently grown, nonprofits have done a poor job in holding on to the donors they acquire. According to the Blackbaud Institute’s Charitable Giving Report, roughly 60 percent of existing donors renew each year, meaning that nearly a third of all donors do not renew. And, when looking at new, first-time donors nearly two-thirds never make a second gift.
This is not a new phenomenon. Ten years ago I warned, “…day in day out, thousands of nonprofits pour the bulk of their donor acquisition marketing and fundraising dollars into a leaky retention bucket, seemingly oblivious to this gigantic waste that endangers their very future.”
Most fundraisers—regardless of the size of their organization—tell me that donor acquisition is one of their biggest problems. But if acquisition is such a big problem then why do these same fundraisers fail to take steps to stop the hemorrhaging of 66% of their new donors and 33% of their multi-year donors?
Failure to address retention is a waste of an organization’s acquisition investment and nothing short of dereliction when it comes to the long-term financial health of their organizations. In fact, at a time when the term “resilience” is so in fashion it’s important to understand that investing a few extra dollars to hold onto each donor is the best protection against the storms of uncertainty.
Considering that the average five-year lifetime value of American donors is somewhere around $500, the loss of every 1000 donors amounts the loss of millions of dollars in future contributions over the next 60 months. And this doesn’t take into account that it generally costs significantly more to acquire a new donor than to hold on to an existing one.
The commercial world doesn’t tolerate such customer loss, so why do we so readily accept high attrition and poor retention. The answer lies in either in ignorance or malfeasance. Ignorance in not knowing the organization’s retention rate or not understanding what to do to stem donor loss. Even worse, malfeasance raises its ugly head when a fundraiser understands retention but turns a blind eye as more and more donors head for the exit.
How many boards, CEOs, and fundraisers understand that as an industry that we have a 66% burn rate of first-time donors—that we are taking two out of every three people who donate to us once and flushing them away?
Let’s say it costs you $15 to acquire a new donor. Wait. Not really. If you have a 66% donor burn rate—the industry average—it actually costs you $45.00 to acquire a real new donor. You are flushing the other $30 down the toilet on donors you are going to lose by the end of the first year. And once you get them to that second year, you are still going to burn more than 40% of them every year following.
Far more attention needs to be given to the planning, analysis and investment decisions required to undergird and protect acquisition efforts by adding the necessary investment to proper thanking, onboarding, and communications that make for successful retention. To identify “bad” or “poor” practices and mindsets that stand as barriers to success.
Losing donors hurts because every donor who leaves represents not only an immediate loss, but a missed opportunity and future pain for the organization. We can stop the pain by convincing ourselves and others in the organization that now is the time to invest more in holding on to our donors. Cutting expenses because of economic uncertainty will only make matters worse. “Penny wise and pound foolish” is not a recipe for resilience in difficult times.
Gain more insights from Roger Craver’s decades of work in fundraising in an exclusive, on demand “fireside chat” with Blackbaud Institute Managing Director, Ashley Thompson, presented as part of the Institute Index’s 10th Anniversary Celebration.