Why is donor retention important? 

Let’s start with a simple example. A new organization with a strong mission has a crowdfunding campaign. With their social media savvy, the organization builds enthusiasm and raises a substantial amount of money for its cause. Unfortunately, as time goes on, many of the new donors from the campaign do not make a repeat gift. The organization tries to repeat its previous campaign’s success to no avail and is utterly confused as to why. 

What they did not realize is that once a donor gives to a cause, there is more work that needs to be done. While it can feel like securing a donor’s gift is the end of the tough work, the first gift is actually the beginning of the relationship with a new donor. So, despite the fact that this organization was initially able to excite the community in its efforts to raise funds, they were not able to sustain it. 

Can’t we just find new donors? 

Although fundraising is often a challenge for many organizations, and particularly small shops, it is necessary and important. The central purpose of any nonprofit is to fulfill its mission, but that can’t be done without the funding to sustain its operations long-term. And to do that, organizations need to work to build strong and lasting relationships with supporters including donors, volunteers, and those that support the organization in other ways. 

If your organization is constantly trying to find new donors, a simpler approach may be to focus on retaining the donors that you already have. Besides, you have their attention, and they have already felt compelled to support your cause in the past. In contrast, the process of identifying and reaching out to new donors can require significantly more time and energy.  

In the for-profit world, one of the costliest processes in the business cycle is finding new customers, and it is much more cost-effective to simply retain customers than to find new ones. The same can be said for nonprofits. It is easier to maintain current relationships than to cultivate new ones.  

How do we find our donor retention rate? 

Donor retention can be measured by looking at the donors who continue to give after their first gift. For example, if your organization had 100 donors last year, and this year – 50 out of the original 100 donors donate again, you would have a donor retention rate of 50%. 

Donors that donated last year and this year/ Donors that donated last year

According to CanadaHelps, the donor retention rate for charities in Canada is 50.8%.¹ So, you may think that since the organization in this example was able to keep half of its donors, that’s not bad, and in line with other charities in Canada. However, if the organization maintains that retention rate, in two years out of the 50 donors that gave, only 25 will remain. This is a decrease in 75 donors from the original group. And I think we can all agree that would be a concerning reality for that organization.  

Our retention rate is decreasing, what can we do? 

So, should you know your own organization’s donor retention rate? Well, as a data person, I would say “yes!” Donor retention is a key metric. Organizations should consider reviewing their donor retention rates, and setting targets on a yearly basis.  

Donor retention is more than just a number, it’s a reflection of the relationship that an organization has with its donors. A decreasing retention rate may be an indicator that your organization is missing key opportunities to communicate with donors. Small shops, despite often having to juggle multiple tasks with a smaller team, can also consider how to better connect with loyal supporters so they can maintain their contributions.  

One way to manage those relationships more effectively is to use a stewardship matrix which is a tool that helps your organization plan how to communicate with everyone that supports your cause. But, perhaps more importantly, a stewardship matrix can help manage your team’s time and resources, which is of particular importance to small shops. 

What is the ideal retention rate? 

Donor retention rates vary from organization to organization. A retention rate at one organization may not sustain the operations of another. So, regardless of your retention rate, remember that it is simply an indicator for how well your organization manages relationships with donors. If your organization makes an effort to build relationships, your retention rates will follow, and hopefully, you will develop long and strong relationships with many supporters well into the future. 

As someone who loves numbers, video games and fantasy fiction Rochelle Greaves can be found creating unnecessarily long formulas in excel, playing video games or watching an action or fantasy fiction movie with her family. As the Co-founder of Story Point Consulting, Rochelle uses her technical skills to help nonprofits increase their fundraising capacity and revenue by using data-driven decisions. If you’re looking to start building better relationships with those that support your organization, we’ve created a sample stewardship matrix with ideas on how to communicate with donors after they’ve given in a way that’s feasible for small shops. 

¹CanadaHelps. 5 Ways To Use A Donor Management System To Improve Donor Retention. Dec 2021.