Stop me if this sounds familiar: Your nonprofit organization is having trouble with first-year donor retention.
Year after year, you make a large investment to acquire new donors because you need to replace the ones you lost from the previous year’s acquisition (along with natural attrition from your core donor group).
The bigger the organization, the bigger this problem becomes. Large nonprofits are trapped in this cycle of churning and burning through new donors. If they cut back on acquisition, their donor file will shrink, they’ll lose out on long-term revenue, and they won’t provide enough money to fuel their mission.
We call this the leaky-bucket syndrome. You need a full bucket, so you pour water into it—only to watch it seep out of the holes.
It’s gotten so bad in our industry that first-year donor retention was just 19.1% in 2022, according to the Fundraising Effectiveness Project. In the commercial world even a number like 30% would be intolerable, yet the nonprofit world just accepts this as business as usual.
And here’s the strangest part: Most nonprofit organizations I speak to are trying to solve this problem by pouring more water into the bucket! Instead, you should be plugging the holes.
That means you need to fix first-year donor retention with a stronger cultivation and stewardship program. If you can improve retention, that creates less need for acquisition.
Here are five ways you can start building better relationships with your donors:
1. Stop asking for donations so much
Think about your stewardship practices. How many appeals do you send donors across channels each year? It’s probably a lot. It also probably far exceeds the number of times you communicate any other messages to them.
Look at this from the donors’ perspective. If the only time they ever hear from you is when you ask for money, then that sets up a pretty poor relationship. No wonder they don’t come back.
In fact, the research RKD commissioned in 2022 showed that the biggest differentiators between donors who had weak and strong relationships centered around the notions of feeling valued and involved.
With tight budgets, it can seem counterproductive to invest in anything that’s not directly related to bringing in more revenue. But this is a long-term strategy to build stronger relationships with donors who care about your mission.
2. Target donors with precision
Only 40% of nonprofit professionals use data to make decisions. This is one area where the commercial world is way ahead of the charitable giving world.
Nonprofits have a wealth of data on donors, but much of it is sitting in separate siloes. Connecting all your data into one central hub will give you a more holistic view of your donors.
With a greater understanding of your donors, you can use advanced modeling tools to select donors into audience segments that match their behavior and interests. For example, a donor who has ignored 10 straight emails from your organization could be placed into a new audience segment that receives differential creative to spark renewed interest.
This data could also be used in acquisition to target new donor prospects who match those on file with the highest long-term net revenue.
3. Customize your messaging
This point is tied closely to the previous one. As you build audience segments, you’ll need to personalize your messaging toward them.
This goes well beyond using someone’s name in the greeting line of a direct mail letter. For example, an animal welfare organization could segment their file based on dog vs. cat lovers. A health & disease organization could segment based on the specific disease that a donor is most interested in learning more about.
The more data you have, the more customized your messaging can be.
4. Create a more enjoyable experience
Make it easy and entertaining for people after the donation. Getting hit up constantly for donations gets exhausting.
Again, think about how commercial businesses operate. They continue to communicate with fun videos and interesting updates that keep them top of mind. What the best ones don’t do is repeatedly ask you to buy their products.
Create videos that show the incredible work you do. Let people peek behind the scenes of your mission. Share how their money is put into action. Have some fun!
5. Be flexible with your investment
Don’t put all your eggs into one basket, sure, but also be willing to move the eggs into different baskets along the way.
If one particular area is working really well, shift a little more spending into it. If an area is struggling, stop flushing that investment away.
The idea is to maintain a steady budget, but be intentional about who you’re targeting and why. Structure the cultivation program to continue the conversation and build relationships. You need to meet people where they are, and that can change over time—even within the same fiscal year.
With these five areas of focus, you can build better relationships with your donors. Better relationships lead to better retention. Better retention leads to a more stable program that doesn’t need as much investment in acquisition.
Otherwise, it’s time to start filling that leaky bucket again.