Why Donor Retention Should Be Your Top Fundraising Priority
Think of your nonprofit as a lively, bustling party. Your donors are the life of that party, keeping the energy high and the good vibes flowing. Inviting new guests (i.e. finding new donors) is always fun, but the best party is when your favorite partygoers (your current donors) stick around long into the night. That’s donor retention — and it’s something the majority of nonprofits struggle with. Let’s explore the reasons why engaging donors so they don’t “leave the party” should be your top fundraising priority.
First, some statistics:
Donor retention is a daunting challenge for the nonprofit sector. According to the Fundraising Effectiveness Project, the total overall donor retention rate for 2022 dropped to 42.6%, the lowest rate on record. This means more than half of all donors did not donate to the same organization in consecutive years. The situation is more alarming when it comes to new donors, with a retention rate of only 19.1%. These statistics underscore that nonprofits, despite their efforts, are struggling to maintain active relationships with their donors. The transient nature of donor behavior, coupled with the broad range of nonprofit giving opportunities available for donors, further exacerbates this challenge.
Now that we understand what we’re up against, let’s look at the reasons donor retention is one of the best fundraising strategies you can invest in.
1. It Literally Pays to Retain Existing Donors
Acquiring new donors can be a costly endeavor, requiring significant resources for marketing, outreach, and cultivation. On the other hand, retaining existing donors is far more cost-effective. Studies have shown that the cost of acquiring a new donor can be 10-20x that of retaining an existing donor. By investing in stewardship and building relationships with current donors, nonprofits can save money and channel limited resources toward their mission.
2. Increased Donations Over Time
Loyal donors who feel connected to an organization are more likely to increase their support over time. As donors become more engaged and develop a deeper understanding of the nonprofit’s impact, many are inspired to give more generously. By consistently demonstrating the value of their contributions and recognizing their impact, nonprofits can foster a sense of loyalty and commitment, resulting in increased donations.
3. Donor Retention Leads to Major Gifts
Donor retention and major gift fundraising are intrinsically linked. Retaining donors leads to strong relationships, which are a crucial prerequisite for successful major gift fundraising. Your most loyal annual donors who deeply understand the value of your work can be some of your best prospects for major gifts and planned gifts. And once a donor has made a major gift — assuming you provide good stewardship — they are more likely to make larger gifts in the future.
4. Loyal Donors Become Advocates
Beyond financial support, building strong relationships with donors can lead to profound ripple effects that extend the reach and impact of a nonprofit. As donors feel increasingly connected to an organization, they may expand their support by volunteering, further deepening their engagement. This active participation allows them to directly see the positive impact of the nonprofit’s work, which can further fuel their passion and dedication.
In the best of circumstances, well-nurtured relationships can transform donors into vocal advocates for the organization. As brand and mission evangelists, they share their experiences and enthusiasm with their personal and professional networks, expanding the nonprofit’s visibility and potential donor base by inspiring others to join the cause. By investing time and effort in cultivating these relationships, nonprofits can create a dedicated community of supporters who will show up when needed — financially and otherwise.
5. Financial Stability
Donor retention is essential for building sustainable philanthropic revenue. Such stability allows nonprofits to focus on their programs and initiatives without constant concern for fundraising. Moreover, a strong base of retained donors serves as a testament to the organization’s impact and attracts new donors who are inspired by the ongoing support.
Actionable Tips for Improving Donor Retention
To improve donor retention rates, consider the following strategies:
Improve Communication with Donors: Regularly update donors on the organization’s activities, positive impact on beneficiaries and the community, and upcoming initiatives. Effective communication builds trust and keeps donors engaged and connected.
Personalize Donor Outreach: Tailor interactions and acknowledgments to each donor’s preferences and interests. Thoughtful personalization demonstrates that the organization values the individual and their unique contributions.
Show Appreciation to Donors: Express gratitude for donors’ support through personalized thank-you notes, recognition in newsletters or annual reports, and/or exclusive events and experiences. Appreciation reinforces the value of their involvement.
Provide Regular Updates on How Donations Are Used: Transparency about how donations are used helps donors see the impact of their support. Regularly share success stories, testimonials, and case studies to demonstrate the organization’s effectiveness.
Make the Donor the Hero of Your Story: When sharing stories of impact, make the donor’s role in your work central to the narrative. Instead of describing what your nonprofit did, describe the positive change as something the donor made possible through their support.
Involve Donors in Your Organization’s Activities: Create opportunities for donors to actively participate in the organization’s work. This can include volunteering, serving on advisory boards, or attending special events. Involvement deepens their connection and commitment.
Conclusion
Donor retention is a crucial aspect of nonprofit organizational sustainability. But it’s a journey that requires ongoing effort and dedication. By continuously refining your stewardship and engagement strategies and adapting to donor needs, your nonprofit can build a loyal and committed donor base that will support your organization for years to come.
On average, new IPM clients see a 34.8% increase in direct mail fundraising acquisition response rates within the first year of working with us. Want to learn more? Contact IPM today.