Claire Axelrad is fundraising coach, blogger and creator of Clairification — her own mini online fundraising school. In this interview, Claire explains how you can increase donor retention at your nonprofit.
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Interview Highlights
Watch the full interview above or read the highlights below.
What is the Donor Retention Problem?
AE: Today we’re going to talk about donor retention. Why is this such a hot and important topic?
CA: If you’re familiar with the Fundraising Effectiveness Project, they’ve been studying donor retention since 2006 and it has been getting worse and worse and worse every year. The results are totally depressing. There are so many nonprofits focused on retention and the average you’re keeping is 23% of donors you bring in.
AE: Just in case someone doesn’t know what we’re talking about, it’s the donors you keep from year to year, who give to you year after year.
I think it’s interesting that you say so many nonprofits are focused on donor retention, because I think the problem is that so many nonprofits aren’t focused enough on donor retention.
CA: Well, what they’re not focused on is prioritizing and fixing the problem. A lot of nonprofits don’t even know that they have a problem, which is one of the reasons they don’t focus on fixing it.
That’s one of the things I tell people … you’ve got to face this problem head on. Do you even know you have a problem?
Solving the Donor Retention Problem
AE: If they don’t realize they have a donor retention problem, what do they do? How do they figure this out?
CA: You can’t just go, we got 1,000 new donors in this year, woo-hoo! Because by the end of 5 years, you’re going to have 30 of those people.
AE: Walk us through the math. What do you mean?
CA: 1,000 donors — you retain 23% of them, first time donors, so you have 230 (in the 2nd year). Once you’ve retained them once though, you keep 60% of them. So retaining them that first time is crucially important.
AE: So if you can get them to make a second gift, your retention rates go up significantly. In fact, they double.
CA: And then you’ve got to get your head in the game. I say this because commercial enterprises understand it is way more cost effective to renew an existing customer than try to get a new customer. What are they doing that we’re not doing?
They say, the customer is always right. They do all sorts of things oriented to two things:
- Building customer (donor) loyalty
- Improving relationships
They study this. They put lots of money into this. I say, let’s borrow from some of their research.
Keeping Your Donors Loyal
AE: What are a few things that nonprofits can do to keep their donors loyal?
CA: It’s not that hard. There’s a study that just came out by the Temkin group — what [they] found is positive emotions drive loyalty. The two emotions that drove them away is that they felt frustrated and disappointed.
AE: So how can we make our donors feel happy and excited? What are some easy tips for nonprofits … actions they can take?
CA: The easiest one is to ask, what’s in it for the donor? Ask, what is the donor going to feel when they read this?
There have been other studies that have shown that what donors want and what we want to tell them are completely different. They want to know:
- you made a great investment
- you’re smart
- you’re a hero
- you’re appreciated
- and most fundamentally, you solved a problem
Shower Your Donors with Gratitude
AE: Yes, be focused on the donor, and not on the organization. Too many organizations are focused on what we did as the organization, and not what YOU did as the donor.
So organizations need to focus on donor retention, and if they can focus enough on their new donors to make them second time donors … that’s key for success. What’s another takeaway?
CA: The most important one thing that anyone can do is send a thank you — prompt, personal, powerfully evocative of the impact.
Watch the full interview for a great analogy about online dating and our donors.
There’s a lot of talk about a culture of philanthropy. I call it a culture of gratitude … it’s not money. It’s about what they helped make possible.
Gratitude is so powerful, but you have to practice it.
AE: Really seeing the donors as an integral part of your organization. They’re the ones helping find a cure, solve homelessness. I think it is hard sometimes for development directors who are frustrated when the donation isn’t as big as they had hoped. So it does come back to gratitude.
You’re in the Happiness Business
AE: Any last words of wisdom?
CA: What I always tell people is that the business we’re in is the happiness business. It’s not about emptying people’s pockets. It’s about inviting them to join us in doing something where they can enact their values in a meaningful way. In a way they really want to … but they don’t know how to do it by themselves. We are philanthropy facilitators.
AE: I love that. From now on, when people ask what I do, I’m going to say I’m a philanthropy facilitator!
Watch the full interview for more words of wisdom from Claire.
What are your thoughts on donor retention? Let me and Claire know in the comments.
Thank you Amy and Claire for these important reminders! It’s critical that nonprofits start by understanding their retention rates. We do so many development assessments in which our clients have never even tracked retention! Love both your comments about focusing on the donor.
Thanks so much for sharing this engaging interview! Donor retention is a topic that has been talked a lot about in the past year – it seems like a simple thing but at the same time is an enigma for many organisations. At its core donor retention is about creating meaningful and genuine relationships with your donors – how is where many get stuck. One of the best ways is saying thank you – a genuine thank you which you send to donors within 48 hours of a gift, and continue to connect with them – whether that is through social, letters, infographics etc. to show them you care.
Yes! Thanks, Madison.
While I agree donor retention rates are critical, I think the comparison to customer retention rates was wrong, since the true customer for any non-profit are the people for whom it is meant to serve. In some sub-sectors, customer retention is a very good thing (i,e,, religious groups, arts groups), while in other sub-sectors, it is a very bad thing (i.e., groups serving the poor or the homeless).
For-profits do have an comparable measure for non-profits and that is in the field of investor relations. I looked at a report on investor retention rates in the for-profit sector (Dalbar’s 22nd Annual Quantitative Analysis of Investor Behavior – 2016) and found much better measures. Most companies tend to hold investors for about four years and sometimes less and their goal is to try to change that behavior.
This is for me a much more meaningful comparison because it makes more sense – retaining people as investors is consistently difficult in both sectors. However, at this time, non-profits are doing much worse than for-profits, because the retention rate for even one year is a significant issue. At least we have a more reasonable target. Once we get there, we should continue to try extend that as far as we can.
Great points. Thanks for sharing, Nelson.
That’s a great interview. Thank you for sharing this with us and reminding us about this. The points raised during this were quite wonderful. Really nice.
Nonprofit fundraising