Recently, several well-respected fundraising thinkers have been lamenting over nonprofit’s lack of focus on improving widespread abysmal retention rates. Roger Craver, for example, wisely argues that donor retention is the holy grail of fundraising and that charities ignore retention at their peril.
Yet it is practically impossible to work on improving retention rates if you don’t even know what yours are.
I suspect this is the case for many, many nonprofits. If you are one of them, time to start paying attention.
This is an often neglected yet critical investment in your organization’s future, so I must add kudos to you for making the effort! Retention rates are a calculation of the % of donors from a specific year who repeated their gift the following year. They are one of the many important metrics you’ll need to measure and document annually as part of a healthy annual fundraising program.
If you’ve never taken the time to calculate your retention rates before, getting started might be fairly intimidating.
Let’s break it down:
Calculate your 2012 Overall Retention Rate
1) Generate a list all of your 2011 donors. How many unique donors did you have in 2011? Count each donor only once even if they made more than one gift in 2011.
2) Of those 2011 donors, how many gave again in 2012? At this point, we aren’t looking for total numbers of donors in 2012. Rather, we need to identify and count those 2011 donors who gave again in 2012. For simplicity’s sake, ignore other 2012 donors who fall into different categories (for instance, donors who gave in 2010 and 2012 but skipped 2011 or new donors). Those will be evaluated separately and we’ll discuss those in an upcoming post.
3) Calculate the % renewing in 2012. This is your 2012 Overall Donor Retention Rate.
Take your answer to #2 and divide by your answer to #1. For example, if you had 1,000 donors in 2011 and of those donors, 750 renewed their gift in 2012, 750/1000 =.75. You would have a 75% renewal rate (and you’d be doing a mighty fine job, I might add!).
Theoretically, yes. It is fairly straightforward, particularly if you have a database that quickly splits the answers to the questions in Steps 1 and 2. I hope that is the case for you.
However, organizations with a less sophisticated database (or dreadfully, none at all) may have a more difficult time accessing this information. Worst case scenario, you’ll have to do this manually.
Assuming those of you who fall into this group likely have fewer donors, it shouldn’t be too incredibly cumbersome. Generate two lists of donors, one from 2011 and one from 2012, match them up and merge them into a new spreadsheet. If your database will calculate these figures for you, but you haven’t yet tackled how do it, it’s time to learn.
Document and analyze
If you don’t yet have one, create a spreadsheet or table where you can record this information from year to year. Print out a copy and put it in your hard copy annual fund documentary notebook.
Every year, as part of your annual fundraising evaluation, you should calculate these figures and then analyze them relative to years past. Are retention rates going down every year? Did they increase significantly? Why might that be? How does your retention rate compare to other similar organizations or to the national average? Moving on to a few more important and interesting numbers you’ll want to know…
Determine your First Time Donor Conversion Rate.
4) How many donors made their very first gift in 2011?
5) How many of these donors made a gift again in 2012?
6) Divide #5 by #4. This is your first time donor conversion rate for 2012. Record in your spreadsheet.
Why do you need to know this? Perhaps you had 100 first time donors in 2011 and only 10 of those made a repeat gift in 2012 giving you a 10% renewal rate. This information might lead you to shoot for a goal in 2013 of a 15% new donor renewal rate. Perhaps you’ll decide to add a new donor welcome letter to your annual fund plan. You might decide to call each new donor in 2013 at some point during the year to thank them personally for their gift.
Determine your Repeat Donor Renewal Rate
7) How many donors made their 2nd (or more) gift 2011 (those that were not first time donors in 2011).
8) How many of those donors also gave in 2012?
9) Now divide #8 by your answer in #7. This is your Repeat Donor Renewal Rate for 2012. Record in your spreadsheet. For example, Let’s say you have 400 donors in 2011 who had previously made a gift in either 2008, 2009 or 2010. Then of these, 275 made a gift in 2012. 275 /400 = .6875 so you have a 69% repeat renewal rate. You’ll want to keep an eye on this group and make sure you work to keep them giving.
You also want to make sure this group’s retention rates continue to improve from year to year. If not, you have a problem you’ll need to identify and fix. As you work through this process, here are the three most important things to keep in mind:
Be consistent from year to year regarding exactly how and what you measure. You need to be sure you are comparing apples to apples. Write down your process.
Document your findings in a way that they can be understood and continued after you move on from your organization.
Take some time to think about what these numbers might mean for your fundraising program. Make a plan and act on what you discover from your analysis.
Join Smart Annual Giving and download my FREE 5-page PDF guide and worksheet “Calculating Retention Rates.”