Data, Donor Retention, and the Secret to Fundraising Success

By Heather Yandow, Third Space Studio

From the Nov-Dec 2016 Grassroots Fundraising Journal, v35 n6. 

SEVERAL YEARS AGO, I was working with an executive director on her fundraising plans for the coming year. After talking through some of her ideas, she paused and asked, “So, do you think we can raise $50,000 from individual donors next year?”

We were on the phone, so she thankfully couldn’t see my expression. I responded that I didn’t know, and inquired about her past results. As we begin to talk about the organization’s fundraising history, it was clear she didn’t have the information needed to answer her question. And unfortunately, I didn’t have any data to help her answer the question either.

At that time, there were no accurate, detailed fundraising data available for organizations with budgets less than $2 million. There were (and are) reports that looked at all giving, or even zeroed in on online fundraising only, but the data was largely inapplicable for small, grassroots organizations. An organization that raises

$50,000 from 100 people cannot accurately compare itself with an organization that raises $5 million from 10,000 people.

As a math major with a history of fundraising and a love of data, I set out to solve the problem. In 2012, I conducted the first Individual Donor Benchmark study. This year marks our fifth year of the project, with 119 organizations from around the country taking part in an online survey. What follows are some of our most interesting findings. For the full report and printable infographic visit thirdspacestudio.com/idb2015/.

Focusing on nonprofits with revenues under $2 million, the Individual Donor Benchmark Report provides a number of data points that are consistent year after year, including:

■ Organizations raise 34 percent of their revenue from individuals. This data point is almost the same as last year’s result of 36 percent, indicating that this may be a universal truth about fundraising for small but mighty nonprofits. The percentage of revenue from individuals does vary depending on the organization’s business model (the way funds are raised and spent). For example, animal welfare organizations—who often don’t have access to foundation grants or government grants—raise almost three out of every four dollars from individuals (73 percent). (See page 11 of the full report for more details).

■ About half of individual donor revenue comes from donors giving less than $1,000. These “everyday donors” give an average gift of $208. The average organization has 581 supporters in this category. The average organization also has 30 major donors (those giving $1,000 or more) giving an average gift of $3,961. (See page 14 of the full report for more details).

■ One out of every five individual donor dollars is raised online. The percentage of online giving is up from 17 per- cent last year, and has been slowly increasing each year. The average online donor gives $219—significantly lower than the overall average gift of $533. As nonprofits move   to conduct more fundraising online, the disparity between donation amounts could have a negative impact on overall revenue. (See page 31 of the full report for more details).

■ Four out of 10 board members are active in fundraising in a significant way, including attending donor meetings, making introductions, and hosting donor events. This data point, too, has been consistent over the past few years, indicating that it may also be a universal truth. Although it is a goal for many development staffers to engage their en- tire boards in significant fundraising activities, these numbers reflect the reality that most organizations are falling short of that goal. (See page 44 of the full report for more details).

■ Organizations are raising about 14 percent of their in- come from recurring donations. These regular monthly (or quarterly) donors tend to give more—an average gift   of $754 annually, compared to the overall average of $533. The good news is that on average, one out of 10 donors are giving in this way. (See page 36 of the full report for more details).

■ Most organizations are using some kind of donor data- base, but their feelings about their database vary widely. This year’s database all-stars are DonorPerfect, Little Green Light, NeonCRM, and Salesforce, all of which were used by multiple participants, scored high marks, and made it relatively easy to retrieve data. (See page 47 of the full report for more details).

This year’s report also dug into two critical focus areas for nonprofit fundraising: donor retention rates and fundraising planning.

Retaining Donors

One of the most important data points for individual donor fundraising is your retention rate: the percentage of last year’s donors who give again this year. With that information, you can judge the success of your donor engagement work, project future fundraising growth, and create effective goals for new donor recruitment. In this year’s study, I found that the donor retention rate is about 60 percent, meaning you can expect that six out of 10 donors who gave last year will give again this year. And, possibly more important, four out of 10 donors who gave last year will not give again this year.

While many of the data points in the Individual Donor Benchmark Report changed with size of organization, number of donors, and presence of a membership program, donor retention stayed at 60 percent across all of these categories. The fact that the retention rate did not change as these other facets changed indicates that it may be a universal truth for small organizations.

 


 

IF YOU WANT TO INCREASE YOUR RETENTION RATE, THE BEST STRATEGY IS TO VIEW YOUR INDIVIDUAL DONOR FUNDRAISING PROGRAM AS A RELATIONSHIP BUILDING PROGRAM.

 


 

Here are two suggestions for how to find your organization’s donor retention rate easily:

  1. Ask your Many databases can calculate your retention rate for you through an automatic search. Relying on your database for this information depends on having good donor records, as you may get incorrect results if they are not well maintained.
  2. Calculate your retention rate by hand. Your retention rate is essentially the number of returning donors divided by the number of donors you had last year. You should start by finding the number of returning donors you have this A good approximation can be found by subtracting the number of new donors from the number of total donors to give you the number of old (returning) donors. Most databases have some ability to find new donors, even if it means running a new query for new records who have given $1 or more in the current year. Once you have the number of returning donors, divide it by the number of donors last year. Now, you have your retention rate.

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If you want to increase your retention rate, the best strategy is to view your individual donor fundraising program as a relationship development program. Your goal should be to build a relationship with your donors, where part—and only part—of that relationship is about their financial support for the organization. Here are a few ways to shift your focus to your relationship:

  1. Consider your organization from a donor’s We often only think about what we are sending out to our donors, rather than what our donors are receiving. And since we are always busy, they must be hearing from us all the time, right? Wrong. Donors often think they are not hearing from organizations enough, even when you are sending them weekly emails, quarterly newsletters, or bi-annual appeal letters. Your donors are busy, and they are likely missing some of your communications.

    Even when we are communicating with and engage donors in many ways, sometimes we have holes in our plan. One way to find these holes is to walk through the experience that different types of donors have with your organization. What happens when a new donor makes a $25 gift? A $2,500 gift? What happens when someone gives online? What is the experience for a $50 a year donor? $500 a year donor? You may find that with a little intentionality you could be doing a much more effective job of engaging your donors with your work.

  1. Remember what you learned about your As   a development director, I learned to listen carefully in major donor meetings and record what I learned after the meeting. I wrote down all of the important details, including philanthropic interests, family updates, or other personal details. Before my next interaction with that donor, I would review my notes and plan what kind of information I’d share and what questions I would ask.

    While this kind of attention is standard procedure for major donors, there is an opportunity to use some of the same ideas with everyday donors. As your donors click on links in your emails, respond to direct mail solicitations, or attend events, they are giving you information about what they are interested in. If you are diligent, you can capture that information and begin to develop a picture of your donors. Organizations can also survey donors to gather information about their interests and use that information to tailor solicitations.

  1. Thank donors seven times before you ask them This advice has been around for a long time, but I still get surprised looks and big sighs when I share it: “Seven times?! How could we possibly do that?” First of all, it’s a guideline—but the real point is that you should not treat donors like ATMs, only coming to them when you need money. You should be in touch year round to share the results of their donations (and your work) and to thank them for their support. These thank yous can look like: an official thank you letter on organizational letterhead, a hand-written note from the development director, a thank you phone call from a board member, a copy of a news article on your work with a hand written note, a quick note that accompanies your annual report, a detailed mid-year donor update, a Valentine’s Day card, a holiday card, a birthday card, or an email update. The thank yous don’t need to generate a lot of extra work—think about content that you are already producing that could be re-purposed as a donor thank you: annual reports, updates for the board, or grant reports.

screen-shot-2016-11-21-at-8-35-05-pmFinding New Donors

Although there may be room to increase retention rates, many organizations will need to focus on finding new contacts and developing strategies to convert them to donors. Losing 40 percent of your donors year after year can be a huge strain on your donor base, even for a strong organization. Goals for finding new donors should be a part of every year’s development plan.

One powerful framework for thinking about cultivating new donors is the cycle of engagement. The cycle includes the follow- ing components and questions:

  1. Opening the door to potential new donors. How do you find new potential donors? How do you collect contact information from potential donors? What have been the best ways for you to find new donors in the past? What methods of meeting new people actually generate the greatest number of new donors?
  2. Thanking and tracking new How are you communicating with donors after they first meet your organization? Do you have a welcome series to introduce your organization? What information about them are you tracking in your database or other places?
  3. Engaging supporters. How can you help people experience your work? It may be by participating in programs, volunteering, or viewing a video about your How can you increase the opportunities for supporters to engage with your work?
  4. Thanking and tracking engaged supporters. How are you communicating with supporters after their engagement with your work? What engagement data points are you tracking?
  5. Asking for a When we think about finding new donors, we often go directly to deciding how we ask them for financial support. Ideally, this step in the process would build on the work that you’ve already done to build a relationship with a potential donor. How can you tie your ask into the way you first met them and/or the way they have been engaged with your organization?
  6. Thanking and tracking How do you thank a donor? How can you thank them seven times? What information about their gift do you need to record in your database? After this step, go back to number three, and repeat indefinitely!

The best way to ensure that your organization is continuing to find new donors is to involve everyone—board, staff, and volun- teers—in identifying, cultivating and asking for support. Even for those who have an aversion to fundraising (the topic of a whole other article), getting involved in opening the door, engaging and thanking donors can be a fun way to help the organization grow its donor pool.

 


 

FOR EVERY ADDITIONAL BOARD MEMBER THAT PLAYS A SIGNIFICANT ROLE IN FUNDRAISING, ORGANIZATIONS WITH A FUNDRAISING PLAN RAISED AN ADDITIONAL $11,868 IN

INDIVIDUAL DONOR REVENUE.

 


 

The Key to Success

The secret to fundraising success is not a secret at all. If you want to raise money from individuals, you need a fundraising plan. Again, this finding is replicated from last year’s report, meaning that it is likely a universal truth about fundraising in small and mighty nonprofits. Organizations that have a fundraising plan reported raising one-third more money from individuals, nearly doubling their number of donors, and garnering significantly larger average gifts.

In addition, if you have a plan and you invest more time or money in fundraising, you will generate more revenue. This is true for paying your fundraiser more, hiring additional staff, or engaging your board members. In fact, for every additional board member that plays a significant role in fundraising, organizations raised an additional $11,686 in individual donor revenue.

What is most interesting about this finding to me is that how much the plan was actually used during the year had no impact. I asked fundraisers: How often do you use your fundraising plan? About half of respondents said that they checked in on it only a couple of times a year or less! That indicates that the act of plan- ning is most important, not the plan itself. The investment you make in reflecting on past performance, articulating goals, and mapping out the year is what matters.

How to Create a Fundraising Plan

I was curious what organizations included in their fundraising plans, which is a term that can be ambiguous. In the Individual Donor Benchmark Report, I found that a majority of organizations include a list of overall fundraising strategies and goals, as well as a calendar of activities. About half of organizations include a more detailed breakdown of their activities, and half include an assessment of previous years fundraising results.

So if you want to create a fundraising plan, or improve the one you have, the report provides some guidance. But the exact format of your fundraising plan will depend on your personal and organizational habits and the plan’s purpose.

For example, if you are coordinating fundraising activities with a large group of staff and board members, you may want to create a detailed plan with specific deadlines and named responsible par- ties. If your goal is to simply make sure you stay on track, a strong sense of overall goals and quarterly benchmarks may suffice.

Whatever format your plan takes, the three most critical pieces are: 

  1. Your reflection on past successes and Use questions like: How did you do last year? Where do you succeed? Why? Where did you stumble? Why? What does this tell you about what this year’s work should be?
  2. Your stretch goals for the year, including those beyond just dollars raised. You may want to include goals for new donors, donor visits, or your monthly giving Also consider including goals for board involvement and goals around strengthening your fundraising infrastructure (database, payment processing, thank you notes, etc.).
  3. A sketch of activities through the year. Mapping out your goals on a calendar—whether by weeks, months, or even quarters—will help ground your plans and keep you on track when other activities begin to crowd your calendar. Be sure to include activities beyond fundraising like programmatic events, board meetings and vacations.

Putting the Data to Use

With this data, you can better understand, analyze and strengthen your organization’s fundraising program. In particular, you can use this data to identify where your organization might focus en- ergy and increase outcomes. Look for places that your organiza- tion’s results are significantly different than the average, and try to understand why. For example, if your average gift is well below the overall average of $533, that may be due to doing a great job at attracting $25 donors—or due to a poor job of reaching out to high level donors. It may take more investigation to truly under- stand your results.

You may also find places where you are beating the average, and you should take a minute to celebrate your success. Also, consider why you’ve been successful and how you can translate that success into other parts of your work.

And most important, if you don’t have a fundraising plan, create one today. Even a simple outline detailing your individual donor strategies and goals over the next few months will help you achieve better results.

For more donor fundraising details and data breakdowns, the full report and printable infographic are available at thirdspaces- tudio.com/idb2015/. ■


Heather Yandow brings 15 years of nonprofit experience as facilitator, trainer, coalition leader, project manager, and fundraiser to Third Space. She helps organizations with strategic planning, board development, business model design, implementing fundraising strategies, and going from good to great.