How to measure donor retention and 3 ways to improve it

If you’re part of a nonprofit organization, you're likely familiar with this rule of thumb: It’s easier and most cost-effective to keep your current donors than to find new ones. That means you’ve got to maintain a healthy donor retention rate, or the number of donors that continue to give to your nonprofit year after year.

It’s no small task — the average donor retention rate is 45.5%, according to a recent report from the Fundraising Effectiveness Project. That means fewer than half of donors stick around after their first contribution, across organizations large and small organizations.

So how can you keep your supporters motivated, invested, and excited to come back and give? In this helpful guide, we’ll give you three fundamental steps to develop a reliable donor database and expand it over time. First, you’ll need to establish a starting point by calculating your current donor retention rate.

How to measure donor retention

You can easily calculate your nonprofit’s donor retention rate — and see how your organization stacks up — by dividing the number of donors this year by those that donated last year.

Follow these steps:

1. First, make a list of donors from the previous year (e.g., 908 donors gave in 2019).
2. Then, determine how many of those donors gave again the next year again (e.g., 423 of your 2019 donors gave to your nonprofit again in 2020).
3. Finally, take your answer to #2 and divide it by your answer to #1, and then multiply by 100 to find your donor retention rate. Let’s use example figures: (423 donors ÷ 908 donors) x 100 = 46% donor retention rate. This nonprofit keeps less than half of its donors year to year, so it may want to work on improving its rate.

Simply put, the donor retention formula is:

(Number of returning donors in year 2 ÷ Number of previous donors in year 1) x 100 = Donor retention rate

This formula works with any group of donors you want to measure, whether it’s first-time donors, repeat donors, New York donors, or male donors. You can also calculate your retention rate for past years, or use this formula to plan for the future.

For example, if you want to keep at least 60% of your donors every year, you can crunch the numbers to see exactly how many donors you’d need to win over, and decide whether it’s a realistic goal.

The flip side to your donor retention rate is your donor attrition rate, or the percentage of donors that your nonprofit organization loses from one time period to another. Our example nonprofit has a retention rate 46%, so that means it has a 54% donor attrition rate.

A high attrition rate or low retention rate both negatively impact your nonprofit’s ability to grow, and the ill effects add up quickly.

For instance, if a nonprofit has a 40% retention rate and 1,000 donors in year one, only 400 of those donors will donate again the next year. After five years, just 10 of the original 1,000 donors are left!

The good news? There are straightforward donor retention strategies you can use to keep your supporters around for the long haul.

3 fundamental donor retention strategies for nonprofits

Once you’ve crunched the numbers and found retention rates for your different donor segments, it’s time to act on your findings. Dive into these actionable donor retention strategies below.

1. Roll out the welcome wagon

First-time donors have some of the lowest retention rates, so there’s a lot of opportunity to improve your donor retention by focusing on this group. You can quickly establish a personal connection with first-timers by creating an attractive welcome campaign.

A welcome campaign is your opportunity to bring new supporters up to speed, introduce them to your community, and provide resources that help them understand the real-life impacts they can make with your nonprofit. Your campaign may look like a four-part email series, direct-mail letter and small gift, or a few friendly text messages. It’s common to offer exclusive new donor content, like videos, e-books, infographics, and tool kits.

Another pro tip? Talk to your supporters in a way that reflects how they first interacted with your organization. A fundraiser event volunteer shouldn’t get the same email as an attendee. And a major donor should get a different phone call than someone who donated $10 to your nonprofit through their friend’s peer fundraising page.

We recommend reaching out within the first 48 hours and staggering updates that lead up to a donation appeal over the following weeks. That way, your cause stays top of mind but you don’t overwhelm your new audience members.

2. Share impact stories and updates

Without compelling stories and transparent data from your nonprofit, your donors may feel like their time and money is vanishing into the abyss. This is a recipe for unenthusiastic donors, lackluster fundraising efforts, and fewer contributions.

Be loud and proud about the impact of each dollar, whether donations saved one life, fed five families, or built 25 new schools.

There are many ways to do this:

• 😍 Feature individual testimonials and demographic-level infographics on your social media pages.
• 🙏 Focus on one major takeaway in your thank-you messages and donation receipts sent through your fundraising software. For instance, “Your $45 donation just gave a patient like Abby a brighter, healthier future.“
• 👀 Incorporate photos and videos of beneficiaries into your prospective and current donor communications.
• 📖 Send out a year-in-review booklet with key statistics, goal progress, and organizational improvements.

Not only is sharing stories and metrics a fundamental part of good donor stewardship, but it allows you to attract new supporters without high donor acquisition costs.

When you’re crafting content, use terms that put the spotlight on your supporters’ actions.

Instead of using first-person terms like “I,” “we,” “my,” and “our,” stick to “you” and “your” where it makes sense.

For example, “You collectively raised over $75,000 to help 50 environmentally sustainable businesses hire, expand, and better serve your community through 2023.”

Framing accomplishments with donor-centric language creates a sense of pride, unity, and accountability that keeps donors committed for the long-term.

By the way, impact stories don’t end with your beneficiaries. Sometimes, there’s no better person to make a case for being a donor than someone who’s already contributing. Why not ask your most passionate supporters or long-time board members why they give and how it’s changed their life?

For more tips, read our marketing guide for nonprofits and explore these examples of captivating nonprofit storytelling.

3. Create a feedback loop

Strong relationships are built on honest two-way conversations, and your donor relationships are no exception to this rule. Soliciting feedback remains one of the best tools you have for increasing your donor retention rate.

First, talking with supporters helps you identify obstacles to donating and participating that your board may not be aware of. Although many retention techniques heavily focus on donor engagement strategies, the reality is that some people stop giving because it’s inconvenient.

For instance, you may be losing millennial donors because you suggest large one-time payments rather than small recurring donations. Or, perhaps you need to offer Venmo and mobile payment options on your website. By soliciting feedback, you’ll get direct insights about your member experience that you can use to optimize your donation process and overall fundraising strategy.

In addition, a feedback request is an excellent “non-ask” follow-up to your fundraising campaign or event. It’s a natural way to continue the conversation without immediately jumping to a monetary ask. Finally, requesting feedback tells your supporters you care what they think and that you’re making efforts to improve their experience.

So, how can you create an effective feedback loop that boosts your retention rate? Here are some ideas:

• 📊 Send out an annual survey and incentivize answers with a raffle prize drawing or other perk.
• 📱 Create a brief general survey and add the link to your donation confirmation emails, follow-up messages, and contact page.
• 👉 Develop a few survey templates for different campaign types and audience segments so you can quickly customize and share them when you’re ready.
• 💌  Use brief surveys to keep donor information and payment details in your donor database up to date.

The bottom line

Maintaining a healthy donor retention rate is one of those things that organizations in the nonprofit sector can’t afford to ignore. But with an effective welcome campaign for first-time donors, compelling impact stories and messaging tactics, and a solid donor feedback loop, you’ll see steady growth in your donor network in no time.