Love Thy Donor: Donor Retention in an Era of Dwindling Loyalty

Author:

Sarah Lange, MSW

,

Principal & Founder

Reviewed by:

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Published:

April 13, 2024

Last Updated:

April 16, 2024

The good news: Philanthropy is up! In 2022, nearly $500 BILLION was contributed to US nonprofits.

The bad news: In the same year we reached an all-time high for overall giving, individual giving totaled $319.04 BILLION, declining 6.4% from the previous year.

That’s still a SIGNIFICANT amount of money being contributed, but it’s also an indicator that we need to do a better job of recruiting and retaining donors to support our cause, because individuals still make approximately 80% of all philanthropic contributions.

Another significant motivator to expand our individual giving program is that we are in the midst of the largest transfer of wealth in our nation’s history. Baby Boomers and the Silent Generation (WWII folks) will bequest a total of $84.4 TRILLION in assets through 2045, with $72.6 TRILLION going directly to heirs.

The transfer of wealth from Baby Boomers will account for $53 TRILLION (63%) of all transfers, while the Silent Generation will hand down $15.8 trillion. The time to act is NOW!

Who’s Leading the Pack When it Comes to Individual Giving?

Religious institutions receive about 46% of individual donations.

Why? (Hint: it’s NOT guilt or God!) Religious institutions get a significant piece of the pie because:

  1. They ask; and do so on a regular basis – they get you into the HABIT of giving.
  2. They make giving easy (basket or plate passed in front of you each week, tithing envelopes, etc.).
  3. They value a gift of any size.

We can learn something from their approach! Do an honest assessment – how does your organization score on these three fronts? Where is there room for growth and improvement?

Donor Motivations and Needs

Here are the top reasons people contribute to nonprofits:

  • They have a passion for the cause
  • They want to “do good” in their community
  • They see the need
  • They have a sense of obligation
  • They were taught to
  • They’ve seen and/or heard about the results you’re achieving
  • They know someone who’s benefitted

(You’ll notice “tax deduction” didn’t make the list!)

The top two reasons that donors give are:

  1. They were asked!
  2. Your mission is in alignment with their vision of how they want the world to be.

The truth is, people act out of self-interest, and they also have philanthropic needs.

Unless their self-interest and needs align with the work you’re doing, they’re unlikely to contribute your cause. Remember to focus on the people who are served by your organization and the transformation that’s happening, rather than your organization.

Your agency is simply the vehicle through which donors are able to contribute to a cause they care about. Stop talking about the mattress! What does that mean? Well, when we’re shopping for a mattress, ultimately, what we’re seeking is a good night’s sleep. It’s the same for your donors!

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What is your organization’s “good night’s sleep?”

Is it that you’re providing a mother with food, so she doesn’t have to send her kids to bed hungry? Is it that you’re providing after-school care, so parents can work and not have to worry about whether or not their child is safe? Or that you provide lunchtime concerts on the town common to uplift people’s spirits?

Donors (and funders) want to be changemakers. They want to make a difference in the world; in their community. They want to know that their contribution – and they – are important to you. Of course, your staff and your board and your volunteers are on the front lines, delivering important services and programs, but when you spend too much time talking about those things – the mattress! – you run the risk of losing donor engagement. Focusing on the “good night’s sleep” helps them connect – through their heart to your cause. Remember: philanthropy means “love of mankind” and is a heart-centered activity!

Beyond knowing the “good night’s sleep” impact your organization is having, donors have three main needs:

  1. Prompt gift acknowledgement
  2. Confidence that their gifts have been “sent to work” as intended
  3. Evidence (measurable results) that their gift is making a difference before another gift is requested

Be sure that you have systems in place to send out timely thank you letters (or better still, hand-written notes from volunteers or clients!), and that you’re communicating donor impact through newsletters, social media, emails, etc.

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Fundraising is Akin to Dating

Regardless of your gender or sexual orientation/identity, when it comes to fundraising, YOU are always the “man” in the relationship (in other words, it’s YOUR job to “make the moves”). If we don’t, we’re likely to get dumped!

It is always OUR job to take the lead, to deepen the relationship, to let donors know that we’re interested in and care about them, to ask the donor to take the next step with us -- be that by making a larger donation, volunteering, engaging in peer solicitation, or joining a committee. Annual donor surveys help, as well.*

Donor Retention is a HUGE Problem

Did you know…

  • We can expect to lose up to 50% of our donors between their 1st and 2nd gift?
  • We can expect an annual attrition rate of up to 30% among donors who make more than one gift?

That’s a lot of lost opportunity, not to mention money!

Here are other reasons we want to hang on to our donors:

Cost

It costs about five times as much to acquire a new donor than to keep one. It costs our organizations 2-3 times more to recruit a new donor than they will give by way of their first gift. Even after the donor has given, it can take 12-18 months before the relationship becomes profitable.

Increased Revenue

Only existing donors can increase the amount of their gift and make additional donations. They are also more likely to attend your events and/or
purchase merchandise that supports your cause.

Word-of-Mouth Marketing

Existing donors are the only donors who provide word-of-mouth “advertising” to their friends, family members and co-workers, and other people they know. As any business owner will tell you, word-of-mouth marketing it worth its weight in gold! AND - 63% of people donate to a charity they’ve heard of through a friend, relative or social connection and donors feel happiest when they’ve contributed in this way!

Help

Existing donors are more likely to volunteer, join a committee, or join the board. AND – volunteers give twice as often as annual donors!

Why Donors Dump Us

There are two primary reasons our donors are dumping us and looking for a better date:

  1. We tend to focus on donor acquisition instead of retention.
  2. We generally treat donations as transactions, rather than an extension of a relationship.

Over and over, what market research shows is that there are three “triggers” that cause customers (donors) to pause and reevaluate their relationship with a company (organization):

  1. Situations (birth, death, move, job loss, etc.).
  2. Influence – they found a better deal elsewhere.
  3. Reactive – they didn’t like the way they were treated.

We can’t do anything about #1, but we can influence #2 and #3!

The cost of lost opportunity is significant! A 10% improvement in attrition can yield up to a 200% increase in the projected value of your database (providing your data isn’t complete garbage)! Why? Because there is a pattern of behavior exhibited by the average donor:

  • They give
  • They upgrade their giving
  • They give in multiple ways
  • They recommend you to others
  • Habitual donors are more likely to pledge and make planned gifts/bequests (gifts left in their will)

This is why we need to invest time and energy into examining our donor data, noticing patterns, and reaching out to our donors on a regular basis. An investment in donor cultivation and stewardship is essential, because donor loyalty is the key to our long-term sustainability and success!

The Four Key Drivers of Loyalty

1. Satisfaction

Satisfaction is a customer’s overall evaluation of the performance of the offering to date – in other words, did the product live up to the promised performance? Translated into our language, has the nonprofit delivered on its promise?

With donors, it’s not just about the service you deliver to them, but more importantly, about the service you deliver to your clients (this is the #1 determinant). In order to create customer (donor) satisfaction, you must meet or exceed their expectations.

Satisfaction has a STRONG effect on loyalty. In fact, donor satisfaction is the #1 driver of loyalty! Do you know what your donors expect? If not, ask them!

The higher the level of satisfaction with your service – to both them and the client – the more likely your donor is to give. Not just another gift, but to give at a higher level.

Satisfaction also effects their level of commitment to your organization and their willingness to help – not just through giving, but by volunteering, doing peer-to-peer fundraising, promoting your work, etc.

Satisfaction also plays a major role in terms of a donor’s future intentions and behaviors, like making significant gift, leaving you a gift in their will, etc.

2. Identification

Identification is the degree to which a customer (donor) identifies with a product and the company (nonprofit). We want our donors to identify with our mission and feel a sense of connectedness to our organization, the people we serve, our staff and board, and define themselves as part of the “we”.

There is a strong correlation between the level of identification a donors feels and their level of loyalty, which directly impacts their level of giving.

Branding plays a significant role in the identification process – it’s not just the brand itself, but what the brand represents. Donors are drawn to brands that are congruent with their values. Do you have a brand? What does it convey?

There is also a connection between the brand and the donor’s self-perception and their hopes for the future. Donors want to support nonprofits that share their vision for how the world might be made better.

3. Trust

I don’t have to tell you how crucial trust is – especially when it comes to matters of money! Trust leads to commitment, which leads to loyalty. Once lost, trust is difficult (if not impossible) to regain.

We earn donor trust by:

  • Delivering high-quality services
  • Exercising good judgement
  • Providing good stewardship; not just of the money, but of the donor
  • Being transparent (ex: annual report)
  • Demonstrating competence
  • Adhering to a set of standards/code of conduct
  • Creating a set of shared values
  • Sharing information about the impact donors are having
  • Honoring our promises (fulfilling our mission)
  • Providing communications that are timely, relevant and contain quality content
  • Engaging in two-way conversations (donor surveys, feedback loops, events)

4. Commitment

Commitment is the glue in any relationship – without it, the relationship cannot grow or deepen.With donors, commitment translates into a desire to maintain their relationship with you. Commitment drives loyalty.

Because commitment is forward-looking, it influences the current and future behavior of your donors. You want your donors to care about the organization – not just today, but to also invest in its future. You want them to act on their genuine concern for and enthusiasm about the organization, its clients and its mission.

Commitment also comes from a sense of fear that harm may come to the clients of organization if the donor stops giving. But remember, commitment is a two-way street! What are you doing to show YOUR commitment – not just to your donors, but to the people you serve?

Donor-centered Philanthropy

In order to maximize the number of dollars you raise from donors, you need to create a culture of philanthropy. What does this mean?

Provide Excellent Stewardship

Stewardship means taking good care of your clients, the money donors give you AND your donors.

Donors prefer information to recognition. Deliver information with a personal touch – use hand-written notes, photos, etc. to stay in touch.

Provide them with extraordinary experiences! Invite them in for a visit, a rehearsal, an open house. Get creative & get them in the door!

Provide Acknowledgement and Validation

All people want to be treated with respect, to be valued and accepted, loved, and cherished. People also want to feel they are making important contributions and that they are being heard. When people feel seen and validated, it builds cooperation and trust.

Just like any other human, your donors need to be acknowledged, validated, heard and respected. Do your donors feel this way?

Map out the Donor Experience

Have you given any thought to the donor’s journey with you and what you want that experience to be like?

Mapping out the donor experience form the outset – for example, creating a welcome packet, a set of welcome emails (drip campaign), and providing excellent stewardship to new donors through their 2nd or 3rd gift -- significantly increases your chances of not only retaining your donors, but of getting them to move up the Giving Ladder more quickly.

Communicate

Relationships usually fare better when there’s a good flow of positive, heartfelt communication. It’s no different with donors – they need and want to hear from you! When did your last newsletter go out? How long has it been since they heard from you via email? Is your website up to date (74% of all gifts begin on line!)? Are you posting to social media channels on regular basis?

Communication helps build donor confidence. Be sure to reach out on a regular basis to remind them of all the great work their gifts are helping make possible. Ways we can stay in touch include:

  • Newsletters, annual report
  • E-newsletters, email
  • Social media
  • Special donor communiques
  • Videos, photos
  • Letters, case studies or testimonials
  • Special, intimate, exclusive events
  • Anything else you can dream up!

Manage Donor Expectations

Understand what your donors need & expect. This includes: thanking them for their gifts in a timely manner, informing them about how their money is spent, responding quickly when donors contact the organization, being polite, timely & frequent in your communications.

Transparency & Ethics

Transparency and ethics are important. You can boost donor confidence by sharing your financials. They don’t need to know every last detail, but it helps when they know that their donation’s being spent wisely. If you’re not already publishing an annual report, now’s the time to start!

While every donor knows that an organization requires many contributors, not a single one of them wants to feel like a number, a transaction, an ATM. We need to treat every donor – and every dollar – with respect and gratitude. Because at the end of the day, we have no idea what any specific donor may be capable of.

Investing more time and energy in the relationships we have with our donors literally pays off in the form of higher donations, multiple donations, habitual donations (e.g., giving every year), volunteerism, word-of-mouth marketing, etc.

As you move forward, remember that growth is uneven. Take it one step at a time – try one strategy, see how it works, then try another. Soon, your retention rates and the size of donations you’re receiving will be skyrocketing!

If you’d like a copy of the questions I often include in Donor Surveys, send an email to sarah@sarahblange.com with Donor Survey in the subject line, and we’ll send it to you!

Sarah Lange, MSW

Sarah Lange, MSW

Sarah Lange has raised over $100M for over 200 nonprofits. She’s the author of "The Field Guide to Nonprofit Fundraising" and has served as an Adjunct Professor at four universities.

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