How to calculate your Donor Retention Rate (plus key strategies to improve it!)

For nonprofits, sourcing donations is a challenge and it is only the first step to securing their flow of finance. A lot of energy goes into finding donors and using strategies to convince them to donate to charities. But retaining donors is also important because you don’t want your efforts of acquiring them going down the drain? Also, it is affordable to retain donors and turn them into long-time supporters than get new donors. When we talk about retaining donors, charities have to be acquainted with a metric, the donor retention rate.

The donor retention rate is crucial for a charity’s survival. While donor acquisition is important, charities also need to focus on keeping existing donors coming back year after year. Before we get into some great strategies to retain donors, let’s get the basics of donor retention rate.    

What is the donor retention rate?

The donor retention rate denotes the percentage of repeat donors or people who continue to contribute to your charity beyond their first gift. Donor retention occurs when your existing donors turn into repeat or loyal donors and keep contributing to your charity every year.   

How do you calculate the donor retention rate for a nonprofit?

The formula to measure the donor retention rate is simple. Let’s take two consecutive years and name them as Year 1 and Year 2. First, we identify the donor list in Year 1. Next, we pick out the same donors who have repeated donations in Year 2. Next, we calculate the donor retention rate as:

Donor retention rate = (No. of repeat donors in Year 2 / No. of donors in Year 1) X 100

Let’s understand it with an example. Let’s say, in the year 2020, the charity had 1000 donors. In 2021, there are 1500 donors (new + repeat donors). Of these, the donors from 2020 who repeated their donations again the next year are 400 and the rest 1100 are new donors.

Therefore, the donor retention rate is = (400/1000) X 100 = 40%

On the surface, it may seem acquiring new donors is better than trying to retain the existing donors. But the opposite is true. Retaining the existing donors and encouraging them to donate again repeatedly is far better than putting in your 100% to acquire new ones. Next, let’s see why donor retention is important.  

Why is donor retention important?

Many nonprofits have a lower donor retention rate which essentially means they are not able to convert the new donors into long-term supporters. Even after putting in double the efforts to acquire new donors, the charities don’t see an increase in their donations because about two-thirds of the donors never repeat donations.

But improving donor retention by at least 10% can improve your charity revenues by almost 200%!

Nonprofits with a high donor retention rate have loyal supporters who return with gifts every year. Charities do not have to worry about a lack of funds to carry out their humanitarian activities.

• A good donor retention rate gives you an outline of the financial status of your charity. It also gives you an idea of the causes that have got in more funds and which campaign techniques are working better.
• It builds a strong donor relationship and these continue to be patrons who care about your causes and the mission. 
• It boosts your cause and gets in new donors
• It directly generates larger donations
• It saves time, effort, and resources otherwise needed to collect donations.

As a charity, your task is to identify the reasons why a donor has contributed to the cause and find out if they will continue to donate in the future.

Strategies to improve your donor retention rate

As a charity, you’ve got to maintain a healthy donor retention rate. It’s no easy task. But proper strategies will help you get through. Here, we list 8 strategies to improve your donor retention rate.  

 1. Invest in technology

Gone are the days when you had to write letters or call donors requesting them for a repeat donation or reminding them of it if they had signed for recurring donations. Technology has taken over and now you have online fundraising platforms to enable easy donation payments from anywhere anytime and also have the provision for repeat donations. It’s easy to set up a donation page on any online fundraising platform and share the link on social media. This way, you reach a wide audience and through compelling stories of the cause, you encourage donors to sign up for recurring donations. Advanced features in the donation page allow donors to initiate an automated fixed amount transfer every month or year to the charity from their bank account or card.

        

 2. Positive donor communication

As a charity, your aim is to make the donors understand the causes you are associated with, invoke empathy, and compel them to contribute. Your organization should collectively work towards the cause and demonstrate the same making the donors feel they are a part of a positive change.

Allow the donors to open their eyes to the actual existing problems and how their contribution will make a difference. When you give your donors a reason to believe in your mission, they’ll stay with you for the long term. 

 

 3. Build relationships

Obtaining lifetime donors is a continual process. You’ve to first try to build relationships with new donors and continue to nurture them if you want them to be lifetime donors. As a charity, make it a point, to communicate and build relationships with each donor individually. Whether a one-time or recurring donation, make the donor feel they are a part of something great. This increases the likelihood of them volunteering for the cause, referring others, or even donating again. In totality, they will serve a greater purpose than just a monetary donation.

 

 4. Ask for feedback

You show appreciation to the donors for their contributions. You send them regular updates. Everything said and done, it’s also significant for you to ask your donors for feedback on what motivates them to give. For this, prepare a survey with a questionnaire and send them to a targeted few. Some questions you may include in the survey are-

• Why do you support our charity?
• How do you prefer to donate?
• What are the causes you support?
• How much of an impact do you feel your contribution had on the cause?
• How would you rate the donation experience?
• What part of our cause or charity appeals to you the most?
• Do you have any concerns or feedback about our charity?

Create a template and insert a rating scale or options for your questions. It makes the donors’ tasks easy. Keep a response box for other questions for donors to see an opportunity to tell about their experiences.

 

 5. Show appreciation

When donors part with their hard-earned money, they do so of their own will contributing to a greater cause. As a charity, appreciate their contribution. This is to show them their donation is making a difference. Showing appreciation will have a major impact on new donors as well as recurring donors.

How to show appreciation to donors for their contribution?

• Feature the new donor names in the upcoming newsletter
• Create a page to appreciate donor contributions on your website
• Send them acknowledgment emails
• Call them directly and thank them for their contribution
• Gift badges or merch with a thank you certificate
• Offer them membership privileges and rewards

A lot of donors contribute by the goodness of their hearts. Enroll them in a tiered membership system. It is a great way to boost contributions and get them back year after year.

 

 6. Create regular updates

Future donations from your donors are more likely when you demonstrate to them that their donations to your charity are doing actual good. One example of updating the donors is by sending an email with direct quotes from the beneficiaries telling the donors about how their contribution impacted their life and thanking them for their generosity. Update on the website about what is happening on the ground regarding the causes. This will have a positive impact on the donors and they are more likely to contribute again to your charity.

 

 7. Follow them up for a second gift

When a donor has gifted for the first time, be actively involved in thanking and updating them about their contribution. Also, come up with a second gift strategy sooner and don’t wait for a year or so to make the move. Data shows the overall donor retention rate after the second gift is 60% when compared to the 23% average. So, prioritize first-time donors and create effective strategies to procure the second. You are more likely to keep getting gifts afterward. Don’t fear seeming too greedy asking for a second gift sooner. The fact is, your donor wants to hear something from you. They need an appreciation and update and they will be more convinced to gift again. There are subtle ways of asking for gifts the second time. If your strategy is right, you’ll have no trouble getting gifts from them sooner the second time.

 

 8. Segment donors to send personalized messages

Invest in a good nonprofit CRM. It will help you create data reports on donors, donations received, lapsed donors, downgraded gifts, donor retention rate, campaigns, event outcomes, and more. With the available donor list, create segments for each type such as lapsed donors, downgraded gift donors, or lapsed repeat gift donors. Now plan strategies and send personalized messages to each segment to get them back. Analyzing data, segmenting the donor list, and sending personalized messages will help increase your donor retention rates.

 

Final thoughts

If the donors stop giving, the chances of them starting again are very small. That’s why it is important for charities to encourage donors to stay involved in the cause and make it easier for them to donate easily.

GivingX, a trusted online fundraising platform has all the features to convert one-time donors into repeat donors. It delivers a better experience so you can raise more funds and create a lasting change. Start acting on improving your donor retention rate by visiting the GivingX platform today.