A Guide to Donor Retention for Nonprofits

Donor retention and its flipside, donor churn, are key issues for nonprofits.

Why do they matter? Most nonprofits invest considerable time and funds into fundraising campaigns for new donors. If you’re losing your current donors quickly, you’re in a never-ending cycle of having to attract new donors. This process is costly and wastes the opportunity to build long-term, recurring donor relationships. Various analyses put the cost of acquiring a new donor at five times that of retaining a current donor.

So, what keeps donors coming back? Here are some best practices for nonprofit leaders to increase donor retention:

What is donor retention?

Donor retention measures how many donors continue to contribute to your organization after making their first donation.

If you have a “high donor retention rate,” you tend to keep your donors year after year.

On the other hand, a nonprofit with a low donor retention rate must keep working hard to acquire new donors in order to keep the doors open and continue to serve their cause.

As we’ve already indicated, retaining your donors is a more cost-effective way to raise funds than constantly recruiting new donors. However, this is becoming increasingly difficult as donor retention across the industry is down overall. 

Donor Retention Statistics

The Fundraising Effectiveness Project releases regular reports with key data for the nonprofit sector, and for this blog, we will be referencing the Q1 2024 report. 

In Q1 of 2024, the number of donors decreased by 1.3% year over year. Luckily, this rate of decline looks like it’s plateauing compared to the 10.3% drop we saw in 2023. That said, there is still a year-over-year decrease in donors, which points to the challenges nonprofits face regarding donor retention. 

In fact, donor retention rates are down 3.0% year over year, with repeat donor retention rates at 24.8%. Around 23% of donors churn just six months after their first donation, which means almost 70% of donors give only once to an organization.

Donor Retention by Donor Types

Donor retention rates for various donor types have also shown a similar downtrend to last year.

• Donor retention rates for new donors were down to 7.2% (nonprofits only retain 7.2% of new donors) in Q1 of 2024, a 7.6% drop year over year. This is a clear sign that nonprofits are having difficulty keeping first-time donors engaged.
• Retention rates for recapture donors (aka lapsed donors; donors who did not give to the organization last year but had given in the past) also dropped by 16.8%.
• Repeat donor retention has decreased by 3.9%, with the lowest decrease. 

Donor Retention Rates by Donor Size

Donor retention by donor size is determined by looking at all types of donors: micro (under $100), small ($101 – $500), midsize ($500 – $5K) donors, major ($5K – $50K), and supersize ($50K+). Of course, these buckets can vary depending on the size of an organization. 

In Q1, 2024, donor retention for:

• Micro donors dropped by 4.5% YOY
• Small donors dropped by 5.8% YOY
• Midsize donors dropped by 5.9% YOY
• Major donors dropped by 5.8% YOY
• Supersize donors dropped by 3.9% YOY

How to Calculate Donor Retention Rate

You can calculate a donor retention rate with the following formula:

[Returning Donors in Year 2 ÷ All Donors in year 1] x 100 = retention rate (expressed as a percentage)

For example, If 2,000 supporters donated to your organization in 2022 and 1,000 of them donated again in 2023, your equation would look like this:

[1000 ÷ 2000] x 100 = 50%

Donor retention rates typically vary across different types of nonprofits. It can be helpful to examine various existing reports to understand these trends so that you know where your nonprofit stands relative to the average retention rate of your organization type.

Another key thing for nonprofits to do is to go beyond the face value of their donor retention rate. By digging deeper into the data, you can figure out who exactly you are retaining and churning.

Ask yourself: Are there common factors at play? Can I learn anything about my ideal donor so that I can be more targeted with my campaigns?

Donor Retention Strategies

Donor retention comes down to several factors, including that you’re targeting the right people in the first place. Here are some best practices to help improve donor retention rates:

Clear and Direct Communication

Donors must feel connected to your organization. Getting to know your donors on a more personal level and ensuring that you communicate clearly and directly can go a long way toward improving your retention rates.

This can mean following any of several strategies, depending on what makes sense for your organization. For example, regular email updates can inform donors about your activities and precisely how their contribution is helping.

Calling donors can be a great way to build relationships, especially with high-value donors. Let them know about upcoming events and congratulate them on a recent milestone, as these gestures create a personal touch.

You should also look at how you communicate more broadly. For example, if you use social media channels, are you regularly posting content that keeps donors informed? Can they get a peek into your organization by following you? Are you being clear about what you’re doing, for who or what, and why? Donors can feel reassured when you maintain a public image and communicate effectively through social channels.

Acknowledging Your Donors

Donors should be thanked early and often. In fact, not being thanked is a known cause of donor churn. Most people want to be acknowledged when they’ve made a contribution to something. Otherwise, it feels a bit like being taken for granted. Thanking donors is a best practice for donor stewardship.

What else can you do? A new donor welcome email series can help to give your new donors insights into the organization and make them feel part of something special. This helps to build trust in your organization and even gives you the opportunity to make another request for donations.

Donor stewardship events can be another way to acknowledge your donors and help to make them feel valued. For example, you could offer donors exclusive tours, a donor’s lunch, or access to seminars or speakers.

There are many possible ways to acknowledge donors, including offering them gifts or swag. A key to successful stewardship is to understand what will resonate with your particular donors. What are their preferences? What will really stand out to them as an excellent donor experience?

Stay on Top of Recurring Donation Plans

Churn from recurring donations can happen for all sorts of reasons, including when a credit card on file is due to expire. In the software world, dunning is an automated process that allows companies to take action whenever there is a failed payment or the possibility of a failed payment. Nonprofits can use this too, by being proactive about reaching out ahead of time. Request new credit card details before the current one expires, and payment fails.

Be on the Lookout for Potential Churn

Another aspect to stay on top of is knowing when to look out for potential churn. For example, it’s typical for more monthly donors to churn in January than in any other month. You might also find within your own organization that your monthly donors tend to churn after a certain period of time. If you understand this data, you can take proactive measures to reach out ahead, perhaps with campaigns that highlight to the donor how their gifts are helping.

Gather Data and Feedback

To borrow from the for-profit sector again, there’s a huge movement around “customer success.” The gist of this is that the organization is proactive about initiating communication with the customer so that they can understand the customer’s experience.

In the nonprofit world, we can use this concept to dig into the donor experience with any organization. When you proactively reach out for feedback, it demonstrates that you care about the donor experience and are willing to listen.

Gathering and analyzing data on your donor’s behaviors, affinities, connections, and preferences can also give you some great insights. While this is less proactive than reaching out directly, understanding this data can help you form proactive donor retention strategies. We recommend keeping your donor databases updated so you can track their actions better. 

Personalize Your Donor Follow-up

One key to successful retention is to acknowledge that not all donors are the same. They’ve connected with you in different ways, have different levels of giving, and have different interests or preferences. This can massively help with situations where you are experiencing donor attrition across the board.

Personalized, contextual follow-up can help donors feel that you’re paying attention to them as people. For example, you can segment donors into groups and design communications that make sense to those groups. It’s about keeping things relevant to the donor. Of course, doing this at scale can be very time-consuming and labor-intensive. One solution is to use a generative AI tool to create drafts that are personalized based on the parameters you set. This complex process becomes smoother and faster to execute, putting you in an editing role instead of starting from scratch.

Some suggestions for segments include:

• Donation amount: Focus on recurring donors with the donation amount sizes that form the largest share of your total donation amounts.
• Event attendance: Predict donor retention by judging their involvement and interest in your fundraising efforts. If a donor has consistently shown lowering engagement, it is time to follow up and rebuild that relationship.
• Donation frequency: Any sudden or unprecedented changes in donation frequency should also result in a follow-up action.
• Acquisition channel: Keep a close look on your acquisition channel to identify which channels are resulting in higher donor retention. This is where you should focus whenever you want to get back to a healthy donor retention rate.

Improving Donor Retention

In conclusion, improving donor retention is key to fostering long-term relationships and ensuring the sustainability of your nonprofit. By focusing on personalized communication, acknowledging contributions, and staying proactive with recurring donations, you can create a more engaged donor base. As donor retention rates fluctuate across the industry, nonprofits that prioritize donor stewardship and data-driven strategies will be better positioned to maintain strong connections with their supporters. Remember, keeping your current donors engaged is not only cost-effective but also vital to growing your impact over time.

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The Kindsight Team