Donor retention is one of the most crucial metrics for any nonprofit organization. Organizations must know how to calculate the donor retention rate to determine whether their current supporters are loyal and how to keep them engaged for a longer period.
This guide explores how to calculate donor retention, the top metrics to track, strategies to improve brand loyalty, and how to overcome common challenges.
Do you need digital marketing and media experts to support your nonprofit’s retention strategies? Contact NextGen Fundraising today and let our team of specialists help you!
What Is Donor Retention and Why Does It Matter
Donor retention refers to the percentage of donors who continue to support a nonprofit organization from one year to the next, or between campaigns. A high donor retention rate indicates that your organization has strong relationships with returning donors and members who trust your nonprofit and are satisfied with the impact of their contributions.
Donor retention is a necessity for your fundraising efforts:
- Cost-Efficiency: It costs around $0.20 to raise $1 through a retained donor but $1.50 to raise the same amount through a newly acquired donor. Donor acquisition costs much more than retention, meaning organizations in the nonprofit sector need to keep members and contributors engaged and loyal to their cause.
- Long-Term Stability: Consistent donations from repeat donors provide a steady income stream, making long-term financial planning easier. For example, making strategic financial decisions is easier if you know how much to expect from monthly donors and long-term supporters.
- Stronger Advocacy: Donors who feel valued and connected to your mission are more likely to become advocates, helping to spread awareness and expand your network of supporters. Because retained donors are of high value (they contribute more to your organization throughout their lifetime), they are more likely to attract other donors and members who will also become advocates for your nonprofit.
- Stronger Organizational Reputation: Organizations that consistently retain donors between fundraising campaigns and throughout the years are bound to have a better reputation. These nonprofits are typically transparent, promote donor-centric content, and have a solid foundation of trust and credibility.
How to Calculate Your Donor Retention Rate
Here is the formula for calculating donor retention rate.
Retention Rate (%) = (Number of Donors at the End of the Year / Number of Donors at the Start of the Year) × 100
Let’s look at a real-world example of how to calculate your donor retention rate. If you started the year with 300 donors and ended with 200, your retention rate would be:
(200 / 300) x 100 = 66.667
The average donor retention rate since the end of 2024 is 55.6%, which serves as a benchmark to determine how effectively your nonprofit retains donors. Measuring this rate at the start of every year is critical because, left unresolved, a low donor retention rate could dismantle your organization and all the progress you’ve made.
9 Key Metrics to Calculate Donor Retention
Besides your actual donor retention rate, there are many key metrics you need to know to understand how long donors and members stay engaged with your nonprofit, how much value they provide, how often they donate, and why they eventually stop making contributions.
Here are the top key metrics to track donor retention and how to calculate them.
1. Donor Lifetime Value (DLV)
Your donor lifetime value (DLV) calculates the total revenue a donor contributes to your nonprofit throughout their relationship. This metric reveals your major donors, helping you strengthen relationships with these supporters to turn them into ambassadors who can attract more high-value contributors to your cause.
Another reason why DLV matters is that it also allows you to assess how many of your current donors don’t provide significant value to your organization. You may have donors who donate for many years, but these contributions are much smaller than those of others. Having these insights allows you to design strategies to increase donor contributions.
Formula:
DLV = Average Donation Size x Average Number of Donations per Year x Number of Years Donor is Expected to Give
2. Average Donation Size
The average donation size tracks the donation amount per donor over a given period, such as annually. Knowing the average contribution you receive from each donor is essential to assess whether your engagement and donor retention strategies are working.
For instance, if you notice your average gift size is increasing, you’ll know that your donors are more committed to your organization and are more likely to become brand advocates. However, if your average donation size is low or declining, your organization needs to better understand how to engage donors and align them with your cause.
Formula:
Average Donation Size = Number of Donors / Total Donations
3. Recurring Donation Rate
This metric measures the percentage of donors who sign up for recurring donations, such as monthly or annual giving programs. High recurring donation rates indicate a strong commitment and loyalty among donors. You want all your supporters to become recurring donors because this provides a steady income stream for your nonprofit.
There are several ways to increase your recurring donation rate. You can promote these programs on your website, social media, and email marketing newsletters. The trick is to make it easy for donors and members to join recurring programs and start with smaller donations so you can nurture more donors to contribute major gifts down the line.
Formula:
Recurring Donation Rate = (Total Number of Donors / Number of Recurring Donors) x 10
4. Engagement Rate
Your donor engagement rate measures how much donors interact with your communications, including email open rates, click-through rates, social media activity, and event attendance. A high donor engagement rate typically indicates a high donor retention rate, as the more donors are engaged with your organization, the more likely they are to remain long-term.
To improve your engagement rate, understand your donors’ preferences, create engagement strategies accordingly, and maintain consistent communication. For instance, if your donors prefer impact stories, share this content with them to keep them interested in your cause.
Formula:
Engagement Rate = (Total Opportunities for Engagement / Total Interactions) x 100
5. Donor Churn Rate
The donor churn rate, also known as donor attrition, refers to the percentage of donors who stop giving after a specified period. High churn rates have a direct impact on fundraising revenue and long-term sustainability. They also impact donor loyalty; the less donors contribute to your organization, the less loyal they are to your cause.
The factors influencing the donor churn rate are
- Whether donors feel connected to your organization
- How often you communicate with them
- How easy it is to make donations
- Whether you express gratitude and make donors feel appreciated
Formula:
Churn Rate = (Total Number of Donors at Start of Year / Number of Lost Donors) x 100
6. First-Time Donor Retention Rate
Your first-time donor retention rate refers to the percentage of first-time donors who give again within a year. A high first-time donor retention rate means your organization converts new supporters into long-term donors successfully.
Engagement is the secret to motivating first-time donors to make recurring donations throughout the year. Ensure you gather insights about these donors to understand how to engage them and what content appeals to them. For instance, you may have some new donors who aren’t responsive to email and may prefer direct mail campaigns. On the other hand, another segment of donors may be actively opening your email newsletters but prefer specific content.
Formula:
First-Time Donor Retention Rate = (Total Number of First-Time Donors / Number of First-Time Donors Who Donated Again) x 100
7. Time Between Donations
This metric measures the average time between donations from a single donor. A shorter time between donations often indicates stronger donor loyalty and satisfaction. If your donors contribute once and quickly give again, they are engaged with your cause and trust your organization.
However, if the time between donations is long, it could indicate that donors are not aligned with your cause and need more nurturing to become recurring contributors.
Formula:
Time Between Donations = Number of Donors / Total Time Between Donations for All Donors
Tools for Tracking Donor Retention
Beyond the key metrics you need to track for donor retention, there are also tools available to simplify this process.
Here are a few of the best tools to help you track, measure, and analyze donor retention.
Fundraising Platforms
Fundraising platforms, like NextGen, are designed to help nonprofits manage donations and track donor retention through ongoing campaigns and donor insights. NextGen’s robust reporting features enable you to track how donors engage with your campaigns and determine whether they make recurring donations.
CRM Software
Customer relationship management (CRM) software provides tools to track, manage, and personalize donor interactions. These platforms support donor stewardship and centralize donor contact information, interaction history, and communication preferences.
Email Campaign Software
Email marketing platforms are essential for nonprofit donor retention because these platforms streamline communication and engagement. With email campaign software, you can automate newsletters and set up trigger emails based on donor actions, such as subscribing to your email list or not interacting with your content for an extended period.
Survey and Feedback Tools
These tools allow nonprofits to gather feedback from donors about their experiences. You can use this feedback to understand what causes lapsed donors and how to improve your retention efforts. Beyond donor retention, survey tools also give you insights into your best acquisition
channel and why donors made the contributions they did.
Top Strategies to Boost Donor Retention
These are the most effective tactics for improving donor retention.
1. Personalized Communication
Communicate regularly with donors and members through personalized emails, thank-you notes, and phone calls. Acknowledge their support, show your gratitude and appreciation, and demonstrate the impact of their donations.
Take it a step further and personalize your communications by mentioning each donor’s name, their most recent contribution, and the specific impact of that donation.
2. Donor Segmentation
Not all your donors will have the same preferences. Group your donors based on their history, preferences, and engagement levels. This approach makes it easier to personalize your retention strategies based on different donor preferences and demographics. So, consider email and CRM platforms that offer segmentation features.
3. Engagement Beyond Giving
You need to engage your donors even after they’ve contributed. Encourage donors to become involved in your mission in ways other than just financial contributions. For instance, you can invite them to volunteer, attend events, or participate in social media campaigns.
4. Annual Giving Programs
Develop recurring giving programs that encourage donors to make monthly, quarterly, or annual donations. Automatic recurring donations are an excellent way to build long-term donor relationships and optimize retention rates.
5. Showcase Impact
Share regularly how donations are being used. Use impact reports, emotionally driven videos, and success stories to show donors the tangible difference they’re making. Transparency fosters trust and encourages your supporters to continue giving.
Common Donor Retention Challenges and How to Overcome Them
It’s clear that donor retention is imperative, but keeping your supporters engaged is easier said than done.
Here are the most common challenges to consider, along with strategies for overcoming them.
1. Donor Fatigue
Constantly soliciting donations can lead to donor burnout. You can overcome this challenge by employing a variety of outreach strategies. For instance, you can send personalized updates, invite donors to exclusive events, or ask for feedback instead of always soliciting funds.
2. Lack of Personalization
Generic communications can make donors feel disconnected from your cause. Use segmentation and data to create personalized messaging that aligns with each donor’s interests and past contributions.
3. Inconsistent Communication
Donors may lose interest if your communication isn’t consistent. Establish a regular communication schedule that includes updates on your mission, future goals, and their specific impact.
4. Failure to Show Gratitude
Failing to properly thank donors can lead to disengagement. Remember, donors have financial responsibilities, so express your gratitude consistently and meaningfully! Consider handwritten notes or phone calls to make donors feel appreciated.
Real-Life Examples of Donor Retention Tactics
These are real-life examples of donor retention strategies to get you started.
Charity: Water
This nonprofit excels in consistent communication through regular impact stories and case studies. It keeps its donors informed about how their contributions make an impact, building transparency and trust.
Another key takeaway from this example is that this organization uses compelling visuals to immerse donors in its storytelling.
Image source: Milled – Charity Water
The Red Cross
The Red Cross offers various monthly giving programs to develop a community of committed, long-term donors. What works is that donors can join different programs that align with their values.
The Red Cross also offers automatic donation deductions, making it easy for donors to commit to long-term support.
Image source: American Red Cross
Optimize Donor Retention With NextGen
Donor retention is an ongoing effort to improve your relationship with members and donors, increase their contribution to your organization, and keep them engaged with your organization over a longer period.
While calculating the donor retention rate is straightforward, there are many more critical metrics to consider to understand how much value donors contribute to your nonprofit and how likely they are to become advocates.
Although donor retention presents numerous challenges, platforms like NextGen simplify these strategies, providing users with complete control and visibility into fundraising campaigns.
Do you need digital marketing and media experts for your nonprofit retention strategies? Contact NextGen Fundraising today and let our team of specialists help you!