The COVID-19 pandemic drove an influx of new donors to many institutions. While those funds provided critical assistance to institutions throughout some of the worst days of the pandemic, those institutions now face another crucial challenge: donor retention.
While a donor’s first gift is important, convincing that donor to give a second, third, or fourth time is essential to an institution’s long-term success. After all, an institution often devotes significant resources to raising that first gift. If it can’t retain that donor, those resources are wasted. That’s why now is the time for institutions to develop (and use) a firm donor retention plan that is tied to several key annual giving metrics.
The key metrics you need to track
Every annual giving officer should be able to quickly rattle off key metrics such as the number of donors he has, the number of gifts he gets, his retention percentage, and acquisition cost.
Each of those metrics help paint a picture of their overall effectiveness. Consider:
The number of donors they have helps annual giving officers understand the overall scale of their portfolio. And, by examining the donors within those portfolios, they can get a sense of who their donors are. That information can enable them to pay more equal attention to donors’ demographics and behaviors to better tailor their approach to specific donor segments.
The number of gifts they have received in the past year (and previous few years) enables them to build a growth model. For example, understanding whether they have 10 donors who give $10 100 times a year or 100 donors who give $10,000 one time a year enables them to understand the budget and resources necessary to grow their program.
Donor retention percentage among new (within the past three years) and longtime donors enables them to set (and strive for) clear, concrete goals that enable them to focus their work throughout the year. Those percentages should be engrained in their mind. For example, I worked in annual giving for a nonprofit several years ago and my target donor retention percentages for new and longtime donors remain seared in my mind.
Acquisition cost, or what it takes to bring in new gifts, will vary based on the type of institution. For example, a hospital with a grateful patient program will have a very different approach than a social service nonprofit that buys lists. By understanding the institution’s acquisition cost, an annual giving team can build a model tailored to the institution.
Leveraging metrics to drive growth
Looking at historical data enables an institution to better understand itself, assess its current strengths and weaknesses, and set goals for the future. This exercise serves a valuable purpose given that understanding retention over a three-year period enables an institution to create a growth strategy going forward. The perspective gained from that exercise positions an institution to effectively leverage benchmarking. Given the uniqueness of 2020 and 2021, I recommend that institutions look at a five-year period right now to provide a better perspective while not disregarding the current climate.
Additionally, institutions need to pay heed to the strong possibility that some donors who gave to an institution over the course of the pandemic may not look or act like its other donors. That’s why we suggest institutions flag those new donors as they come by creating an attribute or solicitation code as a COVID-19 donor.
Those flags are a useful guide to quickly understand the donor and they also help with messaging. As an institution maps out a plan, it enables the organization to have follow-up appeals that are based on the reason they gave.
Develop a donor retention formula
Developing a donor retention strategy that works for your institution requires an institution to have clear objectives that are based on a well-rounded understanding of its prospects and donors.
That strategy typically has two prongs to it. The first is tied to donors who have given a gift that’s focused on a unique opportunity such as emergency relief or a capital campaign. One formula that we’ve seen work is to thank the donor for the gift they gave. Then the second appeal should be consistent with what the donor gave to initially, such as COVID-19 relief, cancer research, or scholarships. Following that message, the gift officer would send a newsletter-type mailing to begin exposing them to other work that the organization does.
Annual giving officers can try another approach when it is coming time to renew a donor. For example, the donor may be about to reach the anniversary of their last gift. We’ve found that a three-part strategy works well for those donors. The first part involves the gift officer sending a warm “Happy anniversary” card that encourages them to renew their last gift. If they don’t give to part one, the gift officer then sends a “statement”-type mailing, this reminds them again that they are up for renewal. The third part—which comes when the donor doesn’t give to the first or second messages—is to send the donor the exact same appeal they responded to the previous year. Not only does this provide the donor multiple opportunities to give, it also helps the annual giving officer understand what motivates the donor.
Finding the right approach is important now—and into the future. After all, donor retention is an ongoing issue that will continue to be important well after the pandemic passes.
If you need help developing a donor retention strategy, contact Annie Hudson at email@example.com.